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Russia Reform Monitor - No. 2144

European sanctions renewed, as Turkey expands energy ties;
A farewell to Kislyak

Edited by Amanda Azinheira, Tyler Russell and Philip Decker
July 20, 2017

June 20:

Russia has issued two tranches of Eurobonds totaling $3 billion, and the global market has responded with surprising enthusiasm.
Reuters reports that demand from international investors topped $6 billion, as eager consumers decided to brave Russia's risky investment climate in order to reap the rewards of cheap financing and high yields (with expected returns of 4.25 percent for the 10-year bond and 5.25 percent for the 30-year bond). International financial institutions, however, are steering clear of the new Russian investment push. With the possibility of more extensive sanctions on the horizon, many Western banks opted not to purchase the bonds, especially given that the sole underwriter for the transactions, VTB, is currently sanctioned by the European Union.

June 21:

The U.S. Senate and House of Representatives are continuing their efforts to determine the extent of Russia's meddling in the 2016 election.
The Washington Post reports that the intelligence committees of both chambers have now launched hearings into the matter, with expert witnesses called to testify regarding Russian disinformation and information warfare efforts - a campaign that the FBI's Assistant Director for Counterintelligence, Bill Priestap, has termed unprecedented in its "scale and aggressiveness."

June 22:

Moscow City Hall has been found to have awarded over 4 billion rubles, or $66.7 million, in illegal contracts to companies seeking to improve the city's sidewalks and the prominent Tverskaya Ulitsa,
The Moscow Times reports. Although the agreements were found unlawful by Russia's Anti-Monopoly Service, or FAS, they cannot be officially revoked because the contractors have already completed the improvements. The contracts come amid a major renovation drive in Moscow, underway since 2014, that has created significant backlash among city residents. The Moscow city government has also sparked protest with proposed legislation to raze thousands of Soviet-era block apartments.

Despite some internal dissent, the European Union has voted to extend its sanctions against the Russian Federation for another half-year,
reports Radio Free Europe/Radio Liberty. The move was the result of a Brussels summit where EU leaders debated the conflict in Eastern Ukraine and the efficacy of the so-called Minsk Agreement, which was intended to impose a ceasefire between Kyiv and Moscow. The sanctions, which must be formally renewed every six months, will now last until January 31st of 2018.

June 23:

Russian regulatory authorities are demanding that American and European technology firms provide access to source code for anti-virus, firewall and encryption software,
reports Newsmax. Corporations such as Cisco, IBM and SAP, eager to benefit from the Russian technology market, have decided to comply. Other companies like Symantec, however, have chosen to resist the demands, citing their belief that the inspectors are not independent from the Russian government. Although Russia is within legal rights to review this material, and officially claims to be carrying out the inspections to prevent intelligence agencies from infiltrating Russian computer systems through "backdoors" planted in the code, technology specialists believe that regulators are also probing for weaknesses in the products that Russian entities can exploit in the future.

The United States is claiming that separatist fighters in Eastern Ukraine are interfering with or attacking foreign monitors who seek to report on the violence in that region,
reports Radio Free Europe/Radio Liberty. The separatists, who are known to have extensive Russian support, have fired upon vehicles operated by the Organization for Security and Cooperation in Europe (OSCE), and in April an American medical worker was among those killed in a roadside explosion.

June 25:

The Financial Times reports that, as part of their accelerating thaw, Russia and Turkey have begun construction of the Turkstream natural gas pipeline. The pipeline will serve both Turkish and Southeastern European consumers and is expected to run across the Black Sea, terminating in eastern Thrace. Russia hopes that Turkstream will solidify its position as the dominant regional supplier of natural gas. Turkey, meanwhile, wishes to diversify its energy portfolio while remaining on good terms with Russia.

The Russian Foreign Ministry is recalling its controversial ambassador, Sergey Kislyak, from Washington,
reports Buzzfeed. Kislyak departs after a term of nearly ten years, during which time he distinguished himself as a fierce advocate for Russian interests, as well as for hosting expensive parties and for possessing an extensive list of contacts. Most recently, Kislyak has become a personality at the center of the current controversy over the Trump campaign's meetings with Russian officials last year - something that has elevated his profile, but also made him a political liability. Russian media sources report that Kislyak's likely replacement in Washington will be Deputy Foreign Minister Anatoly Antonov.

Related Categories: Russia; Economic sanctions/warfare; Russia and Eurasia Program; Ukraine

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