JUNE 2019

WEWE OPENOPEN UPUP FUTUREFUTURE TENDENCIESTENDENCIES

ISSUE №1 Table of Contents

Shadows of the diplomatic Forum in St. Petersburg – scandal in Ukraine and its new Russian economic 4 consequences 10 doctrine The context and shadow aspects of What is the geopolitical function of Fo- Ukrainian diplomatic scandal. Where is rum? Who can be the next president of the influence of Russian “Trojan horse” the Russian Federation? Which signals in its inspiration? The success of were addressed by Putin to Western pro-Russian party in Ukraine. Who will establishment? Reportage from be- be the next minister of foreign affairs? hind the scenes. What is going to be with Klimlin?

Relations in the "gas People’s protests in Georgia: triangle": what to expect in reasons, implications and 13 the foreseeable future 19 possible scenarios Russian opinion about the gas nego- Protest in Georgia and Russian trace. tiations. What is the position of the The real nature of the conflict between Russian side? What are their red lines? people and authorities. What do both Possible scenarios for had situation. sides expect to achieve? The role of Text from the leading Russian expert? Ivanishvili, his hidden interests and fears. The importance of Georgian Minister of the Interior.

Outlines of a potential Shadow politics alliance between China and Russia Politics is not only scientific search 23 30 and fair declarations. Sometimes the New geopolitical union between the backstage of important processes can Russian Federation and China: is it pos- define the real motives and interests sible? What are the outlines of such co- of main actors. Therefore we collect operation? The role of Russian political interesting rumors from Ukrainian and elites: how can their persuade Putin to Russian hidden political field. make turn in the East direction? What is the negative impact of the USA? We present you a complex analysis.

2 UKRAINIAN POINT The Civil Diplomacy Fund

he Civil Diplomacy Fund is an independent public platform which brings together representatives of the public sector, academic and diplomatic circles, the expert community and the political estab- lishment around ideas to form an unbiased interethnic dialogue, prepares the future political elite and competent government officials, develop pragmatic strategies for Ukrainian foreign policy, and Tform an objective Ukraine’s image abroad. As part of its research programs, the Fund is actively working on the preparation of comprehensive analytical materials on political, economic and social processes in the post-Soviet countries. Our methodology is based on the processing of open sources, the elaboration of our own views and the use of insider information of our contacts in public authorities, the apparatus of political parties and among diplomatic circles. We analyze key trends, shed light on the sidelines of the political pro- cess, determine possible consequences and give predictions about potential scenarios.

krainian point is the first public me- dia resource and analytical platform based on the principle of objectivity. The participants of our project are Ua new generation of young journalists and experts, they do not discredit themselves by connections with oligarchic media and have the goal of creating information space free from propaganda. Each active and com- petent representative of civil society can become our participant through the author's journalistic investigation, writing analysts or the private providing of materials for publica- tion.

VOL. 1 | JUNE 2019 3 Shadows of the diplomatic scandal in Ukraine and its consequences OLEKSANDR HNYDIUK, POLITICAL EXPERT OF UKRAINIAN POINT, POLITICAL CONSULTANT

s part of the active phase of the con- brewing over the last month. In particular, Zelensky frontation between the team of Vladimir reacted critically to the provisions prepared for him Zelensky and representatives of the during his visit to Brussels, partly coincided with the previous government, a tough conflict speech of former President Petro Poroshenko at a Abegan in the sphere of the formation of the coun- party congress. There were even talks of the need try's foreign policy. The Ukrainian President spoke for an official investigation of the sabotage, which out against Foreign Minister Pavel Klimkin with did not end with anything.

charges of concealing the latest diplomatic cor- Klimkin understood that as a member of the old respondence with the Russian Federation about team, he would not hold down as minister, repeat- the dismissal of captured Ukrainian sailors. The edly emphasizing his readiness to resign and seek- scandal provoked a lot of speculation and hidden ing the opportunity to get the post of ambassador implications, which are actively discussed on the to the United States. The only thing that kept him sidelines of Ukrainian politics. Let's try to under- in the status of minister was the absence of votes stand the complicated case, determine its main in the Verkhovna Rada for the legal suspension of elements, predict the possible consequences and cadence. scenarios of the situation. Although Zelensky has publicly commented posi- Differences in relations between the Presidential tively on Klimkin several times, the statements were Office and the Ministry of Foreign Affairs have been formal. In practice, the President formed his own

4 UKRAINIAN POINT team, which was responsible for foreign policy in dangerous legal precedent that could be inter- the Office. The team included the Deputy Head of preted as recognition of the illegal annexation; the Presidential Office, Vadim Pristayko, the NSDC Secretary, Alexander Danilyuk, and the Deputy Head 2 secondly, the sailors had to go through the of the Presidential Office, Ruslan Ryaboshapka. Kerch Strait, defined by a bilateral agreement They accompanied the president during foreign as a joint shipping line, so the Russian note had visits, coordinated their organization, and, in fact, another hidden subtext - to encourage Ukraine isolated Klimkin from active work in this area, to recognize the Russian ownership of the strait demonstratively showing the lack of need for his and use it for their advantage to establish con- services. But, the event which occurred, pushed the trol over the navigation of ships in the region;

ambitions of the President and the Minister. 3 thirdly, the decision of the International Tribunal for the Law of the Sea to oblige the Russian As a reciprocal step towards the return of the Rus- Federation to release twenty-four captured sail- sian delegation to the PACE, on June 25 the Russian ors. In case of an investigation under Russian side sent an official note, where it offered to give law, Ukraine effectively renounces its claims Ukraine three ships captured in the Kerch Strait inci- and presents itself in an absurd way to the dent and release their crew. However, Russia set the international community, casting doubt on the requirements - to ensure their participation in the prospects for further lawsuits against Russia. investigation, which will be held under Russian law. Undoubtedly, the Ministry took the actions of the As a result, on June 26, the Ministry replied with a Russian Federation as a cunning diplomatic game reasoned response to a Russian note, where, guided and were right for three reasons: by the decision of the tribunal, they called on the Russian side to fulfill it. A kind of "Trojan horse" of 1 firstly, according to the Russians, the delay of Russian diplomacy not only provoked a public out- the Ukrainian sailors was due to the violation of cry (it is clear that many were justifiably subjected the sea borders of the annexed Crimea (in the to emotions, without going into details), but finally Kremlin, they are considered to be their). Thus, destabilized the situation in the authorities. At a the consent of the Ukrainian side to the pro- specially organized briefing, Zelensky spoke with posal of the Russian Federation would create a harsh criticism of Klimkin testifying to the final split

VOL. 1 | JUNE 2019 5 in the working relationship. Secondly, an artificially created precedent of suc- cessful interaction between the Ukrainian politi- Although, Klimkin had all legal grounds to inde- cian, who will become a part of the future Verkhov- pendently decide on the note received and give na Rada, Medvedchuk and the separatists. You can an answer, the matter with diplomatic corre- already predict a scenario in which Russia will use spondence turned into a political plane. Analysis this case to argue its demand – a direct official of recent events and rumors determine certain dialogue between Kyiv, Lugansk and Donetsk, not grounds for politicization. only in the Minsk format;

Against the background of the parliamentary Thirdly, an effective attempt was made to return election campaign in Ukraine, political competition Medvedchuk (barred by Zelensky from negotia- continues between political forces, one of which tions with militants on exchanges) to a big game remains the “European Solidarity” party of Petro with a view to further popularizing the plan for the Poroshenko. Companions of the former president reconciliation of Medvedchuk’s authorship to the and members of the new party list still remain European political establishment as his main nego- in power (in particular, Verkhovna Rada Speaker tiator on the Donbas case; Andriy Paruby), trying to " throw up roadblocks" of the SE team in order to discredit its competence to Fourthly, the Ukrainian authorities are exposed in the public and reduce the level of electoral support a negative light, which cannot find balance among of the Servant of the People. If the scenario of the the centers of the foreign policy agenda. It should sailors’ return is realized, the ratings of Zelensky be expected that Russia will use this circumstance and his associated party will predictably go up, in order to discredit the Ukrainian leadership and creating the prerequisites for receiving 50% of the send a manipulative message “about impossibility votes and one-party majority in parliament. And of reaching an agreement with the official Kyiv” that means complete centralization of power in the or “failure of the procedure to release the sailors hands of the new President and his entourage. Not because of Ukrainian fault”. surprisingly, that Klimkin aroused suspicion by his act. After all, if the legal component of his decision In addition to the reputational consequenc- is beyond doubt, then not wanting to inform the es, the events listed, inflicted certain elec- guarantor of the Constitution about the non-triv- toral losses on the Zelensky team, playing ial note of the Russian side looks like a kind of into the hands of "the Opposition Platform reaction to the Minister’s distancing from foreign - For Life", "European Choice", and partly to policy. Situationally, Klimkin demonstrated his other "Servant of the People" competitors. commitment to Zelensky's predecessor and played During the elections the pro-Russian polit- against his team. ical force "OP - FL" will receive quite high support (it is possible that more than 10%) The Russian side has taken advantage of the and will go to parliament, creating an addi- ambiguous scandal to play out the political lead- tional tool for realizing Russian interests in er of "the Opposition Platform - For Life", Viktor Ukraine. Medvedchuk. After the described events, Vladimir Putin’s friend organized a meeting with leaders In turn, representatives of the "Servant of the of the unrecognized republics in Minsk, where he People" party will win in the upcoming elections, announced the dismissal of four prisoners of war one of the main requirements during coalition who were accompanied by him in Ukraine. What negotiations is to appoint their person as the did the Kremlin win in this way and how will events Minister of Foreign Affairs in order to consol- develop? idate decision-making in this area. Today, the main candidate is Pristayko. The fate of Klimkin First, a clear signal addressed to European partners has not yet been determined, since the pros- about the readiness of the Russian Federation to pects for heading a diplomatic mission in the seek compromises on the Ukrainian issue and to United States after a conflict with the President make concessions in the release of war prisoners. may not be realized.

6 UKRAINIAN POINT Forum in St. Petersburg – new Russian economic doctrine ANTON NAYCHUK, PH. D. IN POLITICAL SCIENCES, THE HEAD OF CIVIL DIPLOMACY FUND

St. Petersburg International Economic Forum was intended to present a conceptual vision by the Russian side of the architecture of economic relations in contemporary realities, and the speech prepared by Vladimir Putin on the sidelines was regarded as “economic analogue” of his perfor- mance in Munich in 2007. Achieved results and how the Kremlin towers struggle will be discussed further.

The Russian economy

fter the annexation of the Crimean Pen- insula and the imposition of sanctions by the international community against the Kremlin’s aggressive policy, the St. Peters- Aburg Forum received the status of a major discus- sion platform for the presentation of Russian eco- nomic potential. Representatives of state authorities and political elites of the country are trying to demonstrate the stability of the economic situation to their foreign colleagues, which creates conditions for foreign direct investment. For this goal, every time the forum organizers try to ensure an influen- made with Washington, and Trump will continue to tial international representation, which is designed be limited in diplomatic maneuvers through a con- to confirm the status of the event and has to gener- sistent Congress position.The solemn visit of the ate signals of the Russian side’s readiness to reach Chinese delegation and its key place at the forum agreements and get out of international isolation. sites was a tactical victory of the so-called “Chinese This year Xi Jinping, received the honorary mission party” among the Russian political establishment, of the main guest of the forum. The participation of which situationally or because of their own business the Chinese leader in the forum served as a kind of interests support the turn to China as the basis of message for the American administration. Through the future geostrategy.To enhance the symbolism diplomatic signals, Putin hinted that he sees the of his visit, as a gift to Xi decided to present the Beijing as a reliable partner and is ready to turn to Russian side two pandas who, in the tradition of Beijing for support in questions of the fragmenta- Chinese diplomacy, express respect and a high tion of the international economy and in attempts to level of trust. However, over time, everyone was limit the global monopoly of Americans. Against the convinced that diplomacy in China does not exclude background of US ignoring the meeting in St. Peters- enterprise, and even here they found a way to make burg, the Kremlin has demonstrated its readiness some money, because it turned out that the pandas to take a Chinese position in the ongoing China-US were not awarded for free, but are for rent, which economic confrontation, unless clear proposals are will cost about $ 2 million a year.

VOL. 1 | JUNE 2019 7 behind Putin’s back and could not create a negative information background for the forum, just like the repressions against the journalist of the information resource Medusa Ivan Golunov.

City Hall, drugs, rock'n'roll.

The news of Golunov’s arrest by the Moscow police provoked considerable resonance on the sidelines of the forum and diverted attention even from the fundamental speech of the country's president. A Russian journalist known for his high-profile inves- tigations against the organization of the funeral business, according to colleagues, was preparing an investigation material against the corrupt ties of the Moscow mayor’s office. The police detained Golu- nov and fabricated the case against him in the con- tent and distribution of drugs, according to which Escobar seems to be a seller of medical marijuana. Putin decided to respond not with a very expensive The police even managed to attach photographs of gesture and introduced to Xi Jinping, on the side- unknown origin to the case , which had nothing to lines of the forum, Moscow Mayor Sergei Sobyanin do with the searches of the apartment of the victim and Tula Region Governor Alexei Dyumin. Such of the accusation and were probably taken in one of actions of the Russian president are seen not only the clerical "drug port". Although the journalist was as diplomatic symbolism or an attempt to lease changed to a measure of house arrest, the flywheel Russian officials to the Chinese. In this case, most of confrontation inside the “Putin model of power” likely, there is a subtle political game, the subtext has already been launched and the conviction is of which is testing the thoughts of the Chinese that during the last Putin’s cadence the work of partners on the account of Sobyanin and Dyumin the system is not in complete Kremlin monopoly. as possible successors to Putin after the end of the Sometimes Putin has to overcome contradictions last "constitutional" cadence. and rake out possible consequences after making decisions at one of the lowest levels of the power It is too early to say that the new president is hierarchy. elected between the aforementioned politicians, however, active work on the replacement search is On the sidelines of the event, the president was underway and, as we can see, the mayor of Mos- markedly irritated by the events that occurred cow and the governor of the Tula region are on the during his departure from Moscow and in fact short list. disrupted Xi Jinping’s speech and solemn visit to St. Petersburg. Even Calvi's case went into the It is still too early to talk about the reaction of shadows - the situation with the American financier, the CHinese chairman, but after the end of the who was detained by security officials because of main panel with his participation, Xi did what the suspicions of monetary fraud and became a kind American administration was waiting for from the of symbol of the “investment attractiveness” of the Chinese economy, he began to fall off the stage. Russian Federation. Other participants managed to catch up with the Chinese leader and, thus, protect them from an In case of confirmation of information on the prepa- accident (given the authoritarian policy of Xi inside ration of Golunov's devastating reportage against the country, this incident was almost the last hope the Moscow mayor’s office, his case could make a of his opponents about the possibility of personnel significant blow to Sobyanin’s ratings, especially as changes at the head of the Communist Party). The a potential successor to Putin. events with the fall of the Chinese leader took place

8 UKRAINIAN POINT New paradigm of economic and also remove the case with Chinese techno- relations from Putin. logical expansion, which also finds resistance from American Administration) Against the background of the latest manifestation of arbitrariness of law enforcement agencies, Pu- To move away from economic deterrence meth- tin’s speech prepared in detail by Kremlin technolo- ods and form a list of goods, in any case they gists did not cause the expected response. Among willnot be under sanctions for humanitarian and the main signals are the following: environmental purposes, in particular, drugs, essential goods and energy systems. The Russian side proposes to develop generally accepted rules of economic relations of a new The last thesis has several veiled messages: formation based on the principle of priority of national interest (an attempt to give a positive 1 To the European partners about the need to signal in the direction of the Donald Trump follow a pragmatic, in the opinion of the Rus- administration) sian side, approach to the development of trade relations and to consider the existing sanctions А new model of interaction will be marked by on the subject of “humanity”. multipolarity, taking into account the position of influential regional players (attempts to find 2 To German partners, to consider the possibil- a Russian niche in the global economy and play ity of including energy extraction and transit up for the PRC) technologies in the affected countries - a tricky move against the backdrop of Merkel's state- The Nord Stream 2 project and the seizure of ments about the new energy doctrine, focus on the market by the Chinese company Huawei, ac- environmental safety, and the growth of political cording to Putin, reflect typical manifestations support for "green" in Germany. Putin is trying of confrontation between the national interests to hide Russian energy interests with a popular of countries with destructive protectionism of trend of eco-protectionism, providing the Merkel the global economy, which the heavyweights government with an additional argument in dis- of world politics are trying to support (trying to cussions with opponents of energy cooperation position themselves alongside Germany and with Russia. consolidate them around the US countering,

VOL. 1 | JUNE 2019 9 In his speech, Putin also focused on the ice of ance due to energy transit. The stability of the liberal hegemony, undermining the authority of the financial system is ensured by the accumula- US financial system, announced the liberalization tion of foreign exchange reserves, the preserva- of the Russian market and the development of a Na- tion of sufficient oil prices and "gas expansion" tional Development Strategy in the field of artificial in Europe,• civil servants (Medvedev, Siluanov, intelligence, called for the transformation of central Oreshkin), who are working to preserve the and eastern Siberia into a platform for entering the existing economic trends, serving the system markets of the Asia-Pacific region. However, due to and avoiding significant failures, trying to main- the abstract and populist nature of these parts of tain existing or get the best positions during speech reminded, in my opinion, an attempt to em- the transit of political power. Their passivity to phasize the ambitiousness of the Russian economy, attempts to change the system, not least of all, which, taking into account the plans of the presi- is due to the effect of the loud theme with Uly- dent, should take a larger share in the world (today ukayev and other persecutions of officials who Russia's share in the global economy is 3.2%). have fallen victim to the security forces;

The St. Petersburg International Economic Fo- Liberals (Kudrin, Gref, partly Nabiullina), advo- rum (SPIEF) emphasized that the competition cating the introduction of structural reforms, of the Russian elites had long gone beyond the real liberalization and digitization of the coun- traditional confrontation between the “silo- try's economy, creating conditions for attract- viki and liberals” and received a significantly ing investment, transforming the system of diverse nature, even in economic matters. The control and supervisory bodies, going beyond unprecedented conflicts at the venues of the the framework of fiscal stimulation of growth, event were at the minimum level that go within reducing the tax burden on business.The forum the Russian “deep state” between the three has shed light on several conflicting trends conventional camps: among Russian business and the political es- tablishment, can be traced in the statements of law enforcement agencies and leaders of participants from different camps: strategic state corporations (Patrushev, Chaika, Sechin, Chemezov) supporting the idea of a Chief Executive Officer of Rosneft, Igor Sechin, closed type of Russian economy with a limited is against representatives of the “family”: in his field for foreign investments, where the main speech, the country's main oilman addressed a assets are distributed between the immediate clear message to the audience - using the sanc- environment. They do not see problems in low, tions against Deripaska and Rusal, the United but steady rates of economic development States allegedly established control over part against the background of a positive trade bal- of the Russian metallurgical business. In the

10 UKRAINIAN POINT statements, Sechin sees a hidden information increasingly questioning the status of one of attack against Deripaska (a representative of Putin’s favorites. the Yeltsin group) and an attempt to actualize the issue of privatization by the state of the Ukrainian question on the forum metallurgical enterprises; During his participation in the discussion panel, Chairman of the Audit Chamber Alexei Kudrin Putin received a question about a possible meeting is against security officials and passive civil with Vladimir Zelensky. In the response of the head servants: during the forum an economist close of the Kremlin, there was a somewhat dismissive to Putin tried to restore premier ambitions attitude towards the Ukrainian president and at- by directly criticizing the existing system and tempts to address two veiled messages: demanding the development of new rules of the game. He even allowed himself to call into Putin expects to soften the rhetoric of the new question the success of the national projects Ukrainian leadership. declared by Putin, which cannot ensure eco- nomic growth by more than 1% per annum. Russia will not initiate peace talks in a bilateral or Norman format, assigning the role of the first Minister of Economic Development Dmitry issue to the newly elected President of Ukraine. Oreshkin is against the head of the Сentral Bank Elvira Nabiullina. Belonging to different eco- Forum's conclusions nomic camps provoked a conflict in one of the working sections between government officials. On the sidelines of the forum, many other cases Nabiullina harshly criticized Oreshkin’s position were discussed, from the possible resignation of on refinancing the domestic market. In gener- Alexey Miller to the receipt of Yandex encryption al, Oreshkin’s statements repeatedly provoked keys by the security forces. However, the main con- skepticism and laughter in the hall, and during clusions are: a breakfast organized under the auspices of Sberbank, the minister was actually crushed 1 The stake on the Petersburg Forum as a show- by deputy of the State Duma Andrey Makarov case of the Russian economy has not justified for a passive stance on the “Kalvi case” and an itself. In addition to Xi Jinping, UN High Rep- attempt to shift responsibility onto others (man- resentative Antonio Gutieres, Bulgarian Presi- ifestation of shadow confrontation on Putin’s dent Rumen Radev, Armenian Prime Minister commitment between the State Duma headed Nikol Pashinyan, Slovak Prime Minister Peter by Speaker Volodin and the government under Pellegrini, energy ministers of Germany, Saudi the leadership of Medvedev). Thus, Oreshkin is Arabia, Venezuela and individual representatives

VOL. 1 | JUNE 2019 11 of large businesses (BP, Huawei, ExxomMobile, not only among the power and economic elites, Royal Dutch Shell, Glencore) can be mentioned but also among representatives of the political among the distinguished guests who visited establishment who are trying to gain Putin’s or Russia. The situation with the incarceration of other influential actors ’favor in order to pre- the Russian journalist Golunov, which, apparent- serve their positions. ly, was initiated without coordination with Putin, especially overshadowed the event. 5 The economy of the Russian Federation re- quires radical transformations to accelerate 2 The siloviki and heads of state corporations are the rate of growth, it seems impossible in the deepening their own sphere of influence on the context of the expansion of security forces state’s economic policy, calling into question the to the economic sphere. At the same time, a assertion about the prospects for liberalizing positive trade balance and available gold and the Russian economy or changing the foreign foreign exchange reserves ensure the stability policy course after the end of Putin’s cadence. of the economic situation in the country and Moreover, it is increasingly difficult for the make shocks or sharp collapses impossible in Russian president to fulfill the role of arbiter the short or medium term.

and balance interests in the confrontation of the 6 The Kremlin continues to form new approach- Kremlin towers, in the context of the intensifica- es in the light of political changes in Ukraine. tion of backstage conflicts with the distribution The Russian side is awaiting initiatives from of assets within the system. Kyiv to intensify the negotiation processes at the highest level, hoping to position the re- 3 Siloviki retain dominance over the business. The sumption of the dialogue “as Ukraine’s appeal exception is the heads of state-owned compa- for help in resolving the situation in the Don- nies of strategic importance, who have their bas.” Moscow is following the completion of own positions in law enforcement agencies and the parliamentary campaign in Ukraine. Only are able to use them in individual interests; after the formation of a new coalition and gov- ernment we may wait for an active position on 4 On the eve of the end of the last “constitutional” the Ukrainian issue. presidential cadence, competition is deepening

12 UKRAINIAN POINT Relations in the "gas triangle": what to expect in the foreseeable future STANISLAV MITRAKHOVICH, A LEADING EXPERT OF THE NATIONAL ENERGY SECURITY FOUNDATION AND THE FINANCIAL UNIVERSITY (MOSCOW)

he deadline of the current transit con- “triangle” on the transit conditions starting from tract between Gazprom and Naftogaz is 2020 take place? From May 2019 there were indica- approaching, as well as considering the tions from officials on several occasions, there were change of the President of Ukraine and the also assumptions regarding the summer months. Tforthcoming change of membership of the Europe- The EC vice-president of the Energy Union, Maroš an Commission (EC) and the development of the Šefčovič, also had more specific proposals to the sanction conflict between Russia and the West, the Russian Ministry of Energy management on the EU-Ukraine-Russia gas triangle arises many intrigues. date for tripartite negotiations - but it was about the Many intrigues are the result of the interweaving of possibility of meeting before the summer holidays international relations and the internal politics of in European power structures, which usually begin individual states, the struggle within them of separate in the second half of July. interest groups for resources and influence. The num- ber of intrigues is very large, here we highlight the Then we will have to take into account several development prospects of the most important ones. important factors at once, from problems with the implementation of Nord Stream 2 (NS-2) to in- The first question that arises is: when will the tra-Ukrainian political dynamics (the newly elected substantive negotiations of the participants of the President of Ukraine, Vladimir Zelensky, does not

VOL. 1 | JUNE 2019 13 show any withdrawal from the course of P. Poro- table,” added Handog. Previously, Gazprom did not shenko, including energy, and Zelensky will be able allow itself to talk about “saving the chance”, it was to get real powers only after and in the case of always about the unconditional ability to build the successful elections to the Verkhovna Rada). NS-2 until the end of 2019 - only the impossibility of launching it at full capacity in the same period At the same time, the risks for the NS-2, which are indirectly due to the lack of infrastructure was rec- becoming increasingly obvious, encourage both ognized in Germany.

Kyiv and a significant part of the European bureau- Now it’s clear that Russia doesn’t have any real cracy (especially in the EC), which opposes the pro- instruments of pressure on Denmark, unless politi- ject. Few people think that the project will fail, but cians from Berlin take up the persistent conviction its transfer to a later date (both in terms of com- of Copenhagen, which has not yet been observed. pletion of all construction projects, and in terms of Gazprom is preparing a lawsuit against the Danish launching at full capacity when circumventing the authorities, appealing to the 1982 UN Convention renewed EU antimonopoly law) is becoming more on the Law of the Sea, claiming the right of free and more likely. passage of transport in the exclusive economic zone of the national states. Delaying the issuance Even Gazprom itself began, in the statements of top of a permit (more precisely, approval for construc- managers, to gradually recognize the impossibility tion) by the Danish national government, Gazprom, of completing the NS-2 and, moreover, launch it at will be interpreted as a violation of the right. In fact, full capacity (apparently, even the first Eugal line) from a legal point of view, the Russian company is by the end of 2019. So far we are talking only about absolutely right (the pipeline is a mode of transport stylistic changes in the statements of Gazprom and cannot be banned in the exclusive economic workers, but they also matter. Thus, at the end of zone) - but the proof of this fact in the international April 2019, during a teleconference devoted to the court may take years. publication of the 2018 IFRS report, Dmitry Khan- doga, head of Gazprom’s 512 (foreign economic Gazprom, Russia and the company Nord Stream activity) department, said that “at the moment, 2 AG are counting on Germany’s help in another there is a chance of completing the construction potential lawsuit - Gazprom’s claim to the EC on the and launching it [NS-2 ] in this [2019] year. ” “We are application of the updated EU Gas Directive to the analyzing how the issuance of the Danish permit NS-2. On 12 April 2019, the head of Nord Stream 2 will affect at one time or another, we are working on AG, Matthias Warnig, wrote a letter to EC Chairman a set of measures to keep the project in the time- Jean-Claude Juncker, in which he urged to confirm

14 UKRAINIAN POINT that NS-2 would be considered under the directive against for the sake of others. It is possible not as new, but as an existing project, which would that the appeal to the Energy Charter of Russia allow the gas pipeline to receive exceptions accord- will still be remembered "on the occasion" and ing to the old rules (as NS-1). Warnig argues that will try to make it return its signature. After the decision on the implementation of the NS-2 was that, the issue of the liberalization of access made under the previous legislation and at the time by third countries and independent companies of adoption of the new gas directive, € 5.8 billion to the Russian gas transportation system may was already invested in the construction. be raised, which Gazprom does not like.

Interestingly, Warnig is also appealing to the Energy It will be obviously difficult for Gazprom to win in Charter - a document that Russia officially refused the EU Court - again, if Germany does not interfere. to recognize as obliging to itself during the suit of Until now, Gazprom has preferred to resolve disa- ex-YUKOS shareholders to the Russian Federation greements with the EC in a negotiated way - let us in the Permanent Court of Arbitration. The problem recall the resolved issue of an antimonopoly investi- was also in the Transit Protocol and Article 7 of gation by the EC against Gazprom. But at the same the Treaty on the transit of energy carriers. Russia time, not a single Russian company among those considered that the protocol implied an obligation who fell under the sanctions of the EU Council was to provide its gas pipelines to third countries. In able to challenge them in the EU court.

addition, after the Ukrainian crisis of 2009, Moscow Gazprom calculates the option of filing suits to the accused the Energy Charter Secretariat of inac- EC itself because Gazprom is not sure that with tion and unwillingness to intervene in the problem. the help of Germany it will be possible to efficiently Therefore, in 2009, Russia withdrew from the num- (and quickly), within the rules of the updated Gas ber of states that applied the Energy Charter Treaty Directive, withdraw it from the regulation of the on a temporary basis. And in 2018, Russia even NS-2. It is also not clear how exactly the company withdrew her signature from the contract. will manage the end-sea part of the NS-2, separate from Gazprom, which runs in the territorial waters So there is a certain inconsistency. But War- of Germany - if a similar scheme of compliance with nig is trying to prove that the principles of the the Gas Directive is chosen. This new company will Energy Charter must be respected by the EU formally have to provide “transparent tariff setting” countries and the EU itself - the principles that and “ access of third persons,” what actually means some projects should not be discriminated - alternative suppliers. Under the pretext of the

VOL. 1 | JUNE 2019 15 absence of other suppliers, as shown by the expe- reasons, when there is China and Iran? rience of OPAL (a branch of the "Nord Stream-1"), you can keep the gas pipeline half empty. But, the It is clear that the American political mainstream same OPAL experience proved that problems of and the Congress are largely set differently with this type are solved in the end, but Gazprom would regard to Russia. But it is the executive power that not want to wait again for several years. Therefore, imposes sanctions, the Congress only creates an ideally, it is desirable to avoid applying the updated institutional and legal framework for it, such as the Gas Directive to the NS-2 - that is why there are notorious CAATSA law of 2017, which spelled out a the plans of filing suits to the EC. By the way, the high level of obligation for the president to impose amendments to the gas directive should still be sanctions. High, but not absolute (CAATSA is full of implemented at the national level, and there may examples when “president shall”, but not “president be already delays in the Russian favor (if Austria must”). The president can always say that he sees takes care of them, for example).Note that against American national interests differently than sup- the background of the risks posed by the European porters of the escalation of sanctions. An elementa- bureaucracy, the potential US sanctions against ry example: "The fundamental quarrel with Germany the NS-2 are less important, and there are several does not correspond to the national interests of the reasons. United States." It is indicative that no serious sanc- tions were imposed according to CAATSA against First, large-scale American sanctions against Euro- the Russian Federation. New draft laws on sanc- pean companies from among Gazprom’s partners tions are written tougher, right-handed points about will make the United States quarrel with Europeans. the need to coordinate sanctions with allies are In such scenario, the risks are too great for the removed — but it is still immanently implied that ex- Americans, especially when Washington tries to ecutive decisions take specific restrictive decisions simultaneously wage a trade war with China, and regarding specific foreign companies. a sanctions war with Russia, and prepare for a full- fledged war with Iran and Venezuela. In this situa- Congressmen cannot replace themselves as execu- tion, to allow yourself confrontation with Europe (or tive power, even if thay have a strong desire.Thirdly, with many countries of Europe) would simply mean there is a high probability that Gazprom will cope the risk of “overstraining”. Let us remind you, there with the implementation of the NS-2, even in the are a lot of companies and, respectively, countries case of the actual imposition of tough US sanc- that are associated with the NS-2. This is not only tions. Money will definitely not be a problem, the the well-known top five lenders of the project, but project is almost replenished, additional financial also the Finns, who provide logistics services, the resources can be found at least at Russian state- Germans, who supply pipes, etc. owned banks or banks of the PRC. A more difficult problem will arise in case of failure of the Swiss Secondly, the current executive power in the Unit- Allseas and the Italian Saipem to work on the un- ed States regards China as the main competitor derwater pipe-laying. Although for the same Swiss of America in the world, and not Russia, which is it is an extremely lucrative contract, they cannot understandable, taking into account the real poten- offer anything like the United States in terms of tial of the PRC at the beginning of the 21st century. orders. Therefore, there is a risk for Washington to Their own ideological themes also matter according lose face - if sanctions are imposed, and Allseas will to D. Trump's mind: he really sees the main chal- remain in the project. There is a risk of losing face if lenges for the USA from the PRC and Iran, but not Gazprom will build the final part of the underwater from Russia. The point is not that “Trump is the pipe. The vessel "Akademik Chersky", which price agent of Putin”, as the international left-liberal public is $ 1 billion, has been already purchased for this assures, but the current American president quite purpose. But the situation is on edge, nevertheless, sincerely does not consider Russia and the Russian Russia does not have complete competencies in the leader personally as a priority issue. Trump doesn’t underwater construction of pipelines, and at least have an internal psychological incentive to take the implementation of the project may be further risks and beat on the Russian Federation and on delayed. everyone who actively cooperates with it- for what

16 UKRAINIAN POINT While Gazprom is making plans on what to rules of the Third Energy Package (capacity booking do with Denmark and the Gas Directive, the auctions) without long-term commitments. concern is increasing gas injection into its UGS facilities in Europe in preparation for the Theoretically, the Kremlin may give up. De- risks of transit through Ukraine in winter of spite all its external rigidity, all the gas con- 2019/2020. The utilization of UGS in the EU is flicts of Russia with Ukraine and Belarus al- significantly higher than a year ago, and the ways contained episodes when, at first glance, download continues. This is perceived by a adamant Moscow made concessions, there number of European politicians as preparation were too many similar cases. If the EC resist- of Gazprom for difficulties with transit. Also, sa and the condition of permitting the work Gazprom managed to halt the rate of decline of NS-2 and Eugal will be a new contract with in deliveries to Europe (the first months of Ukraine with the rule “pump or pay”, Putin can 2019 were much warmer than the same period agree - if the contract is, for example, not for of 2018). 10 years, but for a shorter period of time.

But Ukraine and its allies amid problems with the In any case, Shefchovic with his requirements for a SS-2 (and continuing risks to extend the TurkStream ten-year contract leaves his post. The new composi- through the Balkans) still felt some opportunity to tion of the European Commission will probably take increase their inquiry positions. into account the possible change of forces in the European Parliament, where there is a chance that Firstly, Naftogaz filed a suit to the EC about the Euroskeptics who are sympathetic to the restora- “anticompetitive” actions of Gazprom and “abuse tion of relations between Europe and the Russian of a dominant position”. Arguments are standard: Federation will gain strength. In any case, at the Gazprom allegedly violates antimonopoly law by end, when the main negotiations take place, the obstructing the virtual reverse, by transferring tran- new composition of the EC will be chosen (most sit plans to the NS-2 and by controlling companies likely, from November). in the European market — Wingas is given as an example. A new antimonopoly investigation by the It is also possible that just about the same time, the EC is hardly worth waiting (and certainly Germany is new Ukrainian President V. Zelensky will be able to not thrilled by the fact that the executive officer of gain at least some serious de facto power. In the Naftogaz Group, Y. Vitrenko, giving a speech in the meantime, he looks very weak, he has no party in United States, “denounce” about Wingas) and Eugal parliament. De facto parliamentary elections will (a branch of the NS-2 is under construction) for be another round of presidential elections in which eurobureaucrats can be found. Zelensky will have to prove his worth. So far, it is not even clear who will be the subject of gas nego- Secondly,as a request for the volume of transit in tiations from Ukraine. Igor Kolomoisky generally the new agreement the same Vitrenko recently suggested that the current head of Naftogaz, can be indicated 60 billion cubic meters per year (previous- premiered A. Kobolev. And that is instead of updat- ly, Minister of Energy and Coal Industry of Ukraine ing the personnel (which Y. Tymoshenko would have Igor Nasalyk carefully called the volume around conducted in the energy sphere if she had won the 40 billion as the minimum acceptable for Ukraine). presidential election), the preservation of the old Moreover, Vitrenko stressed that this proposal of team is not excluded. By the way, Zelensky’s rheto- 60 billion cubic meters will be launched together ric almost completely coincides with Poroshenko’s with Ukraine and the EU. It is not excluded that the rhetoric on all key issues (Russia, Donbass, histori- EC in its current composition will also agree with cal memory, the IMF, etc.), disagreements are visible 60 billion and still require a long-term transit con- only on separate individuals (whom Poroshenko tract. The aforementioned Marosh Shefchovich has awarded, whom he appointed, etc. ). Energy plots already stated that he needed a new ten-year con- are voiced by Zelensky’s advisors A. Danilyuk and A. tract. Gazprom, of course, would like either a short- Gerus, they repeat the old line both in relations with term contract, or - ideally - a reservation of the GTS Russia and in tariffs. facilities for a short time according to the European

VOL. 1 | JUNE 2019 17 In any case, gas is not a priority for Zelensky. and not let Gazprom make money in Europe. And negotiations on this subject will not be earlier than in November. A return to the prac- So far, it can be assumed that the Ukrainian transit tice of “gas wars on New Year's Eve”, when in 2020 will decrease, most likely, not much, but to the parties had no contract on December 31, the level of about 70 billion cubic meters from 87 is not excluded. In 2006 and 2009 this led to billion cubic meters in 2018. Taking into account the a breakdown of transit. But the disruption of described difficulties with the NS-2 and the need to transit is dangerous for the reputation of both complete the construction of Eugal (the second line the supplier and the transit country. Therefore, - only by the end of 2020), the new trans-Baltic gas in fact, neither Kyiv nor Moscow will be willing pipeline may be partially launched in the second to take risks and transit will continue even half of 2020 - in early 2021, and its full capacity will without a contract for some time, followed by occur later. The second thread of the “TurkStream” reaching an agreement to pay for it using a has its own difficulties that deserve special at- certain formula, probably even backdating. tention and analysis, while we only indicate that it will be also launched to full capacity, probably not As an example can be the episode with the supply earlier than the second half of 2021. of Russian gas to Armenia in transit through Geor- gia in early 2019. The previous contract for the So, Ukraine has some time, problems are grow- transit of Russian gas to Armenia through Georgia ing gradually. Even the launch of the first line of expired on December 31, 2018, but then the transit the “TurkStream” deprives Ukraine in 2020 15.75 continued. So, they used an old contract. And only billion cubic meters of transit. It means not only in May, negotiations on the conditions of transit to lost money for the actual transportation of gas, but Armenia were completed. Natia Turnava, Deputy also potential problems with the functioning of the Minister at Ministry of Economy and Sustaina- gas distribution system in those regions where gas ble Development of Georgia, stated that Georgia supplies to Ukrainian consumers are tied to access managed to achieve an increase in transit fees and to the trunk gas going in the direction of Turkey. lower gas prices for Georgia (this is an alternative The smaller transit means that it will become more to Azerbaijani gas that private Georgian business difficult for Ukraine to supply its own consumers. It can use if it wants). The new contract with Georgia, would be rational to look for money and technical like the previous one, will be valid for two years, and solutions in advance for the reorganization of the the parties agreed to use the concluded contract gas distribution system of Ukraine. retroactively - from February 1, 2019 till the end of 2020. In 2018, 1.93 billion cubic meters of gas It would be also rational to listen to the idea of a were transported to Armenia through Georgia, the gas transmission consortium that was reanimated contract between Russia and Armenia involves the by A. Miller at the meeting with Ukrainian opposition supply of gas to 2.5 billion cubic meters annually. politicians in March 2019. It is theoretically possible to imagine a design when, under the pretext of a It is noteworthy that the Georgian opposition (it is potential increase of demand for imported gas in even more anti-Russian than the current official Europe (due to a fall of domestic European produc- government in Georgia) tried to take advantage of tion, a gradual abandonment of coal and a partial the lack of a contract with Gazprom as a reason to abandonment of nuclear power plants in some accuse its own authorities of flirting with Moscow countries), a part of the GTS will be allocated for pri- too much. Oppositional Georgian deputies (for ex- vatized transit, and someone will be invited to the ample, a member of the National Movement Roman management company as a member of Gazprom or Gotsiridze) stated that “Georgia does not need Gaz- some other Russian player. Although this option still prom’s gas” and that “for about a month and a half, looks unlikely: it is necessary to normalize relations gas from Russia goes to Armenia illegally, since between the Russian Federation and Ukraine, which there is no new agreement”. It may be very well that is not yet seen on the horizon, and a guarantee the Ukrainian opposition towards Zelensky will do of gas demand growth in Europe, but it also does something similar under the pretext of the need to not exist - the course of decarbonization in the Old pursue even more consistent anti-Russian policy World has not been canceled.

18 UKRAINIAN POINT People’s protests in Georgia: reasons, implications and possible scenarios ANTON NAYCHUK, PH. D. IN POLITICAL SCIENCES, THE HEAD OF CIVIL DIPLOMACY FUND

he wave of dismantling of the ruling politi- Plahotniuc. And now, probably, it’s time for Georgia, cal regimes has already become a charac- where public protests are subsiding, resignations teristic trend in the territory of the post-So- began and the prospect of early elections remains. viet space. It seemed that an episodic Tdemonstration in Armenia turned into early elec- The peculiarity of the Georgian example is the tions and created the prerequisites for Nikol Pashin- unexpected social explosion driver and it was a yan to come to power. The convincing victory in the deputy of the State Duma of Russia, an Orthodox presidential election in Ukraine of the non-systemic Communist, a supporter of Stalin - Sergey Gavrilov. politician Vladimir Zelensky can be interpreted as a He came to Georgia to become the head of the peaceful “electoral revolution” against the existing meeting of The Interparliamentary Assembly on Or- establishment, the results of which have a chance thodoxy - the institution established in 1994, which to finally gain a foothold after the completion of the brings together politicians from 21 countries, but parliamentary campaign. An unprecedented com- did not differ in resonant results of work, at least promise of external players took place in Moldo- until last week. Then, due to the short-sightedness va, as a result of which the coalition was formed of the organizers or because of their own leadership by pro-Russian and pro-European forces in order ambitions, the Russian deputy decided to sit in the to transform the system created under Vladimir place of the Speaker of the Georgian Parliament. Of

VOL. 1 | JUNE 2019 19 course, as Ukrainian popular wisdom says, there is discontent. Thus, the platform for a social ex- no truth in the legs, but Gavrilov proved situationally plosion was systematically formed for several that the lack of truth is also characteristic of other years, and the Russian deputy became the parts of the body. “communist-Orthodox” spark that ignited this flame. Explosion of social protests has started. To the accompaniment of an active surge in popular Given the diversity of current issues, further pop- discontent and the storming of parliament, Gavrilov ular demonstrations in Georgia became a kind of was forced to leave the premises. Unfortunately, platform for pluralism, which united various social the harsh actions of law enforcement agencies that groups against the actions of the system. Someone used gas and rubber weapons led to numerous continues to articulate their position on the so- injuries among demonstrators. About 100 protest- called “cooperation” with Russia, occupied 20% of ers were detained during direct clashes. In the end, the territories, others protect civil rights violated by the actions of the security forces not only did not law enforcement agencies during the first clashes, stop the rally, but also provoked a new round of the rest are defended by the idea of resetting the demonstrations against the regime, and the demon- institutions of power. In this struggle, opposition stration against the Russian deputy, and as a whole politicians saw a chance to receive their own divi- the meeting of the assembly turned into political dends. actions with a new list of demands. Opposition circles of the country are not completely However, to elaborate further events and forecast different. As a result of the split, two pro-European possible scenarios of the development of the parties were formed – the “Movement for Free- situation, it is necessary to focus on the model dom - European Georgia” and the “Unified National of organization of political life in Georgia and the Movement”. If distance is not a problem for love, circumstances that preceded the mass protests, then it is not an issue for political convictions. That but were equally important. At present, the Geor- is why the ideological leader of the United National gian Dream Party is the leading political force in the Movement remains Saakashvili, who cannot return country. This political force occupies a dominant to Georgia through criminal prosecution, but leaves position in parliament, controls the government this option open in case of a change in the political and even the President Salome Zurabishvili, which situation. formally belongs to another force - “The Way of Georgia”. A specific feature of the “Georgian Dream” In addition, the Alliance of Patriots of Georgia, is the key role in it of the oligarch Bidzina Ivanishvili among the non-conformist forces in the Parliament, – the sponsor, kingmaker and the beneficiary of the is represented. It is a conservative political force project. He created the conditions for the centraliza- of nationalistic persuasion, the idea of which is tion of the political power and economic assets of challenged by Euro-Atlantic integration as a stra- the country in his hands, being the Georgian version tegic vector and countering Turkish expansionism. of his colleague from Moldova. Such worldview allows them to successfully play on the field of the pro-Russian electorate and work on The concentration of levers of influence on the fragmentation of the opposition wing of Geor- the political processes in the country for one gian politics. Therefore, it is not surprising that the person has been the basis for public protests pro-European opposition is the leaders of today's for a long time. Low life indicators, uncertain- protests. ty with European integration prospects, the emergence of ambiguous signals about pos- What is the main interest of the sible rapprochement with Russia, the lack of “movements for freedom and for life”? quality reforms (even the constitutional, which was designed to provide transit to a parlia- Of course, to achieve early re-election without a mentary republic, was dictated by Ivanishvili long transition period is a peculiar Georgian modi- and did not find support in the opposition) fication of the Armenian scenario. Since, in accord- served as additional catalysts for popular ance with the constitutional changes mentioned by

20 UKRAINIAN POINT us, Georgia is moving to a parliamentary form of new convocation. What is the subtext? With Ivanish- government. Thus, in case of concessions to the vili’s financial resource, you can create a lot of polit- authorities and the successful mobilization of the ical forces which are not only able to attract elector- electorate against the background of the protests, ate displeased with the “Georgian Dream”, reflecting the opposition will have excellent opportunities to votes from rivals from the opposition, but also go at least strengthen their own position in parliament to parliament and continue to play into the hands and join the formation of a new government, at the of the Georgian oligarch. Ivanishvili even agreed to most - try to form a majority and seize power in the give his main trump card to the majority, where he “Georgian Dream” of Ivanishvili . Considering the could calmly hold loyal candidates and proposed far-sighted motives, “leaders” from different camps to make changes to the electoral code before the are ready to unite and stand up to the end until the elections would be held in 2020 (previously fixing snap elections are announced. the proportional system was planned for 2024).

What tactics does it apply and how will Surrounded by Ivanishvili, they hoped that the the Georgian Dream continue to operate? measures taken would be sufficient, but they were mistaken. Among the demands of the protesters First of all, the resonant events are a challenge for were two points - the resignation of Interior Min- Ivanishvili, because there was a threat of imbalance ister Georgy Gakharia and the early parliamentary in the country's system of government that he built. elections already mentioned by us. Both cases are Trying to keep the protest movement within accept- ambiguous and unpredictable in their consequenc- able limits, the authorities made concessions. The es for Ivanishvili and his team. first step is the resignation of Parliament Speaker Irakli Kobakhidze. Dictated by the circumstances, In the first case, the resignation of Gaharia could the decision had no behind-the-scenes subtexts, but provoke misunderstandings in the ranks of law it was not enough for the demonstrators. The next enforcement agencies and undermine the security step, a departure from the legal framework and the forces' trust in the ruling regime led by oligarch willingness to hold the next parliamentary elections Ivanishvili. Lately, Gakharia has not only proved on open proportional lists. Although such reaction himself as a loyal and reliable representative of the was positively perceived on the streets, you can management establishment, but also has signifi- look for Ivanishvili’s veiled motives, for some reason cantly increased his own influence in the ranks of it was decided to eliminate the barriers to passage the political force, acting as the leader of the power and any party that won even a small number of wing. The party is not ready to surrender Gakhar- votes would be represented in the legislature of the ia yet, and the minister does not intend to resign.

VOL. 1 | JUNE 2019 21 Moreover, considering that during the clashes about ing the entire negative effect. At the same 80 police officers were also injured, Gakharia tries time, having satisfied the demand of activists, to justify the use of force against the demonstrators Ivanishvili will get more chances to neutralize by delegating responsibility to opposition leaders the request for early parliamentary elections. who called on nationalist circles in the ranks of the They, so far, are not particularly beneficial for protesters to attack the parliament. him, because amid massive protests, the party reliably loses its electoral support and there Ivanishivili faced a difficult choice - to support the will be no time to implement the plan with the resignation and to send a positive signal to the launch of new political projects that will be demonstrators or to uphold the minister close to able to pass to parliament thanks to the zero him leaving the threat of further escalation of the passing barrier. situation. It is possible that the opaque motives of a businessman may intervene in the choice. On the The reaction of the Russian Federation adds turbu- sidelines of Georgian politics, they note that Ivanish- lence to political processes. Vladimir Putin decided vili was wary of increasing the power resource of to cut off the aviation link with Georgia in order to Gakharia, seeing him as a potential opponent. Of strike at one of the main profitable sectors of the course, he is not interested in creating conditions Georgian economy - tourism. According to prelimi- for the appearance of a strong player in the ranks of nary calculations, in case of successful restriction the “Georgian Dream”, endowed with the opportu- of the Russian tourist flow, the country may lose nity to play an independent game. In addition, after up to 5% of GDP, which will have destructive conse- numerous victims of clashes with the police, in the quences in the short term. In addition, Ivanishvili’s course of the next elections, the presence of Gakh- foundings attribute a wide stab of business inter- aria in the ranks of the party can add toxicity to her ests that link it to Russia, which makes the oligarch and alienate a part of the electorate. fear for his assets in case of further asymmetric actions by the Russian leadership. Since the use of Despite all the pros and cons, Ivanishvili main- direct communication channels in terms of protests tains the option of the minister’s resignation is dangerous for our own ratings, according to the in order to relieve tension among protesting existing rumors, attempts will be made to start a citizens. In this scenario, it is necessary to dialogue through the special representative of the find a loyal and ambitious, enforcer who is Prime Minister of Georgia on the settlement of ready to replace the current head of the minis- relations with Russia Zurab Abashidze. The latter try without allowing a split in the ranks of law has a wide range of informal contacts both in power enforcement officers and political forces, and structures and in diplomatic circles, which gives Gakharia may become the main figure in the grounds to use it as a mediator in the growing dy- anti-government demonstrations, withdraw- namics of the Russian-Georgian conflict.

22 UKRAINIAN POINT Outlines of a potential alliance between China and Russia ANTON NAYCHUK, PH. D. IN POLITICAL SCIENCES, THE HEAD OF CIVIL DIPLOMACY FUND

he deepening of the US-China economic er of NATO forces, Admiral James Stavridis, in his war, the continued confrontation of the author’s column Bloomberg, actualizes the concept liberal paradigm with populism both in Eu- of the “heartland” and the emergence of a new rope and globally, the escalation of region- center of influence in Eurasia through the prism of Tal conflicts and the struggle for the redistribution of the Russian-Chinese alliance. geopolitical balances further push the international political process into a turbulent environment, form- American observers pay great attention to this topic ing prerequisites for fierce competition of actors or against the background of the hard course of the the beginnings of potential situational alliances. Trump administration in the Chinese direction, since the nature of the modern dialogue between the In the American information space, there are more Kremlin and the Beijing provokes many important and more publications about the possibility of issues. The unprecedented relationship between of- rapprochement between the Russian Federation ficial Moscow and Beijing will it be the beginning of and the People’s Republic of China as one of the geopolitical shifts and the creation of a new alliance manifestations of modern geopolitical trends. Jour- or warming of relations is situational, caused by nalist of Washington Post Adam Taylor sees a high the temporary rapprochement of individual national probability of deepening the partnership between interests? What will be the format of further interac- countries in the economic plane. Former command- tion between? Let's try to find answers.

VOL. 1 | JUNE 2019 23 Prerequisites of alliance was disturbed by the American hawk, if it can be expressed metaphorically. In China, they strongly support the transforma- tion of the traditional architecture of international Favorable circumstances for rapprochement with relations, advocate the multi-polar world and the Beijing felt in Moscow. The euphoria over the con- development of new rules of the game that can limit clusion of a “big deal” with the Americans and the US dominance in the global economy and the tools redistribution of the world, taking into account the of Washington’s economic deterrence in the form of Kremlin, quickly dried up, and the work of finding sanctions. Redefining the role of supranational eco- ways for compromise turned into the format of nomic associations, distancing European countries special services communication and the Bolton-Pa- from Washington, with America losing its reputation trushev channel. So far, neither Trump's personal as a stable geopolitical partner, further fragmenta- sympathy in Russia, nor the presence of so-called tion of political processes with the increasing role of chemistry between the leaders of the two countries state sovereignty in international relations — these worked, because as if the American president was trends fully meet Chinese national interests, as they not inspired by his amazing personal relationships, help Beijing to expand its economic expansion and smell or favorable aura of his colleague, all attempts encroach on the role of the main geopolitical leader. to reach agreements broke against the wall of resist- ance of the US legislative branch. The mechanism of It is not surprising that during the St. Peters- checks and balances has proven to be an effective burg International Economic Forum, Xi Jin- tool to counteract the subjective will of the president, ping enjoyed listening to Putin’s speech and which is not understandable for the Russians at all. emphasized his special attitude to Russian partners. Russia is making maximum efforts At the same time, the Kremlin is also disappointed and doing “dirty work” in an attempt to bring by the lack of clear lines for stabilizing the politi- the new political and economic reality closer, cal dialogue with the EU. Separate gestures, like which correlates so closely with the national readiness of the return of the Russian delegation to interests of China. PACE or the non-systemic narrative of certain repre- sentatives of the European political establishment Until recently, the existing format of partnership about the need to normalize relations with Russia with Russia and the behavior of China in the inter- does not fully satisfy the Russian leadership. Even national arena fully corresponded to the traditions the construction of the “Nord Stream - 2” suffers of Chinese diplomacy - without direct intervention, resistance within Europe (although it is successfully monitor conflicts in the search for opportunities to moving towards its completion), then we can talk realize their own interests. While the Russian side at about sanctions, the removal of which has a par- all possible sites called for a new world pattern with ticular political importance for Russia, and in the various political centers, spent resources on satis- long term economic need. fying its own geopolitical ambitions and struggled with abstract American imperialism, China stood In such conditions, the actualization of the concept aside and was already beginning to receive divi- of "turn to the east" and rapprochement with China dends from the new geopolitical realities. However, can become: Donald Trump appeared on the horizon with his specific foreign policy approaches. effective tactics of blackmailing European business, which will encourage the leadership The harsh and selfish methods of the American of their countries not to restrict access to the administration have managed to remove even Xi Russian market; Jinping from the balanced world of Confucianism and Taoism. As a result, instead of accepting the a direct signal from the Trump administration centenary agreement, Washington and Beijing are about Russia's readiness to move to China in increasingly drawn into opposition to tariffs and case if Washington continues its containment economic constraints, prompting China to take policy in the Russian direction and there are no more actions. The serenity of the Chinese dragon concessions on key issues;

24 UKRAINIAN POINT capitalize on its own energy reserves by in- wary of investing in the real sector of the Russian creasing the export of gas and oil, ensure economy, not hurrying to accumulate assets in additional revenues to the budget and under- Russian companies, join in the implementation of line its geopolitical importance to the Russian large-scale infrastructure projects or lend to high- population. tech production. On the way of Chinese capital in Russia, there are features of the administrative More and more convincingly on the sidelines regime, the specifics of the work of control instanc- of Russian politics comes the voice of sup- es for the spread of financial flows and low level of porters of the idea of deepening partnership investment attractiveness of the non-energy sectors with China - the conditional "Chinese party", of the Russian economy. Isolated cases of success- which includes such heavyweights as Shuval- ful interaction are more symbolic (like building a ov, Timchenko, Chemezov, Sechin. Pursuing bridge over the Amur river) and do not fall under the individual goals of economic nature, together criteria of strategic importance. they form an influential lobby surrounded by Putin, which supports the idea of rapproche- American sanctions are also deterrent to Chinese ment with the PRC, positioning the Eastern business. Chinese companies are afraid of falling European policy direction as a priority. under economic restrictions and do not intend to take additional risks even during the active phase of Both in Russia and in China there are grounds and the trade war with the United States. a request for the deepening of bilateral ties in the economic, military-technical and political spheres. However, where business cannot produce results At the same time, each of these cases has both independently, there is space for state intervention, favorable and problematic aspects, which are re- and the lack of market guarantees can be hidden flected in the agreed format of interaction between by high political agreements. It was an effective Moscow and Beijing and determine progress in the dialogue between the leaders of the two countries formation of a full-fledged union. that became a catalyst for economic interaction and allowed Chinese funds to be attracted to the Economy Russian economy:

Despite loud statements about the market pros- 10% of shares of the petrochemical company pects, private Chinese business has always been Sibur for an estimated amount of $ 13 billion

VOL. 1 | JUNE 2019 25 were acquired by the Silk Road Fund; the opposite direction are energy carriers and other mineral products (their share is about 76%). More- 9.9% of the shares of the Yamal LNG production over, gas and oil are the main categories that have and supply of liquefied natural gas for an esti- the prospect of expanding their own representation mated amount of $ 1 billion are owned by the in the Chinese market and still remain key targets of same Silk Road Fund, and 20% for an estimated interest from the Chinese partners. amount of $ 2.1 billion acquired by the China National Petroleum Corporation. Also, Chinese It seems that under the conditions of sanctions state-owned banks opened credit lines for a pressure in the Kremlin, they are not trying to think in project of $ 12 billion; global categories, increasingly focusing on making real profit with the help of the energy sector. Active $ 8 billion - the amount of the contract of the work is underway on the construction of the Power Russian State Development Corporation VEB of Siberia gas pipeline with a throughput capacity with the Chinese Development Bank was given of 38 billion m3 gas per year. Although the start of on the development of infrastructure projects operation of the flow is scheduled on December 1, and the agro-industrial complex of the Far East 2019, Gazprom has already begun negotiations not and Siberia in accordance with the “Program for only on the earliest loading of the pipe, but also on the development of Russian-Chinese cooperation holding another transit channel in the direction of for 2018-2024” adopted at the state level. China - Power of Siberia-2 with a throughput of about 30 billion m3. Another gas pipeline is designed to Thus, the fundamental principles of the rare provide gas supplies to the north-western regions of success of economic cooperation between China and to establish a universal transit infrastruc- Russia and China are the direct agreements ture, thanks to which gas will follow the Beijing along of the top leadership of the two states and the eastern and western routes, securing the Russian the energy potential of Moscow. First of all, Federation as the main exporter of raw materials. thanks to these factors, the parties managed to significantly increase trade, which reached $ Among the factors favorable for Russia, which 108 billion with a positive balance for Russia of can increase revenues to the state budget due $ 3,8 and secured the China in the status of a to an increase in exports to the PRC and lay the priority trading partner. foundation for a lengthy Russian-Chinese ener- gy union, the following can be highlighted: However, the upward trend in trade relations between countries is not characterized by a high level of diver- preservation of high production rates and the sification of the structure of Russian exports. If the introduction of a coal generation replacement Russians import goods with a high level of value add- system to improve the environmental situation ed from the Beijing, the main categories of sales in led to an increase in gas imports over the last period by more than 30%. Traditional sources of raw materials, like Turkmenistan, Uzbekistan and Kazakhstan, will not be able to fully meet the demand while maintaining the current trend;

uncertainty with the development scenarios of a trade war with the United States, prompts China to protect itself in terms of energy, as over time, the transit of liquefied natural gas via the south- the Chinese side will not mind using the con- ern route through the Strait of Malacca can lead solidated infrastructure mainly at the Russian to additional risks, in particular hypothetical US expense, allowing partners to receive certain attempts to block transit. financial benefits.

Taking into account all the pros and cons of in- If the US administration does not change its ap- creasing the transit of gas from Russian territory is proach to settling the Chinese case, and Putin once very interesting for China. The key factor that may again finds mutual understanding with Xi, there is a hinder the ambitious plans of both countries is the high likelihood of Chinese-Russian rapprochement in price of gas. At any cost the Chinese side is trying the development of energy and transit partnership. to bring down the price, it successfully managed to The Russian side should hope to receive the status reach in negotiations with the countries of Central of an equal partner in the eyes of Chinese diplomacy, Asia, finding arguments in the form of opening credit so the Kremlin must accept the role of the second lines or exchanging for Chinese products. However, number in a possible alliance or continue to pursue for the Kremlin, it is crucial to set prices for at least abstract geopolitical ambitions. the European market in order to prevent imbalance and provide EU partners with the opportunity to also Military technical case and geopolitics challenge cheaper energy carriers. In contrast to the economic component, the issues Another export item that provides a positive balance of expanding military-technical cooperation do not for the Russian side in bilateral relations is oil. In demonstrate high rates yet, remaining mainly within 2018, China increased its imports of raw materials the framework of declarations. The sale of Russian from Russia to 71 million tons, and a streamlined military equipment is not proportional to the trade in and well-developed infrastructure leaves addition- energy carriers, although Beijing is showing inter- al opportunities for expanding sales in 2020. The est in equipment developed in Russia. In particular, transit of oil of Russian origin is carried out by China has already received the C-400 “Triumph”, convenient and safe routes (the Eastern Siberia - the Russian-made anti-aircraft missile system, and Pacific Ocean oil pipeline, through the territory of under a contract dated 2015, 24 Su-35 fighters have Kazakhstan, by sea transport), which corresponds to entered the service of the Chinese army. Chinese interests through the prism of security and logical aspects. Rostec, chaired by Chemezov, who is close to Putin, and with the support of Russia's Defense Minister In addition to raw materials, not being able to Sergei Shoigu, is working to increase his own rep- offer technological products of a new gener- resentation on the Chinese market, announcing new ation, the Russian corporate business plans contracts. However, the problem of all-round deep- to receive dividends from the transit potential ening of cooperation in this area lies in the peculi- of its own country. Under the pretext of state intentions to join the implementation of Chi- na’s geopolitical concept of “One Belt, One Road,” oligarch Gennady Timchenko, who is close to Putin, successfully develops the idea of a northern sea route as a transport corridor between the EU and China, receiving budget- ary preferences and tax incentives. Probably arities of the Chinese approach to modernizing its to remain on the side of China. The fact is that the own weapons - buy a foreign counterpart and redo it hypothetical reconciliation between the two Koreas with the best characteristics. In other words, if China or the opening of the North Korean market for the acquired the pride of the Russian military-industrial geopolitical opponents (South Korea, Japan) de- complex S-400, the appearance of the S-500 should prives China of the instrument of controlled destabili- be expected in by the Chinese side. Attempts to keep zation in the regiona, and Pyongyang was behind the the secret of its own technology slow the dynamics scenes. The theoretical output of North Korea from of export growth. under the influence of China to strengthen its com- petitors is not in Beijing’s strategic interests. That At the same time, cooperation at the level of defense is why the support of China in this matter can be a ministries, declaring common positions on security constructive diplomatic step for Russia on the way to issues is an effective instrument of pressure on the creating a situational alliance, and the platform of the United States, which is important for both Russia and UN Security Council will become one of the instru- China in strengthening its own bargaining positions ments of geopolitical interaction, if it is necessary. and inducing Washington to engage in dialogue. There are prerequisites for a joint of Russian-Chinese game on the topic of Iran and the Middle East as a In terms of partnership security, both countries have whole, if Patrushev and Bolton fail to identify effec- several areas for interaction. First of all, we can dis- tive modalities of mutual understanding between tinguish the case of North Korea. Annoyed by Donald Moscow and Washington on this issue. Trump, the sides repeatedly declared that their approaches to a diplomatic settlement of the North However, despite the noticeable reasons for rap- Korean problem were symmetrical. In the absence prochement in the sphere of geopolitical interests of of signals from Washington regarding readiness to China, in the territorial zones of conditional control overcome differences with Moscow (including the of Russia, Beijing allows itself to pursue expansionist Ukrainian case) with a high probability in the Kremlin policies, which cannot but irritate the Kremlin. China

28 UKRAINIAN POINT did not stop at a peaceful economic intervention in which ideological differences and political contra- Central Asia, limiting the influence of Moscow in the dictions were overcome by the idea of countering post-Soviet space. Taking advantage of the deepen- a common enemy, the USSR. Almost half a century ing differences in Russian-Belarusian relations, the later, the cardinal geopolitical transformations have Chinese side is successfully applying “investment opened up opportunities for the Russian-Chinese diplomacy” in Belarus. While Russia is engaged in rapprochement where the United States can become deterring abstract threats of NATO expansion in the situational driver. border states, thanks to the implementation of the Silk Road concept in the region, another influential Although it is too early to talk about a full-fledged player has emerged, which economically prevails union between Russia and China through the binding over Russia's capabilities. of national interests and mutual caution in building two-way communication, the synchronization of Balancing mutual geopolitical interests re- approaches of making a new architecture of inter- quires concessions on both sides. If Russia national relations and economic benefits act as cannot argue with China in economic projects, catalysts for the process of deepening partnerships. the security policy component of cooperation Keeping the US administration’s hard line in the Chi- leaves a noticeable potential and allows them nese direction alongside Trump’s possible re-election to work together to develop a mutually benefi- in the next presidential campaign will push Beijing cial security system in the region. Perhaps the toward integrated counteraction tactics, one of platform for communication and the intro- which will be - using Russia for its own purposes in duction of agreements may be the Shanghai the diplomatic arena and as a part of energy securi- Cooperation Organization. ty. A favorable factor in expanding cooperation is a remarkable personal contact between the leaders of In his book “The Shattered World”, American spe- the two countries, which makes it possible to regu- cialist Richard Haas described the formation of the late economic and political areas of cooperation at American-Chinese Union as an alliance model for the state level.

VOL. 1 | JUNE 2019 29 Shadow politics

News 1

The contradictory personnel decisions of the President of Ukraine Vladimir Zelensky negatively affected the ratings of the “Servants of the People”, which, according to various estimates, decreased by 2-3%. Such triggers of a certain drawdown of ratings include the representation of new governors with an am- biguous reputation in several areas. In Odessa region - Andrei Andreichikov, who is associated with the odious politician Gennady Chekita (accused of corrupt activities and "anti-Maidan" views). In Kherson - Yuri Gusev (government procurement scandals for the army, close to Valeriy Khoroshkovsky, former deputy prime minister and head of the SBU of Yanukovich’s time). In Cherkassky region – Igor Shevchenko (lack of experience, real estate business in the Russian Federation). In Donetsk – Pavel Kirilenko (rumored to be in good relations with the mayor of Kharkov, Gennady Kernes, and his brother lives in the occupied territories of Donetsk region, participating in the fighting on the side of the separatists). In Lugansk – the rector of the Lugansk University of Internal Affairs (one of the sons lives in Russia and has Russian citizenship, accused of being loyal to the ideas of the “Russian world”). In Kyiv, Mikhail Bno-Ayriyan (worked in the diplomatic missions of Ukraine in Russia, built a swift career at the Foreign Ministry under Konstantin Gryshchenko, fellow student of the leader of the Servant of the People Party Dmitry Razumkov while studying at the Insti- tute of International Relations. Some of the new governors have already aroused public protests. In addi- tion, ZE team appointed fairly weak candidates with a negative reputation in majority districts, also affected the party’s ratings and could lead to a lack of votes in the elections.

News 2

On the sidelines of Russian politics, an increasing decline in the political weight of Russian Prime Minister Dmitry Medvedev is being discussed. A number of court cases against his entourage and the strengthening of competitors in confronting the centers of influence of the Russian corporate-political system have sig- nificantly weakened political positions, provoking more rumors about his possible resignation. An attempt to use the national projects which are important for Vladimir Putin to remedy the situation did not yield any results and, conversely, they oppose the current prime minister, despite the low themes of their implemen- tation. According to rumors, Dmitry Medvedev is retained in his post for the following reasons: against the background of falling presidential ratings, he is used as a tool to divert the blow from Vladimir Putin, to appoint the new prime minister as the successor to the president, and yet the system is not ready for this.

30 UKRAINIAN POINT News 3

The headquarters of Yulia Tymoshenko is counting on the formation of a coalition with the party “Servant of the People”. To achieve the goal "Batkivschyna" needs to follow three conditions.

Firstly, “Ze!” team shouldn't implement the program at the maximum level and shouldn't receive a majority of voices, because it will gradually oust Yulia Vladimirovna to the periphery of Ukrainian politics.

Secondly, in case of potential agreements between the “servant of the people” and the Golos party (such alliance is actively supported by oligarch Viktor Pinchuk, with whom Svyatoslav Vakarchuk’s political project is linked), they also could not gain more than half of the seats in the new convocation parliament.

Thirdly, the political forces that could theoretically enter into a coalition with the “servant of the people” not to pass the 5% barrier. In particular, "Strength and Honor" by Igor Smeshko.

In case of a positive set of circumstances and the need for “Batkivshchyna” as another member of the co- alition, Yulia Tymoshenko will try to realize her own political ambitions, undermined during the presidential campaign. The maximum result for her would be to obtain the position of Prime Minister of Ukraine, permis- sible - the position of speaker in the Verkhovna Rada and obtaining for her own political party the quota of the Minister of Energy and Coal Industry in the new government.

News 4

Despite active talks on readiness of appointing the former ambassador of the Russian Federation to Be- larus, Mikhail Babich to the Presidential Administration to replace Vladimir Surkov and entrusting him with the curatorial authority of politics in the Ukrainian direction, the Kremlin chose a different role for the politician. He became the Deputy Minister of Economic Development of Dmitry Oreshkin, who, together with the Minister of Economy of the Republic of Belarus Dmitry Krutoy, did not accidentally become the head of a specially created commission for the development of integration processes within the framework of the Un- ion State. According to rumors, Vladimir Putin is seriously determined to demonstrate success in bringing together the economies of both countries and adopt a roadmap of interaction before the end of this year, so Babich’s work will focus on the Belarusian case. He is called upon to become the gray cardinal of bilateral negotiations within the framework of the Oreshkin-Krutoy commission and to send a clear signal to Alexan- der Lukashenko about the seriousness of the Kremlin’s intentions.

VOL. 1 | JUNE 2019 31 EDITORIAL BOARD: NAYCHUK ANTON PH.D. POLITOLOGIST. EXECUTIVE DIRECTOR OF PROGRESSIVE RESEARCHES INTERNATIONAL CENTER. ENGAGED IN POLITICAL CONSULTING AND ELABORATION OF POLITICAL COMMUNICATION TRAININGS. AUTHOR OF SCIENTIFIC AND ANALYTICAL PUBLICATIONS IN UKRAINE AND ABROAD.

KASAP EUGEN POLITICAL ENGINEER, JOURNALIST, CIVIL ACTIVIST. EXPERT OF PROGRESSIVE, ASSISTANT AND CONSULTANT OF UKRAINIAN STATE DEPUTY. FIDUCIARY OF KAMEN- ETS-PODOLSKIY MAYOR IN 2015. AUTHOR OF SCIENTIFIC AND PUBLICISTIC ARTICLES.

HNYDYUK OLEKSANDR POLITICAL ENGINEER, AUTHOR OF SCIENTIFIC AND PUBLICIST ARTICLES IN GEOPOLITICS AND ELECTORAL SYSTEM. WORKS WITH SOCIOLOGICAL RESEARCHES.