Alexander Mercouris, for Russia Insider wrote:
Signs That Russia Has Tired of Waiting for West to Restrain Kiev
Signs that Russia believes hopes for a negotiated solution are dim
Appears to have allowed the rebel to go on an offensive
Is anticipating the possibility of yet more sanctions
There have been many important days in the Ukrainian conflict but it is possible 23rd January 2015 may turn out to be a key day. Consider what happened:
The Russian Security Council met. This is the Russian government’s key decision making body on questions of foreign, defence and security policy. As President and Commander in Chief, Putin chairs it.
We do not have a full account of what was said. What we do know is that the situation in Ukraine was the topic under discussion.
Putin's website has provided us with an extract from the address he made to open the meeting. It repays quoting this extract in full:
“Good afternoon, colleagues.
We are witnessing a dramatic deterioration of the situation in southeastern Ukraine, in Donetsk People’s Republic and Lugansk People’s Republic. In this connection I would like to inform you again that a week ago, on Thursday, I sent a letter to the President of Ukraine, a written proposal to withdraw heavy weapons – artillery and multiple rocket launchers – to such a distance from which it would be impossible to fire at populated areas.
I would like to inform you further that this proposal almost completely coincided with the requirements of the official Kiev. You know that there may be one disputed area along the line of separation between the parties to the conflict. So we suggested that weapons and heavy equipment should be withdrawn to the line that Kiev authorities themselves consider fair and corresponding to the agreements reached in Minsk on September 19, 2014.
Unfortunately, we received no clear answer to our proposal; in fact, we also saw the reverse action, namely the Kiev government has given an official order to launch large-scale combat operations along almost the entire perimeter of contact between the opposing sides.
The result: dozens of dead and wounded, and not only among servicemen on both sides, but, even more tragically, there has been loss of life among the civilian population, including children, the elderly and women. The artillery, multiple rocket launchers and aircraft are firing indiscriminately, directly at densely populated areas.
All of this is happening to the accompaniment of propaganda slogans about the quest for peace and the search for those responsible. The responsibility is borne by those who issue such criminal orders. The people who do this should know that there is no other way to solve such conflicts but through peace negotiations and political means. We often hear, including from today’s official Kiev, that this is their preferred method of addressing issues, but the reality is quite different. I hope that common sense will eventually triumph.
I would like to call for a moment of silence to honour the victims, including those who died at a bus stop in Donetsk.
(Moment of silence.)”
The western media has focused on that part of this address where Putin refers to the “criminal orders” that have led to the indiscriminate bombing and shelling of civilian areas by the Ukrainian military.
Those are indeed important words. They are not however the most important words in this address.
The most important words in the address are the ones where Putin refers to the political leaders in Kiev not as “the government of Ukraine” or “the Ukrainian government” or even “the Ukrainian side” but as “official Kiev” or “the Kiev authorities”.
This is extraordinary language since it calls into question for the first time the degree to which the political leaders in Kiev represent Ukraine as a whole, as opposed to just Kiev.
Putin does refer to Poroshenko as “the President of Ukraine”, something he has done since shortly after Poroshenko’s election.
The Russians have always treated Poroshenko differently from other members of the Ukrainian government ever since Poroshenko was elected President. They have represented him as a moderate surrounded by extremists and on that basis they have tried to negotiate with him.
Whether there is any truth to the idea of "Poroshenko the moderate" is another matter. Since Poroshenko is the President the Russians have however had no alternative but to persist with it if they are going to negotiate with the Ukrainian government at all.
The fact that Putin still refers to Poroshenko as “the President of Ukraine” suggests the Russians have still not completely given up on this idea. However, the wording suggests that they may be coming close to doing so. Putin conspicuously does not refer to Poroshenko by name. His comments are factual and cold. This suggests a relationship on the point of collapse.
As important as Putin’s words about the Ukrainian government are the words Putin uses to describe the two east Ukrainian rebel republics.
For the first time Putin refers to them - without qualification - by the names they have given themselves: "the Donetsk People's Republic" and "the Lugansk People's Republic".
This is the closest Putin has yet come to treating these republics as legitimate political entities. Taken together with his words he used to describe the Ukrainian government, it suggests that Putin in his own mind no longer thinks of the Ukrainian government as the legitimate authority in the Donbass.
To those who will argue that this is to over interpret Putin’s words, I would point out that Putin is the President of Russia and a trained lawyer who chooses his words carefully and that these words were published on his website.
Later on the same day, Putin has also had a telephone conversation with Lukashenko, the President of Belarus.
Lukashenko is a key Russian ally and a key partner in the Ukrainian conflict. He has not always seen eye to eye with the Russians in relation to it.
We do not know what Putin and Lukashenko said to each other but we do know that Ukraine was the subject of the discussion.
It looks as if Putin, after meeting with his Security Council, spoke to Lukashenko to tell him what decisions had been taken there in order to keep Lukashenko both informed and on side.
Russia’s other key ally, Nazarbayev the President of Kazakhstan, will surely also have been kept informed of what decisions the Russians have taken.
Meanwhile, on the same day at the World Economic Forum in Davos, Shuvalov, the Russian Deputy Prime Minister in overall charge of the economy, warned the delegates there that Russia will not submit to sanctions and will not change its government because of them. One of Russia’s leading bankers, Kostin, who heads VTB Bank, also warned the delegates at Davos of any attempt to exclude Russian banks from the SWIFT interbank payment system.
Shuvalov also made it clear in his comments in Davos that Russia is in continuous contact with China and that it is expecting both political and economic support from there. It is a certainty that the Russians are consulting with the Chinese before every decision they take and that the Chinese have been told of whatever was discussed and of what decisions were taken concerning Ukraine at the meeting of Russia’s Security Council.
The Financial Times has a good summary of the comments Shuvalov and Kostin made in Davos. I attach it below.
Meanwhile, rounding out Russian news relating to Ukraine in a packed day, the Russian Justice Ministry announced that a number of Ukrainian nationalist organisations, including Right Sector have been banned from operating on Russian territory. Some of us are surprised that they had not been banned already.
Elsewhere, in Ukraine itself, the Donetsk rebel leader Zakharchenko announced that the Minsk Memorandum no longer applies, confirmed that the secession of the Donetsk and Lugansk People’s Republics from Ukraine is final and said that they are now committed to liberating all their territory from Ukraine.
The Minsk Memorandum is not the same document as the Minsk Protocol, which was the original ceasefire agreement that was signed on 5th September 2014. It is the technical follow-up document that was signed on 19th September 2014.
The Minsk Memorandum purported to set out the detailed terms of the ceasefire that had been agreed by the Minsk Protocol of 5th September 2014. It set out the ceasefire line and provided for the mutual withdrawal of heavy weapons by each side for a distance of 15 km from the ceasefire line.
Neither the Minsk Protocol nor the Minsk Memorandum have ever been implemented. The constitutional talks required by the Minsk Protocol have never taken place. Ukraine has unilaterally cancelled the law of special status it granted the rebel regions of the Donbass in accordance with the Minsk Protocol and has failed to agree terms or recognise the elections that were held there in November. Neither side has withdrawn its troops to the ceasefire line and the withdrawal of heavy weapons has never happened.
By saying the Minsk Memorandum no longer applies Zakharchenko is simply stating the obvious and has freed the rebels to pursue offensive operations, which it is currently what they are doing with reports of rebel advances on Mariupol and Debaltsevo.
Now it may be that all these statements made on 23rd January 2015 amount to little. It could be that they were not coordinated and that Russian policy has not changed.
However, on the face of it, they do suggest a hardening of the Russian position, suggesting that the Russians have for the moment simply given up hope of a negotiated solution to the war, which can only happen if there is concerted Western pressure on Kiev, of which there is no sign.
If this is right, then the Russians have given the rebels the green light to pursue their offensive whilst Shuvalov’s and Kostin’s comments suggest they are preparing to batten down the hatches in anticipation of more Western sanctions to come.
From the Financial Times
One of Russia’s top bankers on Friday warned that excluding the country from the Swift banking payment system would be tantamount to “war”.
The suggestion that Russia could be shut out of Swift triggered widespread alarm in Moscow’s financial community when it was floated by western politicians last summer. Russia’s banks rely heavily on the Belgium-based payments system for both domestic and international payments. However, the move was at the time considered too punitive a sanction, being described by one adviser as “the nuclear option”.
Speaking at a panel in Davos on Friday Andrei Kostin, chief executive of VTB, Russia’s second-largest bank, said: “If there is no Swift, there is no banking . . . relationship, it means that the countries are on the verge of war, or they are definitely in a cold war.”
“The next day, the Russian and American ambassadors would have to leave the capitals,” he added.
Mr Kostin’s comments highlight how the west’s sanctions regime is creating a sense of anger and defiance among the Russian political and business elite.
“The more you press Russia, I do not think the situation will change,” he said, pointing out that the country was moving to reduce its reliance on western payment systems such as Swift.
“We have already created a domestic alternative to the Swift system . . . and we need to create alternatives internationally.”
He drew attention to efforts under way between Russia and China to create a separate platform of their own, outside western control.
Igor Shuvalov, Russia’s deputy prime minister, echoed this theme. “We are developing our eastern vector,” Mr Shuvalov declared, pointing out that although efforts to build links with China had been under way before the crisis, they had dramatically intensified since sanctions started, as Russia looked for alternatives to the west.
Mr Shuvalov said that the so-called Bric countries (Brazil, Russia, India and China) were ready to help each other in a financial crisis too. “Large Chinese investors are coming to us,” he said.
The “pivot to Asia” has become a key part of Vladimir Putin’s foreign policy since the breakdown in relations with the west over Ukraine. While several flagship deals have been signed, such as the $400bn contract to supply Russian gas to China for 30 years last May, few Russian policy makers or businesspeople believe China can save the Russian economy from a painful recession.
“The present situation looks like it is softer than [the 2008-09 financial crisis] but we are going into a long crisis situation and it may be protracted,” Mr Shuvalov said.
But he added that foreign pressure would not succeed in changing the political leadership of the country.
“We will survive any hardship in the country — eat less food, use less electricity,” he said.
Alexei Kudrin, the respected former finance minister, predicted Russia could see capital outflows of $90bn this year after a record $151bn in 2014. “We should clearly understand the price we are paying for sanctions,” he said.