Russia

Russia denies it has a submarine in the area but the search continues

For the last six days, Sweden’s Navy has been in full Hunt for Red October-mode. Ever since a mysterious, unidentified vessel was spotted south of Stockholm, Swedish ships and helicopters have been searching the area for what media reports says is a damaged Russian submarine that has surreptitiously made its way into the Nordic country’s waters. Those reports were only amplified when, on Oct. 18, Sweden reportedly intercepted communications between transmitters in the Stockholm archipelago and the Russian town of Kalingrad. If all that activity sounds like it was lifted from the screenplay of a 1980s Hollywood military thriller, it raises a very real question. Twenty-five years after the fall of the Berlin Wall, has the Cold War returned?

According to Swedish newspaper Svenska Dagbladet, the first sign that something was amiss came on Oct. 16, when Swedish intelligence detected a distress call from somewhere in the Stockholm archipelago. The next day, two civilians reported spotting a submarine-like object in waters about than 40 kilometers east of Stockholm. Sending out 200 troops on corvettes and minesweepers, the military began scouring the area for what it said was most likely a foreign vessel conducting operations in Swedish waters. The sightings, which have now increased to five, took place in “an area that is of interest to a foreign power,” said Swedish Rear Admiral Anders Grenstad at a press conference on Oct. 19. “This does not belong to us. It is a foreign vessel and we have no indications that there would be any civilians involved in underwater activity.”

Although Swedish military and government officials have not identified the nationality of the craft, nor even confirmed that it is indeed a submarine, Dagbladet was less circumspect, publishing stories about the encrypted Russian transmissions and noting that a Russian tanker supposed to be sailing to Denmark had instead been zigzagging through the Stockholm archipelago for the past week, possibly in an attempt to aid a damaged submarine. The Russian government has denied it has a submarine in the area.

Konstantin Sivkov, a retired navy officer of the former Soviet Union who is now head of the Academy of Geopolitical Problems, a think tank with ties to the Russian military, said that surveillance in foreign waters was the normal practice of many navies but that it was very unlikely that a Russian submarine was currently in Swedish waters.

“Judging by the available information, there was no submarine. Had there been a submarine stranded in Swedish waters, and if it had been sighted surfacing and heard giving audio transmissions, it would be found in 3-4 hours maximum,” he told TIME.

Magnus Nordenman, deputy director of the Brent Scowcroft Center on International Security in Washington, D.C., suggests that the presence of a clandestine vessel in the Nordic region would certainly fit within recent Russian practices. “It’s one more data point in a larger pattern,” Nordenman says. “Over the past three years, and especially in the last year, the Russians have made more and more incursions into Swedish airspace. There have been close calls between their ships too.”

And it’s not just the Swedes who are the target. In March, Russia staged a large-scale military drill close to the Finnish border, and its fighter jets have violated Finnish airspace five times already this year. In 2013, Russian jets challenged Danish airspace more than 40 times—double the number of the previous year—and are on track to surpass that number this year. “I keep arguing that the Baltic Sea area is the next friction point between an assertive Russia and NATO,” says Nordenman. “It looks like a peaceful, prosperous area, but when it comes to security, it’s quite soft.”

Ironically, part of that softness comes precisely from the distance that the Nordic countries have tried to put between themselves and the Cold War era. With threats to their territorial integrity greatly diminished, Sweden and Denmark have, in recent years, made the strategic decision to dedicate the better part of their military budgets toward establishing a global presence (in Iraq and Afghanistan, among other places). As a result, Sweden has reduced its number of submarines to just five; Denmark has gotten rid of them altogether. “In part, it was symbolic,” says Johannes Nordby, a commander in the Danish navy and security expert at the Royal Danish Defence College. “Submarines represented a Cold War weapon, and the Cold War was over.”

Or so the Nordics thought. With the conflict in Ukraine, Putin has made clear his desire to both re-establish a broader sphere of Russian influence and to stand up to NATO and the European Union. “The Cold War was a political and ideological war as much as it was a military one, and we don’t have those [elements] now,” says Nordby. “But it was also about influence. I would argue that what’s happening now is a sign of Russia wanting a new and more significant role in the Baltic region, and internationally.”

Russia’s increased assertiveness is already influencing political debate in the Nordic region. Neither Finland nor Sweden are members of NATO, and with public opinion running strongly against, neither shows any immediate inclination to join. But both signed a pact in August that would increase their cooperation with the alliance, and would allow NATO troops to assist in the two countries in case of emergencies, and there may be more concessions to come. “If the submarine proves to be Russian,” says Harri Mikkola, a global security researcher at the Finnish Institute of International Affairs, “it will further increase security policy discussions in Finland. Nato discussion will intensify, but even more so the discussion concerning the need to deepen military cooperation with Sweden.” And this week, while debates broke out in the Danish press about Denmark’s military preparedness, the Swedish Prime Minister announced he would increase defense spending.

But if history is any example, none of that will likely help capture the unidentified vessel currently hiding in Swedish waters. During the Cold War, Soviet submarines reportedly made numerous incursions into the country’s territory, but with the exception of one that ran aground in 1981, none were ever caught. Which is why Admiral Grenstad probably had the past in mind when he announced to the press on Tuesday that his navy would continue the search. “It’s like Jesus,” he said. “Everyone knows who he is but no one has seen him.”

With additional reporting from Simon Shuster/Moscow

Tributes For Total CEO Killed When His Jet Hit a Snowplow On Russian Runway

Christophe de Margerie was headed for France in his Dassault Falcon 50 business jet when it collided with a snow-removal machine during takeoff

(MOSCOW) — The CEO of French oil giant Total SA was killed when his corporate jet collided with a snow removal machine Monday night at Moscow’s Vnukovo Airport, the company said.

Total “confirms with deep regret and sadness” that Chairman and CEO Christophe de Margerie died in a private plane crash at the Moscow airport, the company said in a press release dated Tuesday and posted on its website.

Airport officials told Russia’s Tass news agency that the collision occurred at 11:57 p.m. Monday, killing de Margerie and three crew members, all of them French citizens.

“The thoughts of the management and employees of the Group go out to Christophe de Margerie’s wife, children and loved ones as well as to the families of the three other victims,” the company news release said.

A representative of the transport investigative department told Tass that the French-made Dassault Falcon 50 business jet, headed for France, collided with the snow removal machine during takeoff. Airport officials said the driver of the snow removal machine was not hurt.

Visibility at the time of the crash was 350 meters (1,150 feet), airport officials told Tass.

De Margerie, 63, known as “Mr. Moustache” for his bushy facial hair, rose through the ranks at Total to become CEO in 2007, and added the post of chairman in 2010.

De Margerie joined Total after graduating from the Ecole Superieure de Commerce in 1974, according to the company’s website. He served in several positions in the Finance Department and Exploration & Production division before becoming president of Total Middle East in 1995. He became a member ofTotal’s policy-making Executive Committee in 1999.

Paris-based Total is the fifth-largest publicly-traded integrated international oil and gas company in the world, with exploration and production operations in more than 50 countries, according to a profile on thecompany’s website.

Russian courts also ordered 9 to close

More than 200 McDonald’s restaurants in Russia are being audited by health inspectors, the company said in a public statement over the weekend.

McDonald’s vowed to challenge a court-ordered closure of nine restaurants, according to a Russian-language statement released by the Illinois-based company, Bloomberg reports.

Health inspections of the Russian branches — there were at least 440 as of August — began shortly after countries in the West imposed sanctions against Russia during the conflict in eastern Ukraine.

Regulators argue the searches are part of a widening investigation of sanitary violations, but critics in August dismissed the probes as an exercise in political retaliation.

[Bloomberg]

A man-made object has been spotted deep inside the Stockholm archipelago, and encrypted communication with Kaliningrad intercepted

A large military operation is under way in waters off Stockholm to sweep for a “foreign underwater activity” widely speculated to be a damaged Russian submarine, in what could be the gravest violation of Sweden’s maritime sovereignty since the Cold War.

The intelligence operation, involving helicopters, minesweepers, corvettes, fast-attack crafts, a submarine and 200 service personnel, started on Friday, after a “man-made device” was sighted deep inside the Stockholm archipelago and encrypted radio communication was intercepted between that position and Kaliningrad — the base of Russia’s Baltic Sea fleet.

Sweden’s military said Sunday it had made a total of three credible sightings within two days and released an image taken by a passerby showing a partially submerged object, but has yet to comment on whether it is a Russian submarine. A suspicious black-clad man was also photographed wading in the waters outside the island of Sandön. On Oct. 2, a navy ship collided with an object in the vicinity, which some believe could have been a submersible that has since fallen into distress.

Intelligence expert Joakim von Braun told the Swedish daily Dagens Nyheter that the spotted object could be an advanced mini submarine of the model Triton-NN, and that the stranded crew could have hidden themselves on one of the many nearby islands while waiting to be picked up.

“It could very well be the case that a Swedish sleeper agent is activated since the embassy personnel is too monitored to carry out such a mission,” he said.

Russia has recently been increasingly bullish against its Baltic and Nordic neighbors, prompting some to speculate that they are trying to discourage these countries from deeper cooperation with NATO. In September, Russian fighter jets reportedly violated Swedish airspace, and Finland claims that the Russian navy harassed one of its environmental research ships in international waters last week.

However, maritime incursions have not been apparent since the 1980s, when Sweden’s military was frequently scrambled to investigate, and sometimes hunt, suspected Russian submarines in its waters. International law allows warships to cross maritime borders, while submarines may only do so while surfaced unless previous notification has been given.

Tomas Ries, a researcher at the Swedish National Defense College, says it would be a serious violation if a Russian submarine were located this far into Swedish waters.

“When the Russians violate airspace it’s a political signal, when they practice strategic bomb attacks it’s a political signal,” he told the Swedish daily Svenska Dagbladet.

“But if they are going on like this in Swedish waters it suggests that they are preparing something,” he adds, suggesting perhaps mines or reconnaissance equipment. Alternatively, says Ries, they may have “left something there during the Cold War that they want to update,” describing all explanations as “severe.”

An unnamed Kremlin military source apparently denied that the mystery craft was Russian when speaking to state-backed news agency RT. “No extraordinary, let alone emergency situations have happened to Russian military vessels,” said the source.

Leaders emphasized the need to separate the warring sides in eastern Ukraine and talked about monitoring the cease-fire

(MILAN) — Russian leader Vladimir Putin is meeting with Ukrainian President Petro Poroshenko and key Western leaders in an attempt to negotiate a full end to hostilities in Ukraine that could ease sanctions against Russia.

Putin met separately overnight with German Chancellor Angela Merkel, who has insisted that Russia fully respect a Ukraine cease-fire deal signed last month that has reduced hostilities but not stopped all fighting.

The Kremlin, in a readout on the nearly 2½-hour meeting, said the leaders emphasized the need to separate the warring sides in eastern Ukraine and talked about monitoring the cease-fire. They continued to disagree on the roots of the conflict.

The meetings Friday are on the sidelines of an ASEM summit of more than 50 Asian and European leaders in the Italian city of Milan.

Oil prices dipped to around $92 per barrel in early October

This post originally appeared on OilPrice.com.

Falling oil prices are inflicting deeper economic pain on Russia’s economy, which is already reeling from EU and U.S. sanctions.

Russia is currently considering its budget for 2015-2017, and based on the numbers, the Kremlin is planning for leaner times. With oil revenue accounting for around half of the country’s budget, any dip in prices has a ripple effect.

And in recent years, Russia’s economy has become more dependent on oil to meet its budget commitments. Excluding oil revenue, Russia has run a budget deficit that hit 10.3 percent in 2013, the highest level in three years.

In other words, the government needs oil revenues to plug budget holes, and that need is growing.

Related: Will Ukraine Commit Economic Suicide?

Russia occupies a strong economic position when oil prices are high, but for every $1 decline in the price per barrel of oil, Russia loses $2.1 billion in revenue on an annualized basis. Slumping oil prices in recent months could see revenues to the state decline by $30 to $40 billion.

The Russian economy may only expand 0.4 percent this year, and just 1 percent in 2015. But even that meager growth rate is not a certainty. Russia is increasingly facing the possibility of recession, according to a Bloomberg survey of economists.

Oil prices dipped to around $92 per barrel in early October. While that won’t plunge Russia into an immediate economic crisis, the government needs oil prices to stay around $105 in order to balance the budget. Thus, if oil prices don’t rebound soon, problems will only grow worse for the Kremlin.

The upcoming budget plans for the possibility of persistent inflation, a weakening ruble, and the potential need for the state to dip into cash reserves in order to finance its budget. What is worse, even this negative outlook is based on highly optimistic assumptions – it assumes oil prices of around $100 per barrel.

“It is quite optimistic given where oil prices are at now and given how much the Russian budget depends on oil revenues,” Liza Ermolenko, an analyst at Capital Economics, told The Moscow Times. “For the next year, it’s more likely that the oil prices will be lower than what they are penciling in.”

Running a deficit will be tricky because western sanctions have restricted access to financial markets. Major Russian companies targeted by the U.S. and Europe are unable to take out long-term loans. As a result, they are turning to the Russian state for funds. That has worked so far, but a Bloomberg report outlines an emerging fight within the Russian elite over a dwindling pile of money.

The mid-September arrest of Vladimir Evtushenkov, the head of oil company OAO Bashneft, was a sign that the situation is starting to deteriorate. He is the richest Russian arrested since Mikhail Khodorkovsky was thrown in jail in 2005 and whose oil company, Yukos, was taken over by the state. Evtushenkov, an ally of Prime Minister Dmitry Medvedev, is thought to have been arrested because of a growing rift in Russia’s elite that is at least partially due to the troubled economy.

Related: Europe Seeks To Undermine Russian Energy Influence

“This is creating a dire financial situation, particularly for state companies friendly to Putin, which are now vying for shrinking state resources,” Yevgeny Yasin, a former Russian economy minister, told Bloomberg. Russian President Vladimir Putin and his allies are hunting for more assets as the economy worsens, according to the same article.

Oil prices could remain low for a while. Reuters reports that the Russian central bank is beginning to plan for a disaster scenario in which oil prices drop to $60 per barrel. Such a scenario would precipitate a dramatic weakening of the ruble, forcing the central bank into action.

But there is no easy way out. The Russian economy is far too dependent on the global price of oil, a volatile benchmark largely out of the Kremlin’s control.

More Top reads From Oilprice.com:

• Weather The Oil Storm For Real Rewards
• The Black Sea: A New Frontier for Energy Geopolitics?
• Could Iran Be Trading Oil With Russia For Nuclear Support?

Old practices are dying hard in Russia, including at its national airline

Russia at one point seemed to be embracing the West, and the transformation that came as a natural result. After the unraveling of the Soviet Union in 1991, politics became democratic and the economy capitalist. The Cold War was relegated to history books and outdated spy movies. Separated by ideology and fear no more, the economies of Russia and Europe became closely intertwined. The G7 turned into the G8.

But these days, Russia seems to be reversing course. Politics have slipped back into near-authoritarianism under President Vladimir Putin. Moscow is striving to reassert the influence it once held over its neighborhood during Soviet days. Sanctions and ill-will are again isolating the Russian economy from the West. I recently bought a T-shirt in Moscow sporting a picture of Vladimir Putin karate-kicking Barack Obama. The ideas and attitudes of the USSR have proven hard to change.

That seems to be the case at Aeroflot, the nation’s main airline, as well. During Soviet times, the name Aeroflot was synonymous with gruff flight attendants and dilapidated aircraft. But the airline has mustered ambitions to become a major international carrier, and has made tremendous progress upgrading its fleet and modernizing its services. It joined the SkyTeam alliance, which includes Delta and Korean Air.

But as my wife and I found out, Russia’s national carrier, much like the nation itself, is apparently having some trouble shaking off its past.

A week ago, we arrived at Moscow’s Sheremetyevo airport to check into our flight back home to Beijing only to be told that we no longer had seats on the plane. The flight was overbooked and we had been bumped off. We are seasoned travelers, and in our experience, when flights are overbooked the airline usually asks for volunteers to surrender their seats, sweetening the request with some nominal financial benefit. If Aeroflot went through such a process, we weren’t involved, and when we raised the possibility of seeking volunteers, we were ignored. Apparently, the staff had determined who lost their seats in advance, and that was that.

Aeroflot’s decision, however, put us in a tight spot. Not only did we both have to be at work the next morning, but our visas were also expiring that night, so the delay would cause us to remain in the country too long. We explained our predicament to the Aeroflot staff, but nevertheless, they booked us onto another flight the next day. Then they demanded we sign documents agreeing to the change. When we continued to protest, one of the Aeroflot staffers told my wife we had 15 minutes to accept the new tickets or else he would call the police, have us thrown in jail for a visa violation and abandon us to deal with the consequences without the aid of the airline.

Left with the stark choice of prison or a delayed departure, we signed the papers and took our replacement tickets. However, what we weren’t told by Aeroflot is that we would not be able to move freely in the city, the airport or even a hotel until the boarding time of our new flight. The airline placed us in a special section of a Novotel hotel with a guard posted outside the door.

We were not allowed to leave the immediate area of our room, even to go to the hotel coffee shop, nor to order our own food. Breakfast boasted bread and spoiled yogurt but no coffee. Basically, we were locked away as if we had overstayed our visas, when we had not. The airline forced us into a situation in which we were treated as criminals.

We got a pretty good idea of how Edward Snowden must have lived during his first days in Russia. After arriving at the same Moscow airport, Snowden, too, was held in this travelers’ no-man’s land in a hotel not far from our own.

When I asked Aeroflot’s press officers about our case, they responded that “the procedure was completed in full compliance with the company’s rules and regulations.” The press managers added that “there were no offending words or any intimidations at your address [sic]” and that the Aeroflot staff employed “the persuasion approach” to resolve the problem.

As to the conditions at the hotel, they wrote that “there were no negative feedbacks received about the quality of service provided.” In addition, Aeroflot said that “we have taken the decision to organize additional training sessions for our ground personnel which will include the imitations of similar situations [sic].”

That might help. But if Aeroflot intends to shed its old reputation, it might want to ditch its Soviet practices along with its Soviet planes.