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from MacroScope:

EU slowly tightens screw

A coffin of one of the victims of Malaysia Airlines MH17 downed over rebel-held territory in eastern Ukraine, is carried from an aircraft during a national reception ceremony at Eindhoven airport

The EU is slowly tightening the screw on Russia, with senior officials proposing yesterday to target state-owned Russian banks in its most serious sanctions so far. Ambassadorial talks on how precisely that is to be done continue today and the measures are likely to be enacted next week.

One key proposal is that European investors would be banned from buying new debt or shares of banks owned 50 percent or more by the state. These banks raised almost half of their 15.8 billion euro capital needs in EU markets last year. That is a big deal and there are increasing signs of investors turning their back on Russia lock, stock and barrel. However, with its giant FX reserves, the central bank can provide dollars to fund external debt for a considerable period of time.

The ambassadors did agree to add more people and entities to the EU's asset freeze list, using expanded criteria including Russian companies that help to undermine Ukraine's sovereignty. The 15 individuals and 18 entities, half of which are companies, will be named today. Russian shares are down about 1 percent in early trade.

The United States said Russia was firing artillery across its border to target Ukrainian military positions. It also said there was evidence the Russians intended to deliver heavier and more powerful multiple rocket launchers to separatist forces.

from John Lloyd:

Meet Vladimir Putin’s homophobic, vitriolic, charismatic master of propaganda

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Russian President Vladimir Putin’s popularity has soared at home in the wake of his actions in Ukraine – and the masterful spin his intervention has been given.

The joy that greeted Putin’s seizure of Crimea from Ukraine in March was due, at least in part, to a propaganda system less complete but more virulent than its Soviet predecessor.

from MacroScope:

A dissenting voice

A train carrying the remains of the victims of Malaysia Airlines MH17 arrives in Kharkiv

Interesting intervention from former Russian finance minister Alexei Kudrin late yesterday who warned that Russia risked isolation and having its efforts to modernize derailed.

That sort of internal criticism is rare but Kudrin has done so before without censure which suggests Vladimir Putin is – or has been - willing to hear it. Kudrin added that Moscow should not intervene militarily in eastern Ukraine.

from The Great Debate:

Sanctions finally find Russia’s Achilles heel

Russia's President Vladimir Putin gestures as he chairs a government meeting at the Novo-Ogaryovo state residence outside Moscow

Russian President Vladimir Putin and President Barack Obama were reportedly engaged in a heated telephone conversation last Thursday when Putin noted in passing that an aircraft had gone down in Ukraine. The tragic crash of the Malaysian airliner in rebel-held eastern Ukraine continues to dominate the headlines, but it is important to remember what agitated Putin and prompted the phone call in the first place -- sanctions.

Sanctions against Russia have been the centerpiece of the U.S. response to Putin’s interference in Ukraine. While they primarily have been directed against prominent friends of Putin and their businesses, the underlying target has been a weak Russian economy.  The sanctions have definitely found Russia’s Achilles’ heel, and with harsher sanctions looming in the aftermath of flight MA17, Putin is finding it increasingly difficult to craft an effective reply.

from MacroScope:

EU on Russia sanctions: slowly, slowly

Ukraine's President Poroshenko and Dutch ambassador to Ukraine Klompenhouwer commemorate victims of Malaysia Airlines Flight MH17 outside the Dutch embassy in Kiev

EU foreign ministers meet to decide how precisely to deploy sanctions agreed 10 days ago to hit Russian companies that help destabilise Ukraine and to block new loans to Russia through two multilateral lenders.

The EU foreign ministers are tasked with preparing a first list of people and entities from Russia that would be targeted. The number of individuals and companies to be penalized is up for grabs so there is scope to adopt a tougher posture.

from MacroScope:

Acid test of EU’s resolve over Russia

Emergencies Ministry member walks at the site of a Malaysia Airlines Boeing 777 plane crash near the settlement of Grabovo in the Donetsk region

EU leaders said over the weekend they would be prepared to impose tougher sanctions on Russia, giving Vladimir Putin one more chance to douse the violence in eastern Ukraine and help investigators do their work at the site of the crashed Malaysian airliner or face the consequences.

A statement from the British government said Germany’s Angela Merkel, Britain’s David Cameron and France’s Francois Hollande agreed on a telephone call that their ministers should be ready to announce a fresh round of sanctions at a meeting of the European Union's Foreign Affairs Council on Tuesday.

from Ian Bremmer:

What MH17 means for Russia-Ukraine

Armed pro-Russian separatist stands on part of the wreckage of the Malaysia Airlines Boeing 777 plane after it crashed near the settlement of Grabovo in the Donetsk region

MH17 is an alarming escalation of the Ukraine conflict.

In the wake of a surface-to-air missile taking down a Malaysian airliner over Eastern Ukraine, everyone is pointing fingers. Kiev blames the pro-Russian “terrorists,” with Moscow responsible for providing them with intelligence and weapons. The separatists deny involvement and accuse Kiev of planning the attack, citing the Ukrainian military’s accidental shooting of a Siberian Airlines flight in 2001. Moscow blames the Ukrainian government for pushing the rebels into this violent situation -- even if Russian President Vladimir Putin stopped short of pinning the airliner attack on Kiev. Despite the confusion, it’s clear what MH17 means: dramatic escalation and an even more combustible conflict.

Some analysts and pundits are viewing the downed flight as an opportunity to force Putin into tempering his support for the separatists. While clearer proof of pro-Russian separatist guilt does, in principle, provide the Russians with a reason to do so, it’s highly unlikely that Russia will seize the chance. The underlying fissures have not gone away -- in fact, MH17 makes them even more pronounced.

from The Great Debate:

After MH17: The technical fix that could protect civilian airliners from missile attacks

Site of a Malaysia Airlines Boeing 777 plane crash is seen at the settlement of Grabovo in the Donetsk region

The awful crash of Malaysian Flight 17 in the eastern Ukraine combat zone seems likely to have been caused by a long-range surface-to-air missile. At this writing, who launched the missile remains undetermined. Regardless of who’s guilty -- why is a modern software-driven weapon capable of striking a civilian jet in the first place?

All commercial airliners send out transponder signals that identify them as civilian. In most cases, what’s employed is a protocol called Mode C, which is not used by military aircraft.

from The Great Debate:

What’s behind the downing of Flight MH17 over Ukraine, and what happens next? Five smart views.

Armed pro-Russian separatist stands at a site of a Malaysia Airlines Boeing 777 plane crash in the settlement of Grabovo in the Donetsk region

On Thursday Malaysian Airlines Flight 17, with 298 people on board, was shot down over Grabovo, Ukraine, by what officials have described as a Russian-made antiaircraft missile. As investigators uncover details of the attack -- including the origins of the missile -- Russian President Vladimir Putin’s role in the Ukraine crisis will come under renewed scrutiny. Below are five takes on what happened and why, as well as what the consequences will be.

 The Daily Beast: Why Putin let MH17 get shot down
James Miller questions why Putin would allow the separatists to have a weapon capable of downing a commercial plane, without controlling how it was used. “This is an advanced and battle-proven series of highly sophisticated vehicles which coordinate to track targets with radar and fire missiles so advanced that they were designed to knock smart bombs and cruise missiles out of the sky. Whoever launched this weapon was highly trained and extremely well-equipped.” He explains how the owners of the Buk surface-to-air missile system, which likely brought down the plane, could have confused a commercial airliner for a military jet. (The system works properly, Miller says, when used in tandem with various radar systems.) “Putin’s urgency in Ukraine has turned to recklessness,” writes Miller, and Thursday’s events epitomize that recklessness.

from MacroScope:

A turning point?

Emergencies Ministry members work at the site of a Malaysia Airlines Boeing 777 plane crash in the settlement of Grabovo in the Donetsk region

Could the shooting down of a Malaysia Airlines plane over Ukraine be a fundamental turning point in the crisis that has pitted Russia against the West? And if so which way – towards rapprochement or a further escalation?

Kiev accused militants fighting to unite eastern Ukraine with Russia of shooting down the Boeing 777 carrying nearly 300 people from Amsterdam to Kuala Lumpur with a Soviet-era ground-to-air missile. Leaders of rebels in the Donetsk People's Republic denied any involvement, although around the same time their military commander said his forces had downed a smaller Ukrainian transport plane.

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