Ukraine unrest flares as Kyiv’s control slips

Pro-Russian separatists killed four Ukrainian troops, wounded 30 and shot down a military helicopter while suffering multiple casualties in the eastern city of Slovyansk as the unrest gripping the nation turned more deadly. The pilots survived after the chopper was hit with machine-gun fire and crashed into a river near the city in the Donetsk region, the Defense Ministry said on its website. Government forces killed 20 insurgents, and dozens of civilians were also wounded in the fighting today, Interfax reported, citing an unidentified representative of separatists. The campaign to drive out insurgents from the easternmost regions is in danger of stalling as a growing death toll threatens the government’s efforts to retake positions from Russian sympathizers in the run-up to May 25 presidential elections. With violence spiraling in Ukraine after dozens died in Odessa three days ago, the authorities moved to erect roadblocks around the capital Kiev to prevent provocations. “The slow pace of the anti-terrorist operation is due to the fact that we are trying to ensure the safety of citizens and prevent civilian casualties,” acting President Oleksandr Turchynov told German Chancellor Angela Merkel during a phone conversation today, according to a statement published on the Ukrainian parliament’s website. The insurgents have now shot down three helicopters since May 2, with another damaged in an attack. Seven military servicemen, excluding members of the National Guard, have died since the start of the government’s offensive on April 13, Bohdan Senik, a spokesman at the Defense Ministry, said by phone yesterday. Turchynov said yesterday that the authorities are setting up checkpoints around Kiev to guard against “provocations” on May 9, when Ukraine celebrates the victory over Nazi Germany in World War II. Ten such roadblocks were installed on the main roadway leading into the capital as of today, according to the Interior Ministry. Ukraine sent special forces from Kiev to Odessa after dismissing the local police following a deadly fire, acting Interior Minister Arsen Avakov said on his Facebook account. Fighting in the city of 1 million, where Interfax said two people were injured yesterday, is taking place about 160 kilometers (100 miles) from the European Union’s southeastern frontier in Romania. It’s also Ukraine’s most important conduit to the Black Sea after Russia took control of Crimea last month. Four EU and NATO members share a border with Ukraine: Hungary, Poland, Romania and Slovakia. A “humanitarian catastrophe” is looming in Ukrainian cities blockaded by the military as people are beginning to suffer from shortages of food and medicine, the Russian Foreign Ministry said in a statement today. The authorities in Kiev are “continuing to wage war against their own people,” it said. The conflict is turning into a “real war” and that’s “due to Russian aggression and due to Russian-led protesters,” Ukrainian Prime Minister Arseniy Yatsenyuk said in a BBC interview broadcast yesterday. More than 30 administration buildings, police stations, security-services offices and other installations are currently blocked by rebels in the eastern Donetsk and Luhansk regions, the Interior Ministry said today. “Russia is launching an unconventional attack on its neighbor,” Joerg Forbrig, senior program officer for central and eastern Europe at the Berlin bureau of the German Marshall Fund of the U.S., said in a phone interview. “It’s multi-layered with unmarked soldiers, cyber-warfare and a huge propaganda campaign. Locals involved aren’t the driving force.” The turmoil drove the yield on Ukrainian government debt due in 2023 up three basis points, or 0.03 percentage point, to 10.818 percent today, the highest since March 17, data compiled by Bloomberg show. The yield on the 10-year Russian government bond rose six basis points to 9.55 percent, according to generic data compiled by Bloomberg. Wheat surged to the highest price in more than a year as violence in Ukraine intensified concerns of supply disruption. Russia and Ukraine are expected to rank fifth and sixth among the world’s biggest wheat exporters in the 2013-14 season, according to the International Grains Council. The assault in the Donetsk region marked the biggest operation yet by the Ukrainian government to retake ground from armed gunmen who’ve seized buildings in more than 10 towns and taken several dozen captives. Interfax cited Avakov as saying that about 800 rebels armed with large-caliber guns, mortars and heavy vehicles were in the region. In Odessa, 42 people were killed and 125 injured May 2 after Russian sympathizers took refuge in a building that was later engulfed by fire. They were seeking to escape fighting between soccer fans and supporters of the Kiev government on one side and Russia backers on the other. Seventy-eight people remain hospitalized in the city, RIA Novosti reported today. Ukrainian prosecutors started a probe into the incident and will “investigate everyone,” Yatsenyuk said. Four others also died in recent clashes in Odessa, Turchynov said on television yesterday without specifying the causes of death. Russian citizens took part in provocations before the bloodshed in Odessa, the Ukrainian Foreign Ministry said in a website statement. Their aim was to destabilize the region, the ministry said. Russia’s Foreign Ministry submitted a report to President Vladimir Putin summarizing human-rights violations in Ukraine since end-November, the Kremlin said on its website today. The facts presented in the report suggest that abuses in Ukraine have become widespread, according to the statement. German Foreign Minister Frank-Walter Steinmeier called for a return to direct Russia-Ukraine talks to resolve the conflict. He told Germany’s ARD television that he’s been trying to win support for a second set of Geneva talks after an accord negotiated in the Swiss city on April 17 unraveled. His Russian counterpart, Sergei Lavrov, will attend a Council of Europe meeting tomorrow in Vienna, the Foreign Ministry in Moscow said in a statement on its website. History shows that the Ukraine crisis can’t be solved with military force, Merkel said today in speech in the Bavarian city of Ingolstadt. Merkel, who joined U.S. President Barack Obama on May 2 in threatening broader economic sanctions against Russia if it disrupts the scheduled May 25 presidential elections in Ukraine, sought to calm tensions by suggesting a negotiated outcome remains imperative. “In certain circumstances we have to withstand certain controversies with Russia,” Merkel said. “But the door to diplomatic solutions -- to talks -- will always remain open. That’s the policy that I pursue and that the government pursues.” Economic sanctions imposed on Russia by the U.S. and EU have so far targeted officials, individuals and companies tied to Putin’s inner circle. The next step would be action against Russian industries, including banking and energy. An estimated $100 billion in investment may exit Russia this year, a U.S. Treasury Department official said today on a conference call. Capital outflow was $50.6 billion in the first quarter of 2014, compared with $63 billion in all of last year. The U.S. is ready to do more should Russia not stop its illegal actions in Ukraine, and those steps could include freezing assets of companies in energy, mining and finance, the official said. The U.S. wants to coordinate its actions with European counterparts as well as countries from the Group of Seven and beyond, the official said.

How Russia Inc. Moves Billions Offshore -- and a Handful of Tax Havens May Hold Key to Sanctions

Two years ago, a Dutch law firm prepared a pitch in Moscow to Russian businesses: come to the Netherlands and we can help you avoid taxes and keep your assets safe. “You can rely on our legal system!” the firm, Buren van Velzen Guelen, said in a slide presentation. Such appeals have worked on a grand scale. Russia’s biggest oil, gas, mining and retail companies -- including some run by billionaires close to President Vladimir Putin -- have moved tens of billions of corporate assets to the Netherlands and other European countries often used for tax avoidance and capital flight, such as Luxembourg, Cyprus, Switzerland and Ireland. The firms include OAO Rosneft (ROSN), OAO Gazprom, OAO Lukoil and Geneva-headquartered Gunvor Group Ltd., which was co-founded by a Putin associate now under U.S. sanctions. As a result, a handful of European tax havens may hold the key to pressuring Russia to pull back from Ukraine. The extensive use of foreign subsidiaries by Russia’s richest businessmen exposes their assets to sanctions. Yet capitalizing on this vulnerability requires help from countries that rely economically on Russian capital flight and have traditionally protected investors against foreign laws. “If it can be shown that the owners, through these Dutch structures, are people who are sanctioned, there’s no question that those assets can be frozen,” said Jack Blum, a former U.S. Senate investigator and expert on money laundering and offshore havens. “The question is, ‘How far is anyone willing to go? Are the Swiss and the Dutch and Luxembourg prepared to do that?’ Everybody’s known this has been going on for years.” The Netherlands, Cyprus, Luxembourg and Ireland belong to the European Union and must comply with its penalties against Russia. However, they have discretion on whether to pursue tougher, unilateral measures similar to the U.S., which is considered unlikely. Switzerland is not in the EU. Many European countries have been ambivalent about cracking down on Russia because it supplies much of their oil and gas and is also a significant source of investment in assets such as prime real estate in London. German Chancellor Angela Merkel said May 2 that she’s ready to support sanctions against Russia if it interferes with Ukraine’s May 25 presidential election. “It’s critical to get on board the banking centers or places where Russians have found avenues or vehicles to invest or nest property,” said Juan Zarate, a former deputy U.S. national security adviser and author of “Treasury’s War: The Unleashing of a New Era of Financial Warfare.” The 19 companies sanctioned by the U.S. include Luxembourg-based Volga Group and 10 of its units, according to the U.S. Treasury. Luxembourg had, by a narrow margin, the most foreign direct investment in Russia in 2012 of any country, followed by the Netherlands and Ireland, the most recent full-year Russian central bank data shows. Those figures likely reflect money returning to Russian investors after having been routed through those countries, said Louise Shelley, director of the terrorism, transnational crime and corruption center at George Mason University in Fairfax, Virginia. Yet Luxembourg isn’t likely to implement measures that go beyond the EU’s, said E. Wayne Merry, Senior Fellow for Europe and Eurasia at the American Foreign Policy Council in Washington. “Luxembourg is very good at saying, ‘We’re not giving our approval for things that may have happened somewhere else, but we’re maintaining strict rule of law with what happens within the Grand Duchy,’” Merry said. Officials from Luxembourg’s ministry of finance declined to respond to e-mailed questions seeking comment. In the Netherlands, sanctions have prompted an examination of the country’s role as a popular way station for companies and industrialists routing profits to low-tax jurisdictions like Bermuda and the British Virgin Islands. On May 15, the Dutch Parliament will hold a debate on how Russian and Ukrainian magnates and companies have used the Netherlands to dodge taxes. Putin has been urging his country’s businessmen for more than a year to bring their capital back home. “Russian companies have to be registered here, in their home country, and have a transparent ownership structure,” Putin said at a March 20 business conference in Moscow. Instead, some $51 billion of Russian capital exited the country in the first quarter of 2014, according to central bank data. That figure has risen to more than $60 billion, U.K. Foreign Secretary William Hague said last week. A total of $63 billion flowed out of Russia last year. The U.S. has issued four rounds of sanctions against individuals and companies in response to Russia’s seizure of Crimea, Ukraine’s mainly Russian-speaking peninsula that juts into the Black sea, and its alleged backing of pro-Russian militants who have taken over part of eastern Ukraine. Russian forces, estimated by the North Atlantic Treaty Organization to number about 40,000, continue to mass on Ukraine’s border, acting President Oleksandr Turchynov said on April 30. Last week, the U.S. placed Igor Sechin, the CEO of state-controlled Rosneft, Russia’s largest oil producer, on its sanctions list. His company, which was not put on a blacklist, has billions of dollars in assets in a series of Luxembourg vehicles, records show. The company has also used units in Cyprus, Ireland, Switzerland and the Netherlands. Its Irish subsidiary reported more than $2 billion in gross revenue in 2012, according to its most recent filing. Rosneft’s foreign subsidiaries and companies were primarily established by previous owners, a company representative said in an e-mailed statement. These companies are “dormant in Rosneft and are destined for liquidation” once contracts have expired, Rosneft said. Also under U.S. sanctions is Gennady Timchenko, co-founder of Gunvor, the oil trading company in which the U.S. has alleged Putin has investments. Gunvor, which isn’t under U.S. sanctions, has denied the allegations and said it has never had any links to Putin. A former Soviet Trade Ministry official, Timchenko met Putin in the 1990s and later sponsored a St. Petersburg judo club where Putin served as honorary president. After Putin seized control of political opponent Mikhail Khodorkovsky’s Yukos Oil Co. in 2003, many of its most valuable assets ended up in the hands of Rosneft. Rosneft then awarded some trading contracts to Gunvor, helping the company become one of the biggest traders of Russian crude oil. Timchenko has said that his friendship with Putin is overblown and that it hasn’t helped his businesses. Despite its initial focus on trading Russian oil, most of Gunvor’s sales were routed through a Dutch unit, Gunvor International BV, operating through a branch in Geneva. In 2010, the last time it filed an annual report in the Netherlands, the subsidiary reported $59 billion in revenue, more than 90 percent of Gunvor’s total sales. Thanks to a ruling from Dutch tax authorities, the unit was able to allocate most of its profit to its Swiss branch, helping to cut Gunvor’s global tax bill, disclosures show. “Gunvor Group is structured for optimal tax planning purposes, the same as other global trading houses,” and “operates in full compliance with all applicable tax laws and regulations,” Seth Pietras, a Gunvor spokesman, said in an e-mail. Gunvor, which in recent years has slashed its dependence on Russian oil and diversified into trading metals and coal, reported net income of $308 million for last year on revenue of $91 billion. imchenko, whose net worth is $7.9 billion according to the Bloomberg Billionaires Index, sold his 44 percent stake in Gunvor to his business partner, Swedish national Torbjorn Tornqvist, on March 19, a day before the U.S. imposed sanctions against him. Timchenko owns a residence in Cologny, a wealthy enclave of Geneva. “Timchenko’s activities in the energy sector have been directly linked to Putin,” the U.S. Treasury Department said in a statement March 20. “Putin has investments in Gunvor and may have access to Gunvor funds.” Timchenko owns or controls at least 10 companies through his Luxembourg-based Volga Group, the company’s website shows. Stuart Leasor, a Volga Group spokesman, declined to comment. Gazprom, the state-owned gas company whose CEO Alexey Miller is also considered part of Putin’s inner circle, reported $14 billion of assets in a tiny Dutch unit that employs just 14 people, according to filings. Miller and Gazprom haven’t been placed on any sanctions list. Gazprom would consider appropriate measures if conditions change, Sergei Kupriyanov, a spokesman for the Moscow-based gas exporter, said by text message, without elaborating. Ukrainians who are close to Russia have held their assets in tax havens as well. Billionaire Dmitry Firtash made his fortune as a middleman in Gazprom’s secretive gas trade with Ukraine through partial ownership in a Swiss company, RosUkrEnergo. He was arrested in Vienna in March on U.S. bribery charges. Firtash wrote April 3 on his personal website that the allegations are “completely absurd and unfounded” and he’s confident they will be dismissed. Oleksandr Yanukovych owns a Swiss commodity trading company through a Dutch holding unit. He’s the son of ousted Ukraine president Viktor Yanukovych, who fled to Russia in February. That same month, Swiss police raided and seized documents at the Geneva offices of Oleksandr’s firm as part of an investigation into alleged money laundering. The case is still under investigation and no charges have been filed, according to Swiss authorities. Viktor Yanukovych and his son have both been sanctioned by the EU. Switzerland’s federal prosecutor has frozen 170 million Swiss francs ($193.7 million) of assets in bank accounts belonging to Viktor Yanukovych and people close to him, according to a government spokesman. In addition to companies, the U.S. has so far sanctioned 45 individuals, including four it designated as members of Putin’s inner circle: Timchenko, Arkady and Boris Rotenberg and Yury Kovalchuk. The sanctions mean that any U.S. assets of those people or companies named are frozen and Americans are generally prohibited from dealing with them. While non-Americans aren’t bound to follow U.S. sanctions, some banks and companies make a point of doing so in order to ensure their access to U.S. markets isn’t compromised. “Sanctions in some ways give European countries a ‘get-out’ clause,” said Mark Galeotti, a New York University professor and Russian organized crime expert who advises regulators on money laundering. “It allows countries, say, the Netherlands, to say ‘look, if it was up to us we wouldn’t be putting this pressure on you, but the Americans are beginning to play hardball.’” While there is some overlap between the European Union’s sanction lists and the one compiled by the U.S., Europe has focused mainly on government officials. It has assembled a blacklist of 70 members, whose assets in Europe are now frozen. They are not permitted to travel within the EU. Switzerland has issued an ordinance that prevents financial intermediaries in Switzerland from entering into new business with the individuals sanctioned by the EU or from transferring any assets to Switzerland from inside or outside the EU. Assets held in Switzerland won’t be frozen and existing business relationships involving those sanctioned are not subject to the ban. Economic ties between Switzerland and Russia run deep. About 75 percent of Russian sea-bound crude exports are handled by Swiss-based trading firms including Gunvor, according to the Geneva Trade and Shipping Association, an industry lobby group. Russian energy companies including Rosneft, Gazprom and Lukoil all have trading operations or subsidiary companies in Switzerland. Swiss banks held 13.8 billion Swiss francs worth of Russian money in 2012, according to the latest available statistics from the Swiss National Bank. More than a dozen Russian and Ukrainian industrialists have business interests, charity operations or own property in Switzerland, Tages Anzeiger, a Zurich newspaper reported in March. Andrei Klishas, the politician and metals businessman who was sanctioned by both the EU and the U.S., owns an estate in Ticino, near the Italian border. Switzerland is “closely” monitoring the situation in Ukraine and the sanctions imposed by its “most important trading partners,” Marie Avet, a spokeswoman for Switzerland’s State Secretariat for Economic Affairs, said in an e-mailed statement. “Switzerland could take further measures depending on how the situation develops,” she said. A wide swath of multinational companies, including Google Inc., Yahoo! Inc. and Pfizer Inc., have moved their profits through the Netherlands. It attracts global corporations because of its extensive tax treaty network and lack of withholding taxes on various payments leaving the country for island havens like Bermuda. The country has promoted these features internationally, including in Ukraine. Last November, the Dutch embassy in Kiev hosted a seminar, whose organizers included international law firm DLA Piper. The event, titled “Dutch holding companies: new opportunities for structuring of Ukrainian business,” included tips on “asset protection structures” and “tax planning opportunities for Ukrainian companies.” Svitlana Musienko, one of the DLA Piper attorneys who gave the presentation, said the firm had no comment. An outline of the agenda for the April 17, 2012, presentation by Buren van Velzen Guelen in Moscow cited the various big Russian concerns already using the Netherlands: oil and gas companies Gazprom, Lukoil, and Rosneft, Internet company Yandex NV (YNDX), X5 Retail Group NV (FIVE), and mining and precious metals companies Nord Gold NV and OAO GMK Norilsk Nickel. The firm detailed the particularly generous tax treaty between Russia and the Netherlands, described the virtues of the country’s “flexible” tax policies, and offered examples of several structures to help clients avoid taxes and protect assets, including one that makes it harder to trace a company’s owners. In one slide, the law firm demonstrated how Russian real estate investors could avoid capital gains taxes on the sale of property there simply by using a Dutch holding company. The firm pointed out that this benefit was not available for investors using vehicles in Cyprus and Switzerland. “A good reputation is more valuable than a bulging bank safe,” the firm explained, according to another slide. Peter van Dijk, one of the attorneys at the firm listed on the presentation, declined to comment. The U.S. sanctions have prompted some Dutch politicians to say they worry about damage to the country’s reputation from hiding the wealth of Russian companies and oligarchs. “On the one hand we invite them, and make it possible for them to avoid taxes through the Netherlands, while on the other hand we say we freeze the assets, which is a good thing,” said Arnold Merkies, a Dutch parliament member from the Socialist Party. “But why did we allow them in the first place? We even stimulated them to do this.” “The Netherlands cannot be regarded as a tax haven, and it is not used as such by Russian or any other companies,” said a spokeswoman for the Dutch Finance Ministry. “The Netherlands has been actively involved in the drafting of the recent EU regulations related to the situation in Ukraine and will implement strictly and without delay the provisions thereof including any necessary measures relating to funds held in the Netherlands.” The Netherlands “attaches great importance to close coordination between the EU and U.S.” on sanctions, a foreign ministry spokesman said. Yandex’s decision to domicile in the Netherlands was “motivated solely by corporate law, and not by a desire to optimize our tax structure,” said Vladimir Isaev, a spokesman for Russia’s largest search engine. All of Yandex’s business units “pay taxes on all of their commercial activity in their respective countries.” The U.S. has given tax havens an excuse for inaction by failing to back up its assertion that Putin is a Gunvor shareholder, said a former senior Treasury official who asked not to be identified because he didn’t want to be seen as criticizing the government’s actions. In addition, some oligarchs may have legitimate reasons for moving funds beyond Putin’s reach, he said. Countries like the Netherlands and Switzerland are “in a bind, because an awful lot of what they do for a living revolves around structuring and hiding money and assets through very complex structures,” said Blum, the former U.S. Senate investigator. “It really is a tricky question because there is some legitimacy to people putting assets outside of their own country because of political instability. The flip” is that those countries are “also being used by the kleptocrats who are ripping off Russia.”

Former US ambassador to Moscow warns of war in Ukraine

Michael McFaul, who served as the U.S. ambassador to Moscow until February, warns Russian President Vladimir Putin may be preparing an all-out invasion RECOMMENDED FOR YOU The Netherlands Tells Immigrants to Learn Dutch or Get Out Rally for Rubles: Paying Crowds to Support Putin Anti-Putin Protest in Moscow by Taboola Michael McFaul, who served as President Obama’s ambassador to Moscow until February, has warned that the Ukraine crisis is approaching a state of war that could trigger a large scale invasion by Russian military forces. “The last 24 hours was a major escalation,” McFaul told TIME in a Friday interview, as Ukraine’s military began an operation to reclaim eastern cities and towns taken over by pro-Russia militants. The offensive has led to violence, including reports that Ukrainian helicopters were shot down by pro-Russian forces. Brewing violence in the southern port city of Odessa also claimed dozens of lives Friday. “This is real,” McFaul said. “This is war.” Amid reports that pro-Russian separatists in eastern Ukraine are urging Russia’s military to intervene on their behalf, McFaul says he’s now reconsidering the widely-shared assumption that Russian President Vladimir Putin would prefer to destabilize Ukraine from a distance, without staging a cross-border invasion that would compel the west to take new retaliatory steps, possibly including arming the Ukrainian military. “It would be very costly for Russia to invade Ukraine,” McFaul said. “It’ll be real fight — maybe guerrilla warfare for years. That’s not something one does lightly. But it got a lot more likely in the last 12 hours.” Russia’s parliament has authorized Putin to intervene in Ukraine, though Putin said last month “I very much hope that I will not have to exercise this right.” But many experts fear the rising violence may provide Putin with an excuse, even if it brings a harsh western response. “It would be a very foolish move on Russia’s part,” says Olga Oliker, an international security and defense policy analyst at the Rand Corporation. “However that does not mean that it can be ruled out.” The chaos deepened on Saturday as the Ukrainian military continued to press its offensive. The pro-Kremlin news outlet RT alleged on Saturday that residents in the eastern city of Kramatorsk chased off Ukrainian military forces with chants of “fascists.” In one bright spot, however, a team of international observers held for days by pro-Russian forces were released unharmed. But the larger picture remains bleak. The events of the past couple of days, McFaul said, “make me more worried than ever before.”

Odessa mob rule: Who gave police order to release detainees, and why?

ODESSA, Ukraine -- Odessa took a dangerous step away from Ukrainian government control on May 4 as local police gave in to a mob and released 67 people they had been holding since the night of May 2, when a Russian-backed crowd sparked clashes that led to the deaths of more than 40 people -- most of them in a horrific fire. The rally to release the detainees started with a small group of Christian Orthodox believers who moved away from a larger crowd that had gathered at the burnt-out Trade Union building, where most of the deadly clashes took place on May 2. Bearing church banners and icons, they called for others to follow them to the city police station to demand the release of more than 100 people taken into detention as part of the investigation into the deadly violence. More people soon followed. “Why are you here looking at horrors?” shouted one man. “Come and do something positive for your city!” About 100 riot police blocked one end of the street outside the police station, but did not hinder anyone from walking along the pavement, or approaching from the other direction. They stood by and watched as the surging crowd of a few hundred people threw stones to break the windows, and eventually stormed the gate into the yard. Soon after, the detainees streamed out, greeted by shouts of “heroes!” “We’re keeping the peace,” said one police officer, a phrase which has been repeated in towns across southeast Ukraine where local police have stood by and let local mobs storm government buildings. A major standing with his men said he had not been given any orders, and without orders he was unable to act. Dmitry Futedzhi, the acting Odessa Oblast police chief, harassed by the crowd and out of uniform, put it passively: He said the decision had been taken to release the detainees in order to keep conflict under control. He also said the people detained in the station had been brought there for their own safety, after they asked for help to escape the clashes in the center of Odessa. While it remains unclear where the order to release the detainees originated, the Ukrainian government reacted furiously to the Odessa police’s actions. The police in Odessa acted in a totally disorderly, possibly criminal way,” Interior Minister Arsen Avakov wrote on his Facebook page, adding that all police chiefs would be fired immediately. Earlier, in a speech in Odessa, Prime Minister Arseny Yatsenyuk implied that the police were too busy collecting bribes from local gangsters to do their jobs properly. Two of the detainees confirmed that they had asked the police to rescue them. “We were just walking along Derebasovskaya Street and saw the radicals, and took shelter in the nearest place and it was the Athena building,” said 28-year-old Yevgeny Dyatkov. He and another detainee both said the police had promised to bring them to the station to register their details and then let them go, but instead kept them in the temporary detention cell where they had to sleep on the floor, and charged them with mass disorder. Dyatkov said he had nothing to do with the clashes on either side, but had just been walking in the city at the time with nothing more in his pocket but a mobile phone and some money. His anger was directed at "radicals" and the militant nationalist group Pravy Sektor, who he said had come to Odessa to stir up trouble. He accused the police of letting them act with impunity on May 2 while arresting their opponents under false charges. “I can’t say I’m very happy that they arrested people who had sticks and said they had not sticks but guns,” he said. “Lots of our people died.” The jubilant crowd chanted “All for one and one for all!” and “Russia!” But after the more peaceful members left, a smaller group armed with iron bars and sticks remained in a standoff with the riot police who withdrew to the building, barricading the entrance to the courtyard.

Merkel wants more effort from Russia to de-escalate Ukrainian crisis

German Chancellor Angela Merkel on May 4 phoned Russian President Vladimir Putin to urge Moscow to make more efforts to settle the Ukrainian crisis, Merkel's spokesman Steffen Seibert said. Every effort should be made to ensure that all Ukrainians, regardless of ethnic origin and cultural background, have the opportunity to decide on the future of their country at the May 25 election, "and not in the street, with guns and Molotov cocktails," he said

Activist investor chased out of Russia explains how to really hurt Putin

Bill Browder used to get treated like a crank when he asked governments to put economic sanctions on Russian officials. Now they ask his advice. The CEO of Hermitage Capital was an activist investor chased out of Russia for disturbing the country’s billionaire oligarchs. He mounted a campaign for sanctions against the officials who persecuted his late lawyer, Sergei Magnitsky. Now, Mr. Browder is no longer in the wilderness – he’s in the mainstream. And he argues that western sanctions against just a hundred or so oligarchs and advisers would push Russian President Vladimir Putin back from the brink for his incursions in Ukraine. It would work, Mr. Browder argues, because Mr. Putin is a kleptocrat who has grown wealthy with money stashed for him by oligarchs – and because freezing the businesses of oligarchs will shake the pact between them and Mr. Putin. “He cares about his money in the West. So this gives us an opportunity to seize it, or freeze it, or to make it less valuable,” Mr. Browder said in an interview at an Ottawa hotel this week. But European nations are balking at broad sanctions that might disrupt trade, especially supplies of Russian energy. The U.S., EU, and Canada have placed sanctions on a number of Russian officials and some oligarchs. Mr. Browder notes that the head of energy giant Gazprom, Alexey Miller, isn’t on the list. Obvious targets, some prominent global citizens and owners of famous sports franchises, aren’t either. Those drawing up the lists, he said, seem naïve or cynical. There’s a reason governments are asking this investor about who to sanction. He built a business on finding how Russian oligarchs squirreled money away. His grandfather, Earl Browder, was the leading Communist in the U.S., who twice ran for president against Franklin Roosevelt. He rebelled against the family culture, and set out to become the “biggest capitalist in Eastern Europe.” By 1996, he had his own Russian stock fund, Hermitage. It became a $4.5-billion fund, Russia’s biggest. For investors, Russia in the 1990s was the Wild West. He found management was stealing billions from companies in which he owned shares, so his fund researched how oligarchs stole, and exposed it. “We created a whole business model around its Wild Westness,” Mr. Browder said. “If we could expose the bad stuff, it would sometimes stop. And if it stopped, then the value of our investments would go up.” Mr. Putin, who pledged to clean things up, ended up working with the oligarchs. He crushed the richest, Mikhail Khodorkovsky, so the others, Mr. Browder believes, made a deal to share wealth with Mr. Putin. Instead of being a welcome gadfly, Mr. Browder was expelled from Russia in 2005. More than a year later, Russian authorities raided Hermitage’s Moscow office and law firm, seizing corporate documents. Hermitage’s tax lawyer, Sergei Magnitsky, investigated and testified that officials used the documents to steal $230-million in taxes. Mr. Magnitsky was arrested, pressured to recant, held in jail for 358 days, and refused treatment for pancreatitis and gall stones. He died in jail in 2009, after a beating, at 37. Mr. Browder led a campaign to have western nations impose sanctions on officials involved – and in 2012, the U.S. passed the Magnitsky Act, prohibiting them from entering the U.S., or using its banks. But most countries, including Canada, didn’t follow suit. They sympathized, Mr. Browder said, but didn’t want to pick a fight with Mr. Putin. If they had, Mr. Browder, believes, Mr. Putin wouldn’t doubt the West’s will to impose sanctions now. He believes Mr. Putin’s real interests are his money. “It’s easily findable. It’s too much money not to find,” he said. His firm located most of the $230-million from the Magnitsky tax case, so U.S. intelligence agencies could easily find Mr. Putin’s money, held by wealthy “oligarch trustees” on his behalf. Mr. Browder said that if he was drawing up sanctions for Ukraine, he’d hit Mr. Putin’s cabinet ministers, and about 80 per cent of the oligarchs. Yes, they could move money to China, but once they are on the U.S. Treasury sanctions list, he said, they can’t do business with any company that had U.S. interests, or open a bank account. And when the oligarchs are angry about losing money, a paranoid Mr. Putin will start worrying about which one “is going to come after him first.”

Western sanctions can bring Russia long-awaited infinite relief

Imports of food for the Russian market have become commonplace. Russia imports more goods than it produces, and this trend lasts for years. The world's largest country with rich agricultural history has become virtually dependent on other states, including even tiny European countries that one can hardly find on the map. What will happen to Russia if trade relations are interrupted due to sanctions? Since the end of the 20th century, especially after joining the WTO, Russia's dependence on foreign food has been growing. Reportedly, Russia's imports account for about 80 percent of all available goods, including those that foreign companies produce in our country and those that use foreign-made ingredients in their production. Russia can not even provide itself with meat and milk. Is it really the case? What would happen if the West used drastic measures against Russia that could result in the deterioration of trade relations with the EU and the U.S.? Assistant Professor for Technology Trade Transactions of the Russian Academy of Foreign Trade at the Ministry for Economic Development, Andrei Golubchik, told Pravda.Ru that Russia will not be able to quickly replace imported products with the ones of its own production. "We have enough grain, but the quality of this grain will not let anyone produce premium pasta from it. Russian sorts of grain are not suitable for that, although we can make very good bread from it. We have been providing ourselves with poultry to the fullest. If we take a look at the near future and assume that the state will slowly but surely turn to beef and dairy cattle, then in a year or two we will be able to provide ourselves with Russian-made beef, pork and dairy products. Today, unfortunately, we can not do without imports, - says Andrei Golubchik. - But, thank God, it is not 1938 or 1951. There is fine beef in Argentina and Australia. If Australia joins the sanctions against Russia, Argentina all not - the Argentinians will be happy to sell. Transportation costs will be higher, and it will affect the price, but there are no options here." Generally, Russia can buy meat from the friendly Brazil, which shares BRICS membership with Russia and remains one of the largest suppliers of meat products to Russia. As for dairy and other animal products, including meat, Russia's closest partner is Belarus, an ally in the Customs Union, which borders on western territories of the Russian Federation and sells products at low prices. "Our companies consume frozen meat in blocks, which they use to make sausage products, - the head of the Moscow Department for Trade and Services, Alexei Nemeryuk said. - They are BRICS countries. They have been our partners for quite some time, and we buy this meat from them. Clearly, we had Polish bacon, which was famous for its quality in the industry, but we found a replacement for the product. Speaking of meat, Russia can use the help of Belarus. As for pork and poultry - Russia does not need to import these." As for fruits and vegetables, then, the official said, it was decided to raise subsidies for greenhouses and accelerate the development of poultry and fish production. If there are not enough products for one particular sector of the food industry, then Russia can focus on the production of CIS countries or far-foreign countries. "The situation with fruit and berries is worse. We receive up to 80 percent of berries and fruits from Europe, but it is possible to replace our partners here too. Serbia is ready to supply Russia with berries. Serbia is a large supplier of raspberry and blueberry," says Alexey Nemeryuk. Meanwhile, Andrei Golubchik said that the Russian market had no segments that would be painfully dependent on foreign supplies. The only unpleasant moment that may occur for the Russian economy because of tougher sanctions is connected with the high-tech industry. Still, Russia may find another way for the procurement of necessary high-tech machinery and equipment, for example, through China, which refused to participate in the ongoing campaign against Russian. "There will be workarounds for it. The Soviet Union continuously lived under the conditions of economic sanctions, however, IBM computers worked in the places, where they had to work at Soviet enterprises. Yes, they were more expensive, they had to be imported via Bulgaria or Romania, but it was possible to import them. I am not at all concerned about the absence of some food products, but I am concerned about high-tech equipment," the expert concludes. To crown it all, it is not profitable for other countries of the world to take the Russian sales market away from their own companies. If it happens, the Europeans will have to find new buyers for their fruits and berries, and Bush's legs will have to find another direction to run to. This is still a big question, who is going to lose more, should trade relations be suspended.