Will Russia die without Twitter?

Blocking Twitter in Russia is inevitable. This is what an especially exalted part of the Russian general public concluded after the statements from deputy head of the Federal Service for Information Control (Roskomnadzor), Maxim Ksenzov. The official particularly stated that the administration of Twitter creates conditions to terminate the work of the company in Russia. Making far-reaching conclusions from official statements - this is a widely spread tradition, not only in Russia. Ksenzov said in an interview that there was "a strong feeling that Twitter was a global tool for promoting political information." "In cooperation with us, they use their audience as a tool to achieve objectives. Consistently refusing to fulfill our requirements, they deliberately create the conditions, in which blocking this resource in our country becomes almost inevitable," said Ksenzov. The deputy head of Roskomnadzor explained that Twitter works on https:// protocol, which does not allow technical systems to identify encrypted traffic. "Blocking one single illegal tweet automatically leaves all of its audience without access to the resource," he stressed. "There is always a limit to disruptive interactions, for which the state can not nothing else, but protect the interests of the society. It just so happens that by refusing to fulfill legal requirements of government agencies, corporations set up their users," said Ksenzov. He noted that both Facebook and YouTube periodically remove illegal content on demand of Roskomnadzor. "Twitter, in most cases, strongly refuses to remove illegal information, there is a lot of extremist content circulating on this network," he said. Prime Minister Dmitry Medvedev did not leave an opportunity of blocking Twitter in Russia without attention either. "As an active user of social networks, I believe that everyone must comply with the Russian legislation - both the networks and their users," wrote the Prime Minister on his page on Facebook. "But certain officials, responsible for the development of the industry, need to turn their brains on sometimes, not to give any interviews announcing the closing of social networks," Medvedev added. It is understood that "blocking Twitter is inevitable" and "the government is moving on the path of North Korea" - these are emotional reactions to the statements from deputy head of Roskomnadzor. In fact, though, what Maxim Ksenzov said, was not exclusively a Russian problem. In late March, access to Twitter was blocked in Turkey, due to "attacks against the government." However, two weeks later, the country's Constitutional Court declared the decision was illegal. The European Union, by the way, predictably criticized the decision of the Turkish authorities. However, European countries have their claims to Twitter every now and then as well. In France, three years ago, the authorities were very unhappy about the distribution of anti-Semitic messages on the network. The UK was concerned about calls for pogroms. Noteworthy, in many Muslim countries, Twitter is banned. The social network is blocked in China as well, along with most other popular Western social networks. Instead, the Chinese develop their own services, quite successfully. And yet - how shall one balance out the interests of the state and the users? Pravda.Ru asked this question to the head of "Internet and Law" project, Doctor of Law, Anton Sergo. Roscomnadzor solves its problem as a federal body of our country. As for Twitter, this is a foreign company that is not present on the territory of Russia legally, although this service in Russia is available," he said. "In some cases, Twitter has to take certain steps in cases of clear violations of the Russian legislation. This is one way. Another option is to search for ways of cooperation between Russian executive power agencies and similar supervising agencies in the United States. Such instructions should be transmitted through diplomatic channels. Regulations from U.S. authorities for Twitter will be mandatory," says Anton Sergo. An expert with the Foundation for the Development of Civil Society, Stanislav Apetyan, suggested that the remarks from deputy head of Roskomnadzor was aimed to encourage representatives of Western Internet platforms for a dialogue. "It is an open secret that many Western companies simply ignore requirements of Russian law enforcement bodies and regulatory authorities. I assume and hope that the harsh statements from the authorities were made in order to encourage foreign companies to cooperation," he said in an interview with Pravda.Ru. Stanislav Apetyan believes that if the cooperation is not established, the government will be forced to block services. According to him, after Twitter was unblocked in Turkey, the company was more willing to make ​​concessions to local authorities. "In general, from my perspective, blocking foreign sites and complete blocking of such services, is detrimental to the development of the Russian Internet and Russian communications. But one can understand the Russian authorities as well. When this or that company deliberately ignores requirements of the Russian law, it can not but cause irritation," said Stanislav Apetyan.

Ukrainian Special Forces Headed To Odessa After Deadly Clashes

ODESSA, Ukraine -- A top Ukrainian minister said on Monday that a new special forces unit was drafted into southern Odessa after police failed to bat down days of deadly violence involving pro-Russian separatists that killed dozens of people. Ukraine’s Interior Minister Arsen Avakov said on Monday that a new special forces unit had been drafted in Odessa, the southwestern port town, following recent violence between pro-Russian separatists and police that left dozens dead. The clashes in Odessa marked the deadliest since February when Ukraine’s president fled to Russia and militants began to occupy government buildings in the restive eastern region. “The police in Odessa acted outrageously, possibly in a criminal fashion,” Avakov wrote on his Facebook page. “The ‘honor of the uniform’ will offer no cover.” Fresh violence broke out Sunday after hundreds of people gathered outside the headquarters calling for the release of those arrested Friday, the BBC reports. They broke windows and forced open the headquarters’ gates while yelling, “Odessa is Russian city, one for all and all for one,” CNN reports. In response, Ukraine released 67 people who had been detained. “Based on the decision taken by Odessa’s regional prosecutor’s office and due to the demands of the protesters, 67 people previously detained for participating in mass disturbances on May 2nd in Odessa were released Sunday,” the Ukrainian Interior Ministry’s website read. As Ukraine’s military began an operation to reclaim the eastern cities occupied by pro-Russia forces on Friday, gunfire broke out in the streets of Odessa, the Associated Press reports. The use of Molotov cocktails also caused a union building to catch fire, killing at least 31 people, most of whom were believed to be pro-Russian activists. Although separatists released eight military observers on Saturday, officials in Ukraine warned that the situation in the country’s east was spinning out of control. “What is happening in the east is not a short-term action,” said Vasyl Krutov, head of the Ukrainian government’s antiterrorist center. “This is essentially a war.” The former U.S. ambassador to Moscow made a similar warning Friday, saying the situation could lead to a full-fledged invasion by Russian troops. “The last 24 hours was a major escalation,” Michael McFaul told TIME. “This is real. This is war.” Ukraine’s Prime Minister Arseniy Yatsenyuk suggested Russia was to blame for the outbreak of violence during remarks in Odessa on Sunday, but he said local police were being investigated for their inability to maintain order on Friday. “This is not a tragedy only for Odessa,” Yatsenyuk said. “This is a tragedy for all Ukraine.”

Ukrainian Troops Intensify Fight Against Separatists

ODESSA, Ukraine -- Ukrainian troops are battling a pro-Russia militia occupying an eastern city in an apparent escalation of a security sweep to bring the region back under government control. Gunfire and multiple explosions could be heard Monday in Slavyansk, a city of 125,000 people that has become the focus of the armed anti-government insurgency. The Interfax news agency cited Interior Minister Arsen Avakov as saying that pro-Russia forces were deploying large-caliber weapons and mortars. In the beleagured city of Odessa, pro-Russian demonstrators stormed police headquarters on Sunday and won the release of 67 people detained after deadly riots there. It was Odessa's latest clash between pro-Russian separatists and supporters of the Ukrainian government in the port city, where more than 40 people died in the riots and subsequent fire in a trade union building on Friday. Earlier Sunday, Ukraine Prime Minister Arseniy Yatsenyuk visited Odessa and accused Russia of engineering violence that left dozens of people dead in recent days. Yatsenyuk also blamed government security forces for failing to prevent the bloodshed, calling the deaths a "tragedy of all of Ukraine." But he offered no words of compromise to Russia, accusing it of a "well-prepared and organized action against people, against Ukraine, and against Odessa." Odessa Police Chief Petr Lutsyuk was fired Saturday. Yatsenyuk said investigators will determine the cause of the breakdown in police and security forces that allowed the unrest to become so deadly. But he also promised that prosecutors will bring to justice all Russian-backed organizers and instigators. Yatsenyuk's visit came one day after pro-Russia militants released seven European military observers as the Ukraine government pressed ahead with a military offensive to take back control of cities from the militancy. Military observers from the Organization for Security and Cooperation in Europe were held for more than a week on what militants said were charges of spying. The OSCE, a diplomatic group, said its members were grabbed as bargaining chips. U.S. Secretary of State John Kerry said the release was a step in the right direction. But he pressed Russia to stop backing separatists and to help oust them from government buildings seized in about a dozen cities and towns. Vyacheslav Ponomarev, self-declared "people's mayor' of the town of Sloviansk outside Odessa, says he holds an unspecified number of other captives. The prisoners are believed to include Ukrainian journalists, activists and politicians. President Obama has threatened to impose more financial sanctions on Moscow if it does not stop assisting the militancy, but Sen. Marco Rubio, R-Fla., said Saturday that Obama has failed to take strong enough action to alter the situation. "President Obama talks tough about Vladimir Putin. But his actions have not gone far enough to change Putin's calculation that the benefits of his aggression outweigh the costs," Rubio said. Senate Republicans have introduced a bill that would increase sanctions and provide Ukraine with defensive military assistance, something Obama has refused to do. Interior Minister Arsen Avakov said Ukrainian forces were continuing to gain on rebels and had seized control of a TV tower in Kramatorsk, near the rebel stronghold of Slovyansk. "We are not stopping," Avakov said Saturday. It was Avakov who fired Lutsyu hours after the chief issued a statement calling for calm in the city of 1 million. Russian President Vladimir Putin's spokesman said the Odessa deaths were evidence that the government in Kiev, which came to power following the toppling of the pro-Russia president after months of protests, encourages nationalist extremists. "Their arms are up to their elbows in blood," Russian news agencies quoted Dmitry Peskov as saying. Putin spoke by telephone Sunday night with German Chancellor Angela Merkel, the latest in a series of discussions they have had about Ukraine. The Kremlin said they agreed on the importance of the role to be played by the Organization for Security and Cooperation in Europe, and said Swiss President Didier Burkhalter, whose country currently chairs the OSCE, would visit Moscow on Wednesday. Odessa is the major city between the Crimean peninsula, which Russia annexed in March, and the Moldovan separatist region of Trans-Dniester where Russia has a military peacekeeping contingent. Concerns are mounting that Russia ultimately aims to take control of a huge swath of Ukraine from Trans-Dniester to the east. The fate of those killed in the trade union building has already become a rallying cause for resistance to the authorities by pro-Russians in the east. In a position eagerly promoted by the Kremlin, critics of the government have blamed those deaths on radical ultranationalists abetted by the government. Pro-unity activists have argued, meanwhile, that their rally came under assault, including from attackers bearing firearms, leading to the deadly blaze.

Heavy Clashes Reported As Ukrainian Forces Tackle Pro-Russian Separatists

SLAVYANSK, Ukraine -- Ukrainian security forces battled pro-Russian militants in the eastern flashpoint city of Slavyansk on Monday as Kiev tackled the gunmen who have overrun the region. Military gains were evident on the main highway into Slavyansk, a rebel stronghold, as government forces moved in. A CNN team on the ground saw a substantial number of militants bolster their defensive positions and checkpoints inside the city. One civilian car was hit in the fighting, its exterior damaged by bullet holes. At a local hospital, the CNN team saw several people injured from the heavy clashes. One woman had been shot in the head, probably in a crossfire, and two pro-Russian militants were also brought in. Ukraine's Interior Ministry said four people were killed and nearly 30 injured in the city. It quoted local residents as saying the attackers had shot at residential buildings and set them on fire. Militants blamed Ukrainian forces for the civilian casualties. In a separate statement, the Ukrainian Defense Ministry said a military helicopter was shot down "during a combat mission and patrolling in the area" of Slavyansk on Monday, but the pilots survived after it crashed into a river. They were later rescued. Ukraine's embattled new leaders have launched their most intensive effort yet to dislodge pro-Russian separatists who have reportedly seized government buildings in nearly a dozen cities and towns. Kiev authorities describe the separatists as "terrorists." But the rebels say they are defending Russian-speaking areas of the east against Ukrainian "fascists" trying to root out Russian influence in the country. Riot-hit Odessa The uprisings began when President Viktor Yanukovych, a supporter of closer ties with Moscow, was toppled by demonstrations led by pro-Western figures in February, namely in Kiev, the capital. Violence soon erupted in the east and south of the country, escalating dramatically last week. On Sunday, pro-Russian sympathizers smashed their way into a police station in the Black Sea port city of Odessa, demanding their detained comrades be released. In another victory for a violent crowd in east Ukraine and yet another humiliation for state authorities, police didn't try to stop them. Instead, they offered the crowd a deal, releasing 67 alleged enemies of the state if the furious crowd went home. Sunday's storming of the Odessa police station -- just two days after more than 40 people were killed in a street battle and deadly blaze in the city -- was one more example of how Ukraine's new Western-backed leaders are struggling to maintain law and order in the south and east of the country. It also raises questions about the ability of the army and police to confront an uprising that Kiev says is backed by Moscow -- an accusation the Kremlin denies. The men released Sunday had been detained over the weekend after bloody clashes between supporters and opponents of Russia in Odessa on Friday, which ended in the deadly blaze. Forty-six people were killed in the bloodshed -- the deadliest since Yanukovych was ousted. Video posted on YouTube appeared to show supporters of Kiev's government throwing Molotov cocktails at the building where pro-Russian separatists had reportedly taken up positions. The footage, which CNN could not independently confirm, showed people sitting on ledges trying to escape the fire and thick smoke. In an attempt to reassert Kiev's authority, Ukrainian interim Prime Minister Arseniy Yatsenyuk went to Odessa to appeal for unity while accusing Russia of provoking the clashes. Ukraine's Cabinet said it would offer financial assistance to the victims' families. "This is the wake-up call for the entire country, for reconciliation. We need to realize that Russians want to eliminate our country," Yatsenyuk said. His message is a tough sell in a city where so many now believe people who speak Russian are being killed and arrested by forces loyal to the Ukrainian government. Military action Ukraine's government reported some progress over the weekend in its military campaign. Officials said security forces had regained control of a TV tower in Kramatorsk, some 10 miles (16 kilometers) south of Slavyansk. Residents in Kramatorsk reported hearing gunfire and a CNN team on the outskirts of Kramatorsk saw troop carriers moving toward the city center Saturday. Amateur video posted online -- the authenticity of which could not be confirmed by CNN -- showed burned buses, plumes of smoke and residents calmly observing it all. Saturday actually featured a rare bright spot in the volatility: the release of seven international military observers and five Ukrainians from the Defense Ministry who had been held hostage for eight days in Slavyansk. However, in another challenge to Kiev, separatist leader Valeriy Bolotov in Luhansk declared a state of emergency and announced the formation of a "South-East" army for the entire region. In a video statement aired on local stations, Bolotov introduced a curfew, a ban on political parties and his expectation that local law enforcement officials will take an oath of allegiance to the people of Luhansk. In Donetsk, separatists say they are preparing their own referendum on May 11 to ask residents whether they want sovereignty from Ukraine -- an echo of events that led to Moscow wresting Crimea from Kiev. Denis Pushilin, the self-declared chairman of the Donetsk People's Republic, told CNN the question on the ballot paper would read: "Do you support the act of state sovereignty of the Donetsk Republic?" to which voters can respond with "Yes" or "No." He said enough ballot papers had already been printed to hold the vote. Tensions with Russia Separatists -- many of them of Russian descent -- say they believe the government in Kiev is illegitimate because it formed after what they call the illegal ousting of Yanukovych in February. Officials in Kiev accuse Moscow of meddling by supporting the separatists. NATO has estimated that up to 40,000 Russian troops are now near the border with Ukraine, which has made Kiev's government and neighboring nations wary of invasion. A senior U.S. official told CNN on Monday that the latest intelligence still showed 40,000 to 50,000 Russian troops on the border. "There has been no major change in force disposition or readiness and no indications of preparations for an invasion," the official said, adding that the U.S. continues to assess the situation. The troops are so close to the border, an invasion could happen with little or no warning, the official said. Russia and the West squared off diplomatically over the fate of Ukraine when Moscow annexed the Black Sea peninsula of Crimea in March after a hastily called referendum and Yanukovych's ouster. He was pushed from office after months of protests by people upset that he had turned away from Europe in favor of Moscow. French Foreign Minister Laurent Fabius warned Monday there could be fresh sanctions on Russia if Ukraine's presidential elections do not take place on May 25. Russia has condemned Kiev's military action in the volatile east. Dmitry Peskov, Russian President Vladimir Putin's spokesman, said Russia's government had received thousands of calls since Friday from people in southeastern Ukraine. The callers described the situation as "horrendous" and pleaded for Russia's involvement. "Most of the people literally demand active help from Russia," he said. The government in Kiev is bracing for further unrest in the run-up to May 9, a national holiday to commemorate the end of the second world war. Interim President Oleksandr Turchynov told local TV that checkpoints had been set up around the capital in case of possible "provocations."

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.”