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RA’s Daily Russia News Blast – July 22, 2020

Today in Russia: Bus hostages in Ukraine; Moscow metro to install facial recognition cameras; “Moscow’s corona euphoriaand the crackdown; No Sino-Russian alliance in the Arctic; Khabarovsk’s new governor known for “weird ideas” but also pragmatism; US Nord Stream 2 sanctions; Yandex.Money deal closed between Yandex and Sberbank; New twist in Calvey-Ariunsan dispute as latter buys up Vostochny Bank shares

A standoff in the Ukrainian city of Lutsk in which a gunman held 13 passengers on a bus hostage came to an end after the country’s president, Volodymr Zelinsky, posted a short clip on his social media in which he endorsed in which he declared, “Everyone should watch the 2005 film Earthlings,” apparently one of the demands of the gunman. The hostage taker was identified as Maksym Kryvosh, a 44-year old Russian-born man who had previously spent time in prison on various charges.

Moscow Metro plans to install facial recognition cameras in 1,500 subway cars by the end of the year. “Each of the 12,300 cameras linked to 398 servers will be able to identify 15 faces per second [in Russian] according to the Kommersant business daily,” and the project comes at a cost of 1.4 billion rubles ($20 million).

Politico wrote about Moscow’s “corona euphoria” which has seen celebrations about the end of lockdowns (although daily COVID-19 cases continue to be above 6,000), and the simultaneous crackdown on all dissent in the country. Journalists, historians, and politicians opposing the Kremlin have faced an unusually harsh crackdown this summer. “The carefree mood [of the post-lockdown summer] fits Putin’s plans perfectly. While Russia parties and minds are on the sunny beaches of Crimea, the Kremlin has taken advantage of the vacuum to ruthlessly clamp down on its critics.

Foreign Policy wrote that talk of a Sino-Russian “alliance” in the Arctic is a misreading of the situation, and that it is in fact a result of Russia searching beyond the West for investment post-Crimea and China’s infinite thirst for resources. However, in the realm of grand strategy – in the Arctic and indeed in Central Asia and other parts of the globe – China and Russia’s interest may diverge. They write,

Russia and China’s Arctic partnership is not an alliance—it is driven by business. Despite mutually beneficial interests in the region, commercial realpolitik is at the heart of their engagement. For now, the partnership in the Arctic navigates existing fault lines, such as Beijing’s failure to acknowledge Russia’s annexation of Crimea and Moscow’s nonalignment in the developing India-China conflict. Any regional cooperation is due to their shared interest in maintaining domestic stability. Long-term economic development ventures and the viability of non-Western multilateral bodies, such as the Shanghai Cooperation Organisation, are critical for their shared vision of world order.

Furthermore, elite and public opinion in both countries, but especially Russia, are wary of one another:

Russia and China’s relationship is fraught with historical resentment and some mutual suspicion—and not just among the political elites. This is more apparent on the Russian side than on the Chinese side: For Beijing, the relationship is more or less colored by indifference. But polling [in Russian] shows that Russians are increasingly wary of China, with their favorable view of Beijing falling from 72 percent in 2019 to 65 percent in 2020.

Meduza took a deep dive into Khabarovsk’s new governor and his political history, noting that he is a “pragmatist” but has also had some “weird ideas.” Notably, he was previously a member of United Russia but switched to the LDPR when he felt his career was hitting a wall in the party:

A favorite of Liberal Democratic Party (LDPR) leader Vladimir Zhirinovsky, Mikhail Degtyarev had no connection to the Khabarovsk Territory prior to July 20, 2020. The 39 year old grew up in a family of doctors in Russia’s Southwestern city of Samara. He began his political career there: at the age of 20, he led the Samara Region’s branch of the pro-Kremlin youth movement “Idushchiye Vmeste” (Walking Together), after which he joined United Russia and its youth wing (now known as the Young Guard of United Russia, at the time it was called “Molodezhnoe Edinstvo” — Youth Unity). At the age of 22, he became a deputy in the Samara City Duma. 

I joined United Russia because I was working as an engineer, and the CEO gathered everyone together and said we had to join. I didn’t resist because Putin supported the party and I didn’t have any prejudices against the president, not then, not now. I stayed there for two years and they tried to remove me twice. But in 2005, I met [Vladimir Zhironovsky] at a train station. My whole life I had turned up the volume on the television when he spoke, so I went over to introduce myself…”

That said, those familiar with Degtyarev claim that he switched from United Russia to the LDPR because his career growth within the ruling party was limited — he wasn’t allowed to head the local branch of United Russia’s youth wing and had no opportunity to move into position any higher than municipal lawmaker. But as a member of the LDPR, Degtyarev — with the help of the leadership of the large local holding company “Volgapromgaz” — immediately became not only the head of the local branch, but also became LDPR leader Vladimir Zhirinovsky’s aide in the Samara Region.

The U.S. House of Representatives has passed an amendment that would impose new sanctions on companies helping Russia complete a controversial natural-gas pipeline to Germany. The Democratic-controlled House passed the amendment to the National Defense Authorization Act (NDAA) on July 20. The NDAA must be approved by the Senate and signed by the president before the new sanctions would become law,” RFE/RL wrote.

Yandex and Sberbank at last closed their deal [in Russian] in the sale of joint venture Yandex.Money to Sberbank. As part of the deal, Yandex will buy out Sberbank’s stake in Yandex.Market for 42 billion rubles, and Sberbank will pay Yandex 2.4 billion rubles for each to take a 100% stake in their respective businesses. The two emphasized that the move was not a “divorce” and was rather a “restructuring” of operations.

RBC reported that Artyom Avetisyan’s Finvision is buying out troubled assets from Vostochny Bank for 1.6 billion rubles. The bank acquired them in 2016, but the Central Bank and another Vostochny shareholder, the Baring Vostok fund, put forward claims to the transactions.

Vostochny Bank was chaired by the American investor Michael Calvey, the founder and chairman of investment firm Baring Vostok. The bank merged with a bank controlled by Avetisyan, a little known but Kremlin-connected businessman. When the credit profile of the merged bank deteriorated severely, a dispute arose between Calvey and Avetisyan, and proceedings were brought in London and Calvey was arrested in Russia in 2019 on a fraud case that Calvey claims is politicized. RBC wrote,

The conflict between Baring Vostok and Finvision has been going on since 2018, when the parties exchanged claims in the High Court of London for tens of billions of rubles. In 2019, a criminal fraud case was opened against Baring founder Michael Calvey and his colleagues. Now the accusation has been reclassified for the embezzlement of 2.5 billion rubles, which Bank Vostochny yielded to the First Collection Bureau (PKB), affiliated with Baring. In exchange, he received shares of the IFTG investment fund. The investigation believes that the shares were not equivalent to a loan of 2.5 billion rubles. Calvey connects the criminal case with the situation in “Vostochny”, the other side of the conflict denies this.

But the purchase of Vostochny’s remaining shares by Finvision is being contested, as RBC wrote: Now the deal to buy out shares in the companies of its debtors by Vostochny is being contested in the Arbitration Court of the Amur Region: Marina Ushakova, a minority shareholder of Vostochny and a former employee of the Baring Vostok fund, filed a lawsuit against Avetisyan and Alla Tsytovich, the former head of Uniastrum, seeking damages the amount of 1.65 billion rubles.

PHOTO: A stand-off in Ukraine has ended with the arrest of the hostage taker, a Russian-born man with a criminal history and the freeing of 13 passengers on a bus in the city of Lutsk (AFP).