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Soldiers of the Ukrainian army on the front line during the Joint Forces Operation in Donbass area, Luhansk region, Ukraine, on June 2018.

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A high-profile prisoner exchange between Russia and Ukraine is being seen as a boost to the possible resumption of peace talks, but some experts are tempering those hopes.

Ambassador Kurt Volker, the U.S. special representative for Ukraine negotiations, told CNBC Wednesday that “there is a long way to go before there would be any normalization between the two countries.”

“Russia’s invasion, occupation, and claimed annexation of Crimea will never be accepted by Ukraine,” Volker, who is also the executive director of the McCain Institute for International Leadership, told CNBC. “That said, it is possible to make progress toward peace in Eastern Ukraine.”

“This prisoner exchange is a good step, that could pave the way for further exchanges, a more durable cease-fire, withdrawal of heavy weapons and — ideally — a decision by Russia to proceed with implementing the Minsk agreements. If so, it would tremendously improve the lives of the local population,” he added.

On Saturday, a possible thawing of frosty relations between the two neighbors came about after Russia and Ukraine exchanged a total of 70 prisoners, including Ukrainian sailors that were detained in November 2018 following a skirmish in the Kerch Strait.

The incident in the strait was just one of a number of incidents reflecting heightened tensions between the countries since 2014, following Russia’s annexation of Crimea and its role in a pro-Russian uprising in the Donbass region in the east of the country.

The uprising prompted Russian-backed separatists within the Donbass to proclaim two “people’s republics” in Donetsk and Luhansk, exacerbating the destabilization of (and tensions with) Ukraine. It has also led to Russia becoming something of a pariah in the international community and it is still subject to sanctions for its actions.

What’s happened?

The conflict in the Donbass region is now in its fifth year, although it has been characterized more by regular skirmishes than outright war. Nonetheless, the human cost has been high. Over 13,000 people (including civilians and combatants from both sides) have died since 2014, according to the United Nations, and hostilities have affected 3.9 million civilians living in the region.

Efforts by France and Germany in 2015 to broker a cease-fire and peace deal, known as the Minsk agreements, were widely seen to have failed with both Russia and Ukraine accusing each other of failing to meet the conditions of the deal.

Against a backdrop of bitter relations, a lot of focus has been on how the new Ukrainian President Volodymyr Zelensky, a comedian and TV star by trade, would handle Russia after he campaigned on a pledge to end the conflict in the Donbass region. During his inauguration, Zelensky said that the government’s “first task is to achieve a cease-fire in Donbass.”

‘Normalization’ of Ukraine-Russia relations?

Zelensky said Saturday that all steps must be taken “to finish this horrible war,” Reuters reported, while Russian President Vladimir Putin said the swap would be “a good step towards the normalization of relations.”

Even President Donald Trump got enthusiastic, tweeting his approval and his hope for peace.

Experts are cynical, however. Otilia Dhand, senior vice president at Teneo Intelligence, is also not convinced that the exchange means conflict resolution, noting that there are major barriers to peace in place.

“First, this was just another (though high-profile) among several exchanges of prisoners between Ukraine and Russia under the 2015 Minsk cease-fire agreement,” she said in a note Tuesday.

“Second, the political conditions of the cease-fire agreement require constitutional reform in Ukraine prior to the restoration of Kyiv’s territorial control. Separatists would likely demand decision-making powers in foreign policy to prevent any possibility of Ukraine’s westward economic and security integration, which remains unacceptable for Kyiv.”

Nonetheless, Dhand noted that the recent increase in bilateral activity suggests that some form of talks over the Donbas conflict will likely take place soon, with both sides having vested interests in a resolution.

“Ukraine’s new president, Volodymyr Zelensky, seeks a substantial political victory to foster his position in the political system … Russia seeks a normalization of relations with the EU and the U.S., the easing of sanctions and the return to the global political stage,” she said.

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Conservatives rename Twitter account ‘factcheckUK’

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In this handout image supplied by ITV, Prime Minister Boris Johnson answers questions during the ITV Leaders Debate at Media Centre on November 19, 2019 in Salford, England.

Jonathan Hordle | ITV via Getty Images

The U.K.’s Conservative Party renamed one of its official Twitter accounts to “factcheckUK” Tuesday night, masquerading as a political fact-checking service in the midst of a televized pre-election debate.

Britain’s ruling political party also temporarily replaced its profile picture with a check mark, seemingly in an effort to make social media users assume it was a verified fact checker. Its Twitter handle, @CCHQPress, was however unchanged, and its cover photo stated it was from the communications arm of the Conservatives.

The account is followed by over 76,000 people. James Cleverly, chairman of the Conservatives, defended the move in an interview with the BBC on Tuesday.

“The reason we did that is because we were calling out the inaccuracies, the lies that were coming out during the debate,” Cleverly told BBC Newsnight, adding that he disagreed the party was misleading the public.

It’s one of the first tests for the Silicon Valley microblogging platform as it looks to ban political advertising in a strategy outlined by CEO Jack Dorsey. The Twitter chief said last month that the social network would enforce such a ban from Nov. 22. The move has put pressure on Facebook to do the same ahead of elections in the U.K. and U.S., but boss Mark Zuckerberg instead defended its policy on political ads.

Twitter called the stunt an attempt to “mislead” people, adding that any similar actions in the future would result in “decisive corrective action.”

“Twitter is committed to facilitating healthy debate throughout the U.K. general election,” a spokesperson for the firm said in an emailed statement to CNBC. “We have global rules in place that prohibit behavior that can mislead people, including those with verified accounts. Any further attempts to mislead people by editing verified profile information — in a manner seen during the U.K. Election Debate — will result in decisive corrective action.”

According to The Guardian, the party’s press account put out pro-Conservative tweets in the middle of a TV debate between U.K. Prime Minister Boris Johnson and opposition leader Jeremy Corbyn. The account has since reverted to its normal name and branding.

U.K. voters are set to head to the polls on Dec. 12.

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US’ anti-Russian stance might return during 2020 election

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Given the results of the Mueller investigation, which concluded that Russia had interfered in the 2016 U.S. election, one could forgive Americans for being wary of the country as the 2020 vote approaches.

Russia is still operating under U.S. (and international) sanctions for its meddling in the U.S. election, as well as its annexation of Crimea from Ukraine in 2014 and its role in a military conflict in the east of the country. But there have been signals that the global appetite to continue these sanctions is waning.

Andrey Kostin, president and chairman of Russia’s second largest lender, VTB Bank, told CNBC Wednesday that Russia would like to see a clearer policy regarding Russia from the U.S.

“We should expect some more specific policy on the part of the U.S. Because I think after the results of the Mueller report the anti-Russian stance somehow weakened but it might revive during the election campaign, we don’t know,” Kostin said, speaking to CNBC’s Dan Murphy at the Russia Calling forum in Moscow.

“It’s very unfortunate because we want a good relationship with the United States, our president is always ready to talk to Mr (Donald) Trump and other officials from the administration, but I’m afraid that unless there will be more precise policy on the part of the American administration, and for this he should probably agree with the Senate and Congress,” the relationship might not improve, he said.

Russia was accused of meddling in the 2016 election race and the allegations, which Russia denied, prompted a near two-year long investigation led by Robert Mueller. The probe said that the Russian government interfered in “sweeping and systematic fashion” and had been designed to favor Trump and harm Hillary Clinton’s campaign. Mueller said the inquiry did not establish that the Trump campaign conspired or coordinated with the Russian government in its election interference campaign.

Relations between Trump and his Russian counterpart, Vladimir Putin, have apparently been cordial against a backdrop of wider hostility toward Russia among U.S. lawmakers on both sides of the political spectrum, and pressure on Trump to not roll back sanctions.

Asked what the outlook was for U.S.-Russia relations, Kostin said it was better to wait until the result of the 2020 U.S. election.

“My expectation is that we should talk about this maybe only after the elections in the U.S. (in 2020) because now America is going into the new political cycle … And there will be a lot, a lot of fights which we already saw in the last three years since Trump came to power, or did he come to power?,” Kostin joked, adding that Trump appeared to have a good chance of staying in power.

The Russian economy

International sanctions affected certain Russian sectors, including the financial industry, entities and individuals. The sanctions lists have increased each year; global risk management firm The Risk Advisory Group noted in September that the list now consists of more than 500 companies and 300 individuals.

Majority state-owned VTB Bank was placed on a U.S. (and other Western nations’) Ukraine-related sanctions list in 2014.

Kostin was added to a U.S. list of sanctioned individuals in April 2018 as he was deemed to be close to Putin and designated as a government official given the bank’s state-owned status. He told CNBC in May 2018 that the decision to put him on the list was “unfair.”

Nonetheless, Russia embarked on a program of import substitution and has weathered a storm of dramatically low oil prices, which coincided with the imposition of sanctions, leading to a financial crisis in Russia with the ruble tumbling and inflation rocketing.

Russia’s central bank has tamed high inflation in the last few years with a policy of high interest rates (the interest rate was 17% in December 2014) but has since then been gradually lowering the rate as inflation has decreased. In October, the central bank again cut its main interest rate by a surprising 50 basis points to 6.5% and signaled that it could cut the rate again in the coming months because of slowing inflation (which now stands at 3.8%, below its 4% target).

Still, sanctions and geopolitics don’t appear to be putting off all investors with Russian equities among some of the world’s top performers this year amid relatively low valuations and a strengthening currency.

Net returns on the MSCI Russia index are up more than 40% year-to-date as compared to the overall MSCI Emerging Market Index, which is up 10.35% in the same period, data from the MSCI at the end of October showed.

Andrey Kostin, chief executive officer of VTB Group, sits on the plenary panel at the annual VTB Capital ‘Russia Calling’ Forum in Moscow, Russia, on Wednesday, Nov. 28, 2018.

Andrey Rudakov | Bloomberg | Getty Images

Stability, but risks

VTB’s Kostin said the key word to describe the Russian economy today was “stability” but conceded there was room for improvement.

“What we lack today is fast economic growth, the forecast is 1.3% only in comparison with last year when it was 2.3%,” he said.

“Of course, Russia is an open economy and what’s happening in the world and the slower economic growth in China, in the world, in Europe, is affecting the Russian economy. But we also have our domestic problems, (such as) the lack of investments and lower domestic demand.”

As the world’s second largest natural gas producer, and third largest oil producer in the world, Russia has been able to lean on its energy exports as sanctions have curtailed other parts of its economy. Oil prices have also risen since late 2016 in no small part due to Russia’s pact with OPEC to curb oil output in order to balance supply and demand.

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House passes Hong Kong rights bill amid Trump China trade talks

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Pro-democracy supporters hold their phone’s flashlight in a rally to show support for students at The Hong Kong Poytechnic University on November 19, 2019 in Hong Kong, China.

Anthony Kwan | Getty Images

The House passed a pro-Hong Kong rights bill on Wednesday, putting President Donald Trump in a bind as he tries not to roil high-stakes trade talks with China.

The chamber approved a measure that aims to protect human rights in Hong Kong by a 417-1 margin amid efforts to crack down on months of pro-democracy protests. The House passed a second bill to bar the export of certain munitions to Hong Kong police by the same margin.

The Senate unanimously approved both pieces of legislation, so they head to Trump’s desk after House passage. The White House has not yet signaled where the president stands on the bills, but he could face a dilemma.

Chinese Foreign Ministry spokesman Geng Shuang said Beijing “condemns and firmly opposes” the first bill, known as the Hong Kong Human Rights and Democracy Act, according to Reuters. Trump aims not to anger the Chinese regime as he pushes for the elusive first piece of a U.S.-China trade agreement.

Congress’ move to pass the bills comes at a tricky time for Trump, who hopes to have a China trade victory to promote on the 2020 campaign trail. Major U.S. stock indexes fell on Wednesday following a Reuters report that the world’s two largest economies may not finish a “phase one” trade deal this year.

Trump did not answer shouted questions from reporters Wednesday about whether he would sign the bills. The legislation passed with near-unanimous support in both chambers, meaning Congress could override a Trump veto.

The government response to months of pro-democracy protests in Hong Kong, a semi-autonomous region, has grown increasingly violent. The demonstrations first started in response to a since scrapped bill that would have allowed extradition to mainland China. 

Some members of the Trump administration such as Secretary of State Mike Pompeo have harshly criticized China’s response to the protests. Trump has said China should handle the situation itself, though he has warned harsh treatment of people in Hong Kong could derail the trade talks. 

One bill passed this week would require Pompeo to say once a year that Hong Kong has enough autonomy to keep special U.S. trading consideration that helps its economy. It would also set up the potential for sanctions on people responsible for human rights abuse in Hong Kong. 

The second measure would bar the sale of items such as tear gas and rubber bullets to Hong Kong police.

Asked about the trade talks earlier Wednesday, Trump said Beijing wants to strike a trade agreement more than he does. He added that he has not made a deal because “I don’t think they’re stepping up to the level that I want.” 

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