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The Challenge Ahead in Eastern Ukraine
by Askold Krushelnycky
Atlantic Council
August 15, 2017

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Bloody fighting between government troops and pro-Kremlin separatists and Russian regulars has continued for three years in Ukraine’s east. Meanwhile, an equally fierce battle is being waged for the hearts and minds of civilians on the Ukrainian side, many of whose loyalties hover between Kyiv and Moscow.

The town of Lysychansk in Luhansk province recently commemorated the third anniversary of the Ukrainian army driving out pro-Kremlin forces. But while the festivities rallied a passionately pro-Ukrainian section of the town’s 100,000 residents, they also revealed many who were less than exuberant to be under Ukrainian control.

As a Ukrainian soldier walked toward crowds in the town’s main square, two middle-aged women approached and asked what was happening. The soldier replied, “We are celebrating the liberation of the town three years ago.”

One of the women snapped back, “Who did you liberate us from?” Her answer and tone made it clear she and her friend were not fans of the Kyiv government.

Eastern Ukraine is overwhelmingly Russian-speaking and has the country’s densest concentration of Russian ethnics. Lysychansk’s inhabitants formerly worked in the coal mining industry and oil refineries in Luhansk and Donetsk, which expanded during Stalin’s breakneck race for industrialization. Much of this industry was already withering as the USSR fell apart; it shriveled further during Ukrainian independence and the conflict sounded the death knell for most of it.

During Ukrainian independence, Lysychansk was controlled by shady businessmen who became fabulously wealthy. Using the TV stations they owned, they kept the area in a weird twilight world of nostalgia for the Soviet Union. Now Lysychansk is a depressed and depressing place: a grimy, worn out town encircled by smokestacks and skeletal industrial structures.

During the time Lysychansk was occupied, pro-Russian forces terrorized anyone deemed pro-Kyiv and tried to eradicate Ukrainian flags and symbols, and to block Ukrainian language lessons in schools. It was the scene of fierce battles to wrest back control of Ukrainian territory from the Russians, beginning on July 19, 2014. By the time it ended five days later, some twenty Ukrainian soldiers and scores of pro-Russian fighters had died.

The commemorations began with a convoy of cars fluttering blue and yellow Ukrainian flags driven by pro-Ukrainian activists; they halted to pay tribute at spots where the deadliest fights happened. In the evening, folk music and rock bands played on the central square. Nobody heckled or tried to disrupt the events, although a few stared with hostility.

One of the organizers of the commemorations, Ruslan Miroshnichenko, who is from the area, estimates that perhaps 20 percent of the town’s inhabitants are vigorous Ukrainian government supporters; a higher proportion, 30 to 40 percent, are sympathetic to Moscow. The remainder, he believes, will bend whichever way the wind blows.

Miroshnichenko served with Ukrainian peacekeeping troops alongside NATO forces in Iraq and was impressed by American efforts to interact with Iraqi civilians. He was instrumental in the Ukrainian army’s formation of its own Civilian Military Cooperation (CIMIC) unit. It operated where Ukrainian peacekeepers served and is now deployed across the Donetsk and Luhansk provinces, which are split between Ukrainian-held and pro-Russian areas.

He thinks the unit can help persuade the undecided to bend Ukraine’s way by providing information and practical help to those affected by the war, particularly the 1.8 million internal refugees who overwhelmingly fled to Ukrainian-held territory from Russian-occupied areas.

Miroshnichenko is now vice president of Ukraine’s Youth Atlantic Council, which is affiliated with NATO and acquaints young Ukrainians with Western values.

He says, “The government has to convince those who might support the separatists that it is serious about fighting corruption and implementing reforms in the economy, health, education [sectors]. Kyiv has to show that it can provide security and stability and that democracy and Ukraine’s independence will bring benefits to everyone.”

He believes it must be a priority to effectively counter the distorted and fake Russian news bombarding areas close to the conflict areas. He says, “We are trying to build a democracy and so we can’t forbid people’s right to choose; we can’t just switch the Russian channels off. Therefore, those responsible for Ukrainian TV and radio should provide high-quality programs that can out-perform Russian broadcasts.”

He adds, “We need a Marshall plan for the east of Ukraine that will prove to the people here that the West is indeed their friend.”

In Lysychansk’s main square, shielded by blue and yellow metal sheeting, are the legs from a statue of Lenin. Thousands of such statues have been torn down since Ukraine’s 2014 pro-Western revolution. For Ukrainians, they are symbols not only of Communism but of Russian rule.

Most of Lysychansk’s Lenin statue toppled when a hawser was cast around his neck and tugged by a truck. However, the legs obstinately resisted buckling. Thus they remain, hidden from view. Yet, like Lysychansk inhabitants who may not wish Ukraine well, their presence is known to all.

Askold Krushelnycky is a freelance journalist based in Washington, DC. His work has been published by Foreign Policy, The Independent, the Sunday Times, and the Chicago Tribune, among others.

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The Senate Just Passed a Monumental New Russia Sanctions Bill—Here’s What’s In It
by Edward Fishman
Atlantic Council
June 14, 2017

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Today, the Senate overwhelmingly approved a bill that would fortify existing sanctions on Russia and add new restrictions. If the bill becomes law, it would mark the most significant step taken by Congress on Russia policy in recent history. Though not perfect, the bill would substantially strengthen the West’s negotiating position vis-à-vis Russia on the conflict in Ukraine and send a strong message to Moscow that efforts to undermine US elections carry costly consequences.

“It’s clear,” another forensics investigator wrote, “that metadata was deliberately altered and documents were deliberately pasted into a Russianified [W]ord document with Russian language settings and style headings.”

In addition, there is the adulteration of the documents Guccifer 2.0 posted on June 15, when he made his first appearance. This came to light when researchers penetrated what Folden calls Guccifer’s top layer of metadata and analyzed what was in the layers beneath. They found that the first five files Guccifer made public had each been run, via ordinary cut-and-paste, through a single template that effectively immersed them in what could plausibly be cast as Russian fingerprints. They were not: The Russian markings were artificially inserted prior to posting. “It’s clear,” another forensics investigator self-identified as HET, wrote in a report on this question, “that metadata was deliberately altered and documents were deliberately pasted into a Russianified [W]ord document with Russian language settings and style headings.”...

The FBI has never examined the DNC’s computer servers—an omission that is beyond preposterous. It has instead relied on the reports produced by Crowdstrike, a firm that drips with conflicting interests well beyond the fact that it is in the DNC’s employ. Dmitri Alperovitch, its co-founder and chief technology officer, is on the record as vigorously anti-Russian. He is a senior fellow at the Atlantic Council, which suffers the same prejudice. Problems such as this are many....

In effect, the new forensic evidence considered here lands in a vacuum. We now enter a period when an official reply should be forthcoming. What the forensic people are now producing constitutes evidence, however one may view it, and it is the first scientifically derived evidence we have into any of the events in which Russia has been implicated. The investigators deserve a response, the betrayed professionals who formed VIPS as the WMD scandal unfolded in 2003 deserve it, and so do the rest of us. The cost of duplicity has rarely been so high.

-- A New Report Raises Big Questions About Last Year’s DNC Hack: Former NSA experts say it wasn’t a hack at all, but a leak—an inside job by someone with access to the DNC’s system, by Patrick Lawrence

It is not yet a sure thing that the bill will become law. While the legislation has bipartisan support in the Senate, Secretary of State Rex Tillerson signaled on June 13 that the Trump administration might oppose it. The White House’s opposition could give House Republicans cold feet about voting on the bill.

But for now, it is worth examining the contents of the bill and explaining what it would mean for US policy toward Russia.

1. The bill locks in existing US sanctions against Russia and gives Congress a check on the president’s ability to lift sanctions.

The most basic element of the bill is that it codifies existing US sanctions against Russia—including three executive orders tied to Russia’s aggression in Ukraine, one tied explicitly to Russia’s annexation of Crimea, and two tied to malicious cyber activities. Absent such codification, President Donald Trump could terminate US sanctions against Russia with the stroke of a pen. By codifying the executive orders, the bill constrains the executive branch’s ability to remove any of the sanctions currently in place.

Moreover, the bill spells out what the president must do in order to remove sanctions: submit a report to Congress explaining the rationale, including what the United States expects to receive in return. Within thirty days of the submission of such a report (sixty if it is submitted during summer), Congress can approve or reject the president’s decision to remove sanctions.

By itself, this measure greatly strengthens US policy toward Russia. On Ukraine, it will give America’s sanctions partners (the European Union, Japan, Canada, and several others) confidence that Trump will not unilaterally back away from sanctions—which, in turn, will make it less likely that America’s partners will remove sanctions. Equally important, the provision will give Moscow clarity about America’s position: the United States will maintain sanctions until Russia changes the behavior that led to the imposition of sanctions in the first place.

2. The bill significantly expands US sanctions on Russia’s energy sector. If implemented proactively, it would cut off Russia’s hopes for developing its next-generation oil resources.

Current sanctions prohibit Western companies from providing goods or services to next-generation oil projects in Russia: specifically, Arctic offshore, deepwater, and shale projects. The bill expands US restrictions in two important ways. First, it brings projects in which Russian companies are involved—regardless of where they are located—under the purview of sanctions. That means Russian companies will be denied the opportunity to amass expertise in advanced drilling techniques by learning from Western partners.

Second, the bill requires the executive branch to impose sanctions on foreign firms that make significant investments in next-generation Russian oil projects. This provision—a classic case of secondary sanctions—will discourage companies around the world from investing in Arctic offshore, deepwater, and shale oil projects in Russia, diminishing the risk that lost US business will be backfilled by foreign competitors.

Taken together, the energy sanctions in the bill will likely block Russia’s development of next-generation oil resources, which can take many years to develop, for as long as the sanctions are in place. For Russia’s oil-dependent economy, this is a big deal.

3. The strongest sanctions in the bill concern transactions with Russia’s intelligence and defense sectors. These measures are the bill’s most important counterpunch against Russia’s interference in the 2016 US election.

As a response to Russia’s interference in the 2016 US election, the bill includes a number of sanctions that make sense thematically but will likely have minimal economic impact. But it does include one provision that packs a major economic punch: mandatory sanctions on any “person” (i.e., individual or entity) “that engages in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation.” If the Treasury Department implements this provision aggressively, it will amount to a threat of secondary sanctions against any company around the world that buys substantial arms from Russia (which, as of 2016, accounted for roughly 8 percent of arms sales globally).

With Russia investing heavily in arms while it increasingly uses its military to defy international norms, it behooves the US government to take steps to impede the development of Russia’s military capabilities. This provision, therefore, not only represents the muscle of the bill on cyber deterrence but also advances strategic objectives by hindering Russia’s military modernization and incentivizing foreign militaries to diversify away from Russian arms purchases.

4. The bill includes an optional tool that could help the US government impede Nord Stream II—and enhance European energy security—if the White House decides to use it.

While most sanctions in the Senate bill are mandatory, one important measure is discretionary: sanctions on investment in the construction of Russian energy export pipelines. If the Treasury Department opts to use this provision aggressively, it could threaten sanctions against any company that makes a significant investment in Nord Stream II, the controversial gas pipeline that would connect Russia to Germany by way of the Baltic Sea. And if Treasury were to levy such threats credibly, the parties involved in Nord Stream II may well decide it is too risky to proceed with the project.

This would be a big deal, as it would scupper Russia’s efforts to deliver gas to Europe while bypassing Ukraine, and it would help the EU diversify away from Russian energy. It could also be a boon for American companies seeking to export liquefied natural gas to Europe.

5. Other sanctions in the bill are mostly symbolic.

Under current sanctions, American financial institutions cannot provide credit to the six largest Russian banks with maturity of thirty days or more. The bill tightens the debt maturity threshold to fourteen days. While the symbolism is clear—sanctions are tightening and inching closer to blacklisting the Russian banks entirely—it is doubtful such a move will have significant practical impact. Other measures included in the bill, such as sanctions on the corrupt privatization of state-owned Russian assets, are difficult to judge in terms of projected impact.

6. This bill sounds great—what’s the catch?

There are several loopholes in the bill. One obvious loophole is in sanctions on investments in next-generation Russian oil projects. The text of the bill allows the White House to opt not to impose the sanctions if “the president determines that it is not in the national interest of the United States to do so.” While waiver authority is necessary, the provision would be improved if it required a report to Congress each time the president decides not to penalize a worthy target. Thankfully, the strongest provision in the bill—which restricts transactions with Russia’s intelligence and defense sectors—includes a waiver that mandates Congressional notification.

Other quibbles with the bill are minor. The bill requires several reports from the executive branch, including a study on the potential impact of a ban on dealing in Russian sovereign debt. Reports, unfortunately, can suck up precious staff time that is better spent enforcing sanctions proactively. The bill would be much stronger—and more effective—if it simply imposed restrictions on dealing in Russian sovereign debt.

Nevertheless, senators on both sides of the aisle deserve much credit for designing legislation that will clearly advance US interests.

7. Keep your eyes on the EU’s reaction.

Had Congress passed such a bill during the Obama administration, the EU would have opposed it vocally. That’s because the bill alters certain sanctions that were initially negotiated multilaterally, without giving the EU or others a chance to weigh in. Moreover, because of the reach of the US financial system, European firms will likely comply with the new American sanctions whether or not their governments approve. And of course, the bill includes a number of secondary sanctions—which no foreign government likes.

In ordinary times, France could be expected to oppose the bill as a unilateral use of American power. But having been victimized by brazen Russian cyberattacks during his own campaign, President Emmanuel Macron may be tempted to support it—or at least to remain quiet. The same is true for German Chancellor Angela Merkel, who may view the legislation as an opportunity to reestablish a degree of transatlantic unity on Russia policy.

The Latest: France says no trace of Russian hacking Macron
by Associated Press
June 1, 2017

5:30 p.m.

The head of the French government’s cyber security agency, which investigated leaks from President Emmanuel Macron’s election campaign, says they found no trace of a notorious Russian hacking group behind the attack.

In an interview in his office Thursday with The Associated Press, Guillaume Poupard said the Macron campaign hack “was so generic and simple that it could have been practically anyone.”

He said they found no trace that the Russian hacking group known as APT28, blamed for other attacks including on the U.S. presidential campaign, was responsible.

Poupard is director general of the government cyber-defense agency known in France by its acronym, ANSSI. Its experts were immediately dispatched when documents stolen from the Macron campaign leaked online on May 5 in the closing hours of the presidential race.

Poupard says the attack’s simplicity “means that we can imagine that it was a person who did this alone. They could be in any country.”

Regardless, Secretary Tillerson and Secretary of the Treasury Steven Mnuchin would be wise to send envoys to Europe to try to persuade US allies to sign on to similar sanctions. The West’s leverage in negotiations with the Kremlin is strongest when America and the EU project a united front.

8. What does the bill mean for broader US policy toward Russia?

One interesting hypothetical is what will happen if the bill becomes law but the Trump administration is apathetic about enforcing it. Such a move would muddle US policy toward Russia. After all, sanctions are only as useful as the policies they are meant to advance. But the executive branch will be required by law to implement most provisions in the bill, and the Treasury Department will take its legal obligations seriously.

Even if Trump persists in his pro-Russia rhetoric, the bill will provide much-needed clarity to US policy toward Russia. It will end worried speculation about the White House’s intentions on sanctions, and it will indicate once and for all that America remains committed to combating Russian aggression. That the US Senate was able to pass such a significant piece of legislation during a time of intense partisan division is no small achievement.

Edward Fishman, a fellow at the Atlantic Council, served as a member of the Secretary of State’s Policy Planning Staff and as the Russia and Europe Lead in the State Department’s Office of Sanctions Policy during the Obama administration. He tweets @edwardfishman.