Getting Russia Wrong

On Friday, January 6, the Office of the Director of National Intelligence released a ‘declassified’ version of its report on Russian ‘influence efforts’ aimed at the 2016 election. It would be an understatement to say that the report is laughably bad, which reads more like a half-assed college paper than a final product from agencies with a collective annual budget north of $50 billion. I will not dwell on the report’s details or faults, which have been well-covered here and here.

Instead, I want to expound a bit on what the report reveals about the worldview of the U.S. intelligence community and U.S. political elite in general. The report demonstrates that these groups subscribe to the narrative that Putin has absolute control over everything that happens in Russia. Now, I’m not saying that the Russians didn’t hack the DNC/Podesta, nor that Putin was aware/involved in the event that they did. The problem is that the report’s analysis relies on deductive reasoning in this area – i.e., Putin controls everything that happens in Russia –> something happened in Russia –> therefore, Putin is responsible for that happening. This is why the report cites statements by clowns like Zhirinovsky and Kiselyov as indicative of Putin’s innermost thoughts. Ridiculous.

Ironically, many of the diplomatic cables released by Wikileaks show more nuanced views of Russia. But those are the people on the ground, and I suspect this report was primarily generated in Washington. In other words, I’m not saying that the entire U.S. intelligence community is ignorant about Russia, but those who were qualified to offer evidence and analysis either weren’t consulted or were ignored (perhaps due to the highly political nature of the report).

It may be useful to offer an anecdote that illustrates the complexity of Putin’s Russia. In a pretty well-known case, Russian customs seized nearly 170K Motorola phones at Sheremyetevo Airport in 2006. The public reporting quickly revealed that the issue boiled down to corruption – the customs officials wanted a bribe, or to sell the phones on the black market, etc. At the time, Motorola sold its phones via the Evroset chain. Evroset’s CEO was Yevgeny Chichvarkin, who is, shall we say, a unique individual. Shortly before the Motorola Affair, Chichvarkin was at a reception in the Kremlin, which Pres. Putin attended. Chichvarkin – wild soul that he is – was wearing ‘colorful’ clothing completely inappropriate for the staid event.

Apparently, Putin was talking to a group of officials, noticed Chichvarkin, and remarked, “Who is that fool?” He was only noticing Chichvarkin’s unconventional style choices, but the officials interpreted it as a symbol that it was open season on Chichvarkin. This led to Chichvarkin’s problems, and then Chichvarkin’s problems became Motorola’s problems. To its credit, Motorola worked to address the issue through official channels. The lower-level officials gave random explanations for why the phones could not be released. Finally, a letter was sent to Putin that actually made it to his desk, describing the whole situation. Putin read the whole document, then took out a pen and wrote on top, “Resolve this according to the rules.” That was the end of Putin’s involvement. But what rules? The law? The unwritten rules in Russia permitting officials to derive extra income from private businesses? Nobody knew.

Many of the phones were later discovered for sale on the black market, which I believe is what led to actual punitive measures against some of the officials involved. But the point is, Putin’s power has neither the substance nor form of a traditional ‘dictator’. He presides over a system with many groups (some say ‘clans’) having their own independent sources of power, which often conflict with one another. Putin’s legitimacy comes from (i) managing these ‘clan’ conflicts to prevent open warfare; and (ii) improving ordinary Russians’ perception of their lives in the form of economic development and perhaps Russia’s standing in the world.

The system is inherently opaque because there is no real rule of law. Putin needs to cater to various, conflicting interest groups at all times, which means his actual position can never be clear (what if he throws his weight behind a losing faction?). That is why his most oblique statements are puzzled over by the Russian elite, just as much as they are by the U.S. foreign policy elite. As his ‘resolution’ of the Motorola situation makes clear, sometimes he does this deliberately.

The point is that we should exercise caution when trying to find Putin’s direct involvement behind discrete events, such as the DNC hack. It is entirely possible that Putin knows the FSB and GRU were hacking the DNC, but that he never authorized the leaking of documents. But if he reveals that his intelligence services have gone rogue, it diminishes his power (the year before a crucial election). Hence, the continuous stream of non-denial denials and coy statements from Putin and Peskov. It is entirely possible that Putin himself is trying to figure out what exactly happened.

I would love to think that our intelligence community is playing three-dimensional chess with Russia here – say pinning the blame on Putin while planting intelligence that Sechin ordered the hack – but sadly, the one persistent feature of both our countries’ governments is incompetence.

 

Posted in chichvarkin, corruption, FSB, GRU, hacking, russia

Unpacking Russian Hacking

In the summer and fall of this year, emails and documents belonging to the Democratic National Committee and Hillary Clinton Campaign Chairman John Podesta were published online by Wikileaks. Guccifer 2.0 – purportedly a Romanian hacker – published a smaller set of DNC documents prior to the first Wikileaks release (he also claimed to be Wikileaks’ 2100spjsource).

Crowdstrike – a private cybersecurity firm hired by the DNC – attributed  the hacks to Russian intelligence agencies after one month of investigation. Their findings were reviewed and generally repeated by a number of other private firms. In October, the Director of National Intelligence and Secretary of Homeland Security released a joint statement, saying they were “confident the Russian Government directed the recent compromises.”

No new information on the hacks surfaced until after Donald Trump unexpectedly won a majority of electoral votes on November 9. Suddenly, a flurry of new reporting emerged, much of it recycling the same attribution conclusions from Crowdstrike and the DNI/DHS statement. But there were a series of additional allegations or conclusions, entirely from unnamed intelligence officials, that sharpened the narrative around the hacking. Specifically, the unnamed officials asserted (in this order): (i) Russia’s goal was to disrupt the election, in order to undermine confidence in the outcome (this was reported prior to the election as well); (ii) Russia’s goal was to elect Donald Trump; and (iii) Pres. Vladimir Putin personally directed and oversaw the hacking.

On December 29, the Obama Administration gave new life to the story when it announced sanctions on several Russian officials, private citizens, and public and private entities. The White House added to the sanctions by declaring 35 Russian diplomats (“intelligence operatives”) persona non grata and rescinded access to two Russian government properties in Maryland and New York.

I have neither the time nor space to meticulously cover each element of this story. There have been some excellent pieces that collect all the various threads, with links to the sources, at The Intercept and Empty Wheel.

Instead, I would like to focus on just two issues that caught my attention: hacking vs. leaking; and the sanctions targets.

Hacking vs. Leaking

In the media accounts, the hacking of the DNC and Podesta are often conflated with the leaking of the documents. This is strange because it is well-known and even tacitly accepted that foreign governments routinely hack and spy on U.S. presidential campaigns (e.g., the Chinese and Russians spied on both the Obama and McCain campaigns in 2008). Also, the medium of the leaks – Wikileaks – has repeatedly stated that their source is not Russian (choose to believe that or not, but it raises the question).

Indeed, I cannot find any current U.S. government official stating on the record that the Russian government leaked the hacked documents, although you have to parse their words carefully. Given that the people drafting, editing, and, in the President’s case, delivering these messages are lawyers, you need to think about their wording from a lawyer’s perspective.

Start with the DNI/DHS statement. The five sentences in the first paragraph offer three conclusions and two pieces of analysis:

  1.  Conclusion: The U.S. Intelligence Community is confident that the Russian Government directed the recent compromises of e-mails from US persons and institutions, including from US political organizations.
  2. Analysis: The recent disclosures of alleged hacked e-mails on sites like DCLeaks.com and Wikileaks and by the Guccifer 2.0 online persona are consistent with the methods and motivations of Russian-directed efforts.
  3. Conclusion: These thefts and disclosures are intended to interfere with the US election process.
  4. Analysis: Such activity is not new to Moscow – the Russians have used similar tactics and techniques across Europe and Eurasia, for example, to influence public opinion there.
  5. Conclusion: We believe, based on the scope and sensitivity of these efforts, that only Russia’s senior-most officials could have authorized these activities.

Note that, except for number 1, the conclusions all have some analysis baked into them. If you boiled this down to a single sentence, it could be: “The Russians most likely hacked DNC/Podesta, and very well may have leaked them as part of an effort to interfere with our election, which could only be approved at the highest levels due to the scope and sensitivity of that effort.” As you can see, conclusions 3 and 5 are built on the weak foundation of analysis 2 – i.e., they are not confident the Russians leaked, and if they didn’t leak there is no attempt to influence the election.

Indeed, Pres. Obama incorporated the hacks vs. leaks distinction when answering questions at his final press conference on December 16. All of his answers refer to the Russian hacks, but generically to “the leaks” and “the leakers”. At one point, Obama used such tortured phrasing – “the leaks through Wikileaks had already occurred” – that you can’t ignore this distinction (why couldn’t he have said, “The Russians had already leaked the documents to Wikileaks”?). Also interesting was Obama’s exchange with Martha Raddatz, who asked about Putin’s personal involvement in the hacks (at 56:12 below):

Note that Obama refused to go beyond the DNI/DHS statement – only that the IC community is confident that the Russians were responsible for the hacking of the DNC and Podesta. He didn’t even touch the second part of her question – was this done to help Trump, which of course would first require a conclusion that the Russians also leaked the documents.

The FBI/DHS Joint Assessment Report (“JAR”) similarly seems to distinguish hacking from leaking. The JAR largely repeats the private sector (i.e., Crowdstrike, FireEye) analyses and conclusions with respect to the intrusions that occurred in 2015-16, and confidently assigns blame to APT 28/29. But, the report mentions the ‘leaking’ only once:

hack-vs-leak
First, sorry guys but I think we all know that “information was leaked to the press and publicly disclosed.” Second, why the shift from strong active tense verbs on hacking to weak passive tense on leaking? If you look at this phrasing in the context of the ODNI/DHS and Obama’s statements, it suggests that the U.S. Government does not know who leaked the DNC/Podesta data to Wikileaks. Indeed, as emptywheel noted, the JAR does not even discuss the Podesta hack.

Again, the hack vs. leak distinction is crucial because the Russians, Chinese, and probably other state actors have hacked past presidential campaigns. We knew it happened but did not consider it scandalous, probably because we do the same thing. Indeed, it is the leak that is (i) unprecedented and (ii) the basis for claiming Russia ‘interfered’ in our election. Thus, even if hackers acting on behalf of the Russian government hacked the DNC and Podesta emails, if they were not responsible for the leak there is no basis for treating the hack differently than past hacks.

Reading the Sanctions Tea Leaves

The new sanctions target entities and individuals from both the public and private sectors in Russia:

Public

  • GRU – for “tampering, altering, or causing a misappropriation of information with the purpose or effect of interfering with the 2016 U.S. election” (emphasis mine)
  • FSB – “assisted the GRU” in the aforementioned activities
  • Igor Korobov – Head of GRU
  • Sergey Gizunov – Deputy Head of GRU
  • Igor Kostyukov – First Deputy Head of GRU
  • Vladimir Alexseyev – First Deputy Head of GRU

What’s interesting here is that, again, the wording of the justification for sanctions against GRU leave open the possibility that the GRU did not leak the information that Wikileaks et al published. Second, the FSB assisted, but previous analyses concluded that the FSB and GRU efforts were uncoordinated and possibly unknown to the other.

The inclusion of Korobov may seem unremarkable at first, but there are some interesting background details. First, Korobov took over as Head of GRU in February 2016, after his predecessor – Igor Sergun – died of heart failure in early-January (i.e., GRU had not Head for one month). Keep in mind that GRU allegedly sent the phishing emails to the DCCC and Podesta in mid-March. Ironically, despite being dead for a year now, Sergun is still on the OFAC sanctions list (for Ukraine sanctions implemented in 2014). OFAC never got around to removing Sergun and adding Korobov – despite ongoing GRU involvement in East Ukraine. In other words, sanctioning Korobov doesn’t do anything new.

Second, Gizunov’s inclusion is interesting because he was one of the other candidates to replace Sergun (along with Korobov and two other Deputy Chiefs). Gizunov has a cyber background, and writes inscrutable math texts on things like ‘pseudo-matroids’. The other two guys are a bit puzzling. Kostyukov is a ghost – I can’t find anything online about him in Russian or English. The only information on Alexseyev was this Moskovskiy Komsomolets article from 2011, which says he was the head of intelligence for the Moscow military region, then the far east region, and most recently back in Moscow in charge of GRU special forces (спецназ). That latter detail is interesting, as GRU spetsnaz units have reportedly been the most active in the Ukraine conflict.

Private

  • Special Technology Center – “assisted GRU in conducting signals intelligence”
  • Zorsecurity (Esage Lab) – “provided the GRU with technical research and development”
  • Professional Association of Designers of Data Processing Systems – “provided specialized training to the GRU”
  • Two random Russian hackers not linked to the DNC hack – Evgeniy Bogachev and Aleksey Belan

Regarding the Special Technology Center, we again see a Ukraine connection – they produce the Orlan-10 drone that the GRU has used in Ukraine. Is the White House implying that the GRU used a drone to facilitate its hacking of the DNC? Nobody has claimed this previously.

Perhaps the most entertaining case is that of Zorsecurity, an apparently now-defunct company that operated in the ‘white hat’ cybersecurity sector. Its founder, Alisa Shevchenko, even won an award from the DHS last year for uncovering an exploit in Schneider Electric’s systems used in critical infrastructure. Shevchenko was profiled in Forbes Russia in 2014, which hinted at government contracts. She previously worked at cyber giant Kaspersky, which makes the popular antivirus software. Shevchenko denied that she does work for the government and that Zorsecurity was responsible for the hack in a separate interview with Forbes. If you look through her Twitter timeline, it’s mostly cats and cyber stuff i don’t understand. The Zorsecurity website is down now, but the mobile version is still available and under ‘areas of activity’ includes, “research and development for state structures.” Shevchenko also helped found a ‘hackspace’ called Neuron, which hosts nerdy meet-ups about ‘exploits’, etc. But there is not much there, really. The only interesting item I have been able to find in my searches is that one of Shevchenko’s former colleagues – Boris Ryutin – uses “Duke Barman” as his Twitter handle (one of the original names for APT28 was ‘the Dukes’).

This has led some, like emptywheel, to speculate that OFAC just sanctioned Zorsecurity because it is a random – apparently defunct – company with no ties to the U.S. (i.e., more symbolic). Why did they not choose, for example, Kaspersky itself, which has a large U.S. presence and rumored ties to the Kremlin (the founder was allegedly in the KGB)? Or why not IB Group, which has even more concrete ties to the FSB and GRU as well as  New York office? Because there would be real consequences and would invite real retaliation against U.S. tech companies operating in Russia, such as Google and Facebook.

What does it mean?

Indeed, it almost seems like this new round of sanctions was calibrated to express general annoyance with Russian behavior – for hacking, Ukraine, Syria, and harassment of U.S. diplomats in Russia – but not truly meant to punish Russia for ‘hacking our democracy’. One can easily imagine the kinds of sanctions would come out of the fever dreams of Russophobes like Sens. McCain and Graham – a full or sectoral embargo against Russia similar to what we have for Iran, Syria, and North Korea. This would invite a serious response from Russia, possibly even be seen as an act of war (as I argued in my last post).

Mainstream media commentators concluded that Obama was trying to ‘paint Trump into a corner’ by reacting to Putin’s ‘aggression’ forcefully before Trump takes office. But Obama has never been on board with the Russophobe crowd in Washington – just look at his approach to Ukraine (no lethal aid), Iran (cooperate with Russians on nuke deal), and Syria (just say no to no fly zones). Rather, I think Obama has rather skillfully placated the demands from Democrats that WE MUST DO SOMETHING, which have been whipped into an irrational frenzy by anonymous source-fueled media reports. But he has also avoided responding in any serious way that would meaningfully alter the trajectory of U.S.-Russia relations. Putin knows this and that is why he did not retaliate at all, while still launching colorful verbal attacks on the ‘lame duck’ Obama administration (you see, they’re playing along).

The subtext of all this nicely complements my reading of official statements on hacking vs. leaking: that we either do not know that Russia leaked the documents or maybe even have intelligence suggesting they did not leak the documents. Although they almost certainly did hack the DNC, it would not make sense to react to something we tolerated in the past and that our own intelligence community does. Instead, the debate is not moored in reality, but political theater.

The politicization of the issue is not just Clinton vs. Trump, but rising Russophobia generally. The latter is driven by a diverse group of powerful interests: neocons bored with the Middle East and need a new toy; defense contractors looking at the defense budget bills set for consideration in April (as well as the ongoing debate on nuke modernization); and the members of Congress who receive campaign contributions from the defense contractors. So there are major incentives to exaggerate and hype the threat posed by that ‘thug’ Putin.

Hopefully we will learn more from subsequent investigations, and perhaps these investigations will generate evidence that the Russians did leak the information. But I would be very surprised if we ever see an official statement from the U.S. government confirming that the Russians provided the information to Wikileaks. If I’m proven wrong, I will be the first to admit it.

Where could we get further information without declassification? I don’t have the technical background to know for sure, but shouldn’t the DNC have server logs showing data moving out? Were there any similar, unusual ‘exfiltrations’ of data? Aside from the long NYT article, I have not seen many quotes attributed to employees of MIS Department, the DNC’s IT vendor that ran the server. Employees at MIS Department would have had administrator access over the server. Did a disgruntled employee or overzealous Sanders supporter provide the data to Wikileaks? It is strange that none of the possible alternative sources of the leak have been investigated in the mainstream media. It would be beneficial for journalists to explore the entire story rather than incessantly rehash the Russia angle.

 

 

Posted in Cold War, Espionage, FSB, Government of Russia, GRU, hacking, secret agents, spying, Trump, u.s.-russia relations

As New Cold War Heats Up, Russia Preparing to Go It Alone?

There is nothing new under the sun. It has all been done before. – Sherlock Holmes (A Study in Scarlet)

Brief History Lesson

Leading up to the United States’ entry into World War II, Japan was reliant on trade with the U.S. and its European allies for about 75 percent of its foreign trade. Items like oil, gasoline, steel, iron, copper, and nickel constituted a disproportionately high amount of this figure. Thus, when the U.S. began imposing ever-increasing sanctions on Japan in response to its aggression in South Asia and alliance with Germany and Italy, the economic costs were devastating. Without an end to the sanctions or securing new sources of these materials, Japan would simply run out of the ‘stuff’ it needed to run its economy and military. Japan’s leaders ultimately decided to gain access to new sources through military conquest and the rest, as they say, is history.

Russia’s Economy Today – a National Security Perspective

Unlike Japan, Russia is blessed with many natural resources including oil and gas. A ban on oil exports to Russia would be like refusing to sell string to a spider. Russia also has a capable national defense industry, which adequately supplies the Russian military’s needs as well as those of other countries through international arms sales, where Russia is second only to the U.S.

But, despite its prowess in the ‘hard’ industries that were greatly prized during the 20th Century, Russia lacks a national capability in the ‘innovative’ industries – e.g., high-tech, pharmaceuticals – that have become the prizes of the 21st Century.

Indeed, Russia currently imports about 80 percent of all medicines consumed in the country, and the 20 percent that are produced locally rely on imported components. Strikingly, Russia imports 93 percent of its pharmaceuticals from countries that have imposed sanctions on Russia (although the sanctions have not covered pharmaceuticals). Here’s a chart illustrating Russia’s dependence on imports by industry and sanctioning country source:

rus-econ-dep

Russia Goes it Alone – Pharma Case Study

There are signs that Russia is responding to its reliance on imports of high-value-added products, and thus exposure to potential sanctions affecting those products. The best example is in the pharmaceutical industry, one of the areas where Russia is most reliant on imports from countries that have imposed sanctions in the past.

To be sure, the Russian government has sought to promote the development of a domestic pharmaceutical market. In 2011, the government launched a major investment program to support local industry, with nearly $4 billion in funding behind it. The purpose of the program was to ensure that 90 percent of Russia’s ‘vital medicines’ be domestically produced by 2020. Safe to say, Russia is not likely to meet these goals in four years. In 2013, the Russian government sought to boost this initiative by excluding foreign manufacturers of drugs from selling to government purchasers (around 99% of all purchases in Russia).

Many international pharma companies at the time did consider local production, typically  in the form of joint ventures with their distributors that already had some degree of local manufacturing capability. Most of these plans were scuttled, with some token exceptions like Abbott’s acquisition of Veropharm.

Foreign pharma companies’ disregard of Putin’s will did not generate much of a reaction, until now. In August, Pres. Putin ordered the government to conduct a review on prices of medicines on the domestic market. The consequent review, conducted by the Federal Antimonopoly Service (“FAS”), identified “criminal elements” as a source of excessively high prices of imported drugs. For those not already aware, FAS is kind of like Russia’s regulatory lifeline to the West. They are by far the most sophisticated, ‘Westernized’ agency in Russia, but nonetheless implement the orders of the government. FAS’s audit of drug prices thus far has no clear outcome. But the message to Western drug companies is quite clear – build up local production or go home.

PM Medvedev is also on the case. In a totally not staged visit to a pharmacy in Lipetsk, Medvedev made an ‘impromptu’ visit to a local pharmacy on his way to visit pensioners at a ‘rehabilitation center’, Medvedev asked consumers their thoughts on the drugs available. Medvedev was dutifully informed by consumers and pharmacists alike that Russian drugs are increasingly available and trusted by local consumers (the whole thing had a supremely Soviet feel to it). Recently, Medvedev has promised to shut down pharmacies that engage in violations of Russian law with respect to the pricing of medicines.

These aggressive steps in relation to imported medicines come against a backdrop of increased support for local producers. In September, the government announced a 100 percent increase in subsidies for local pharma manufacturers. Collectively, the purpose of these moves seems to be ensuring a transition from reliance on imports to reliance on locally-produced generics by 2020 (which seems ambitious). Within this goal towards local reliance, of prime importance is ensuring control over state purchases of medicine (the top purchaser of medical goods in the country by magnitudes).

What Does it All Mean?

For Russia observers, it is difficult to take these announced measures seriously. We’ve seen them all before (just like the wars against corruption, deofshorizatsiya, etc.). But it is important to consider the context in which these measures arise. Although there is definitely a local political need to show pensioners that the government is responsive to their concerns about drug prices, I would argue that the economic pressures on the Russian government’s budget and the threat assessment of a new Cold War has made this issue a real priority for Putin and the rest of the government.

A full trade embargo – like the U.S. kind of still has with Cuba – would be devastating to Russia, particularly if it could encompass European drug producers (most of whom are listed on U.S. stock exchanges or otherwise have substantial U.S. connections). With no vaccines, cancer and diabetes treatments, and other essential drugs, the Russian population would face a degree of hardship not known since WW2. Naturally, Russia is planning for the worst case scenario, and seeking to avoid this eventuality.

 

 

 

Posted in Business, Business and Economy, Cold War, economics, FAS, Foreign direct investment, foreign investment, goskorporatsii, Government, Government of Russia, pharma, procurement, Russian economy

Ukraine Takes NYT for a Ride

On August 15, the New York Times published a lengthy, detailed article on Trump Campaign Chairman Paul Manafort’s potential involvement in corrupt dealings in Ukraine. Two of the journalists published an overview of Manafort’s Ukraine activities last month. Unlike their campaign trail colleagues, the authors are excellent journalists who have been covering Russia/FSU or involved in investigative reporting for some time. Unfortunately, the Manafort article – or at least the implications it contains – is not their best work.Shooter Manafort

One commendable feature of the article is the volume of facts it conveys to the reader. The authors did not get overly hung up on Eastern Bloc vignettes describing what Ukraine looks like or rumors about Yanukovych’s weakness for luxury goods. Instead, the authors do their best to describe and weave a common thread through the following main assertions:

  • Secret Ledger: the lead item of the story is that Manafort’s name – or the name of his form Davis Manafort – is listed 22 times over a five-year period in a so-called ‘black ledger’ detailing cash disbursements from the Party of Regions to various individuals and entities. According to these entries, Manafort or his firm was paid approximately $12.7 million. The source of this allegation were investigators from the National Anti-Corruption Bureau (NABU, by its Ukrainian acronym), which was formed in October  2015.
  • Offshore Shell Companies: the second main issue described in the article relates to the use of offshore shell companies to facilitate the sale of Black Sea Cable (BSC), a Ukrainian telecom company. The short story is that Manafort’s firm set up an investment fund – Pericles Emerging Market Partners – that was intended to purchase BSC assets. One of the Pericles ‘partners’ was Russian oligarch Oleg Deripaska. The NYT article cites two sources concerning suspect shell companies: a Ukrainian anticorruption prosecutor – who “pointed to an open file on his desk” – and Cayman Islands litigation records.

Evidentiary Gaps

The otherwise interesting article falls short when it comes to the evidence supporting the two principal claims.

Secret Ledger

Regarding the secret ledger, the authors are careful not to state that they viewed the ledger entries – or even one example – showing Manafort’s name. They published an example of the ledger released by NABU, but noted in the caption that it does not contain Manafort’s name. But the source of the sample page – NABU – is the same source for the statements that Manafort’s name appears in other pages. Why wouldn’t they just release the page showing Manafort’s name? And wouldn’t this be a red flag to an investigative journalist?

Strangely, while the authors rely entirely on the statements of NABU investigators to support the claim that Manafort’s name appears in the black ledger, they fail to discuss the absence of such evidence from an extract of the ledger that is freely available online. Specifically, there are 22 pages of ledger – which the article does refer to – that were provided to Viktor Trepak, a former deputy director of the SBU and later released on Ukrainskaya Pravda. The 22 pages released by UP appear to cover the period from June-December 2012. The journalists helpfully transcribed the handwritten list into a searchable list as well. Manafort’s name never appears.

The absence of Manafort’s name on the list released by UP is interesting, as the NABU investigators told the NYT journalists that the payments to Manafort show up in the handwritten ledger “from 2007 to 2012.” Moreover, one of the tasks that Manafort assisted on – the drafting of a report concerning the prosecution of former PM Yulia Tymoshenko – was delivered in December 2012. Thus, you would expect to see payments to Manafort in the second half of 2012.

None of this means that Manafort’s name does not show up in the pages that have not been released to the public. But the article is weakened by its reliance on NABU investigators’ statements versus primary source documents, and the failure of the authors to address (i) why they were not shown the ledger entries with Manafort’s name and (ii) the absence of Manafort’s name on an extract of the ledger publicly available.

Offshore Shells

The gaps in the offshore companies issue are more nuanced, but perhaps more glaring. The Ukrainian prosecutor who referred to the ‘open file’ on his desk during his meeting with the reporters mentioned a specific shell company – Milltown Corporate Services. Indeed, this is an infamous company that is widely known to anticorruption lawyers active in the former Soviet Union. The company has indeed been implicated in numerous cases of corruption, fraud, and other illegal activities. The best example was in a 2010 report prepared by investigators working on behalf of the Yushchenko administration, which identified corruption in public procurement under the previous (i.e., Party of Regions) government.

Milltown operates in an ecosystem of offshore shell companies that I collectively refer to as the corporate machinery of evil in the world. Without these companies and the secrecy jurisdictions that support them, the volume of corruption, illegal arms sales, and other nefarious conduct in the world would be minimized. Milltown’s specific role in this ecosystem of evil is more administrative – it sets up companies that administrate ‘off the shelf’ shell companies used for a few corrupt transactions, and then are discarded. The best analogy is to an illegal firearm sale for use in a murder: Milltown is the seller, the single-use shell company is the firearm, and the corrupt official is the murderer. So while Milltown is a bad guy, it’s not the bad guy.

The NYT authors failed either to understand or to educate their readers of this distinction in roles. Indeed, the reference to Milltown by the Ukrainian prosecutor breezily transitions into a discussion of the BSC transaction involving Manafort and Deripaska. The authors note that the BSC assets were controlled by offshore shells that “led back to the Yanukovych network, including, at various times, Milltown.” Let me be clear: Milltown is not part of any Yanukovych network. It is an offshore services provider that Yanukovych and his cronies have used in the past.

More importantly, Milltown has nothing to do with the BSC transaction the article proceeds to describe. Milltown was dissolved in July 2005, according to its registry page in Ireland. But according to the litigation records cited by the article, Pericles was not formed until March 2007 and thus has nothing to do with Milltown. But the guilt-by-association sticks with the reader, based on Milltown’s past control of BSC assets. Again, an analogy: the logic is similar to alleging that you are guilty for buying a used computer that, under its previous ownership, was used to engage in criminal activity. More importantly, the BSC deal fell through – the article hints at this but never plainly states it – and Deripaska is now suing Manafort’s company. So are Manafort and Deripaska friends or enemies…I’m confused. I would also object to the article’s characterization of Deripaska as a Putin “ally,” but that is too meaty a subject to address here.

Seductive Narrative

To me it seems that the authors – or perhaps more likely their editors – were seduced by the prospect of being the first ones to publish an investigative story that conveniently segued into the Trump-Putin narrative that arose shortly after the RNC convention. Indeed, the article was probably one of the most-reported-on political stories of the day.

It would be interesting to know whether the reporters sought out the story, or if it came to them. Frankly, I would not be surprised if the NABU investigators sold the story. There are certainly Ukrainian motivations at play: to hurt a candidate perceived as less supportive of Ukraine; to gain clout – and perhaps more funding and legal authority – as a young agency.

Unfortunately, the reporting on this story will inhibit a real understanding of what type of political animal Manafort really is: a bottom-feeder who will sell his services to anyone who pays on time. To be sure, Manafort’s willingness to board the S.S. Trump on its all-but-certain disastrous voyage reveals what a rank opportunist he is. Moreover, the primacy of financial gain over democratic values is not a story about Manafort, but rather of the political consulting industry in general.

But instead of an exploration of this industry – which, let’s face it, subverted the 1996 Russian presidential election – we get Putin-Trump conspiracies packaged as investigative journalism. As Trump would say at the end of a Tweet, “SAD!”

 

Posted in russia, Trump, ukraine

The Whole Putin-Trump Thing

I have been trying to write this post for two weeks now, but the issue seems to morph and expand on a daily basis. I did not want to write a ‘hot take’ that characterizes the majority of campaign coverage in the United States. Most of these pieces come to firm conclusions as to whether or not Trump is a covert Russian agent based on his muddled and contradictory utterances. Probably the best piece on the issue was by Russian journalist Mikhail Zygar. But if you want one Trump statement that encapsulates the precise nature of his relationship with Putin, it comes from this tweet three years ago:

You see, as someone likely suffering from narcissistic personality disorder, Trump wildly overestimates his own skills and importance and yet constantly  craves the admiration and approval of others. And Putin – wittingly or unwittingly – fueled this need in December 2015 when he called Trump “very bright and talented.” The statement was made offhand in response to, it seems, an American journalist’s question:

Putin’s status as number 1 bogey man in the United States meant the comment was picked up in all major media outlets and, over time, ‘very bright’ became ‘brilliant’ and ‘a genius’. Regardless of what version he heard, Putin’s comments tickled Trump in his favorite spot, and his views on Russia very likely stem from those comments alone…kind of. He did still advocate shooting down Russian fighters that ‘buzz’ NATO warships and has flirted with a policy of using nuclear weapons in Europe.

But Trump’s whole appeal to Putin – if it does exist – reminds me of an appearance Mark Ames made on the Dylan Ratigan Show in 2009, during Obama’s first trip to Russia as President. Asked what, in Putin’s view, would be the ‘perfect relationship’ with the United States, Ames replied, “Basically, that we would be stupid and weak.” Although true at the time, I am not convinced that the same analysis applies today. Nevertheless, if it did Trump would represent the ideal U.S. candidate of stupidity and weakness for Russia. Stupid because Trump is uninformed and too inattentive to handle the intensity U.S.-Russian relations; and weak because (i) if Trump won, a near-majority of the country would hate him, and (ii) simple appeals to Trump’s vanity – e.g., quoting The Art of the Deal in the middle of a nuclear forces reduction negotiation – would trump the Donald’s understanding of the national interest. So, yes, in a way Trump is a Putin candidate. And there are also the personal, stylistic similarities between the two that Zygar described. But, to quote Trump, “There’s something going on.”

Recent Development in U.S.-Russian Relations

You can pinpoint the exact date of the nadir of post-Soviet U.S.-Russian relations: July 17, 2014, when MH-17 was shot down over eastern Ukraine (likely by Russian-backed separatists, but who really knows). The tragic downing of the airliner followed Russia’s annexation of Crimea, and U.S. sanctions on Russia in response. The second round of sanctions – announced the week of March 17, 2014 – were hastily thrown together by the State Department using Google the weekend before. The resulting need of U.S. companies to evaluate whether they were doing business with Gennady Timchenko or the Brothers Rotenburg was like a full-employment act for all Russian-speaking attorneys in the U.S.

But in the two plus years that have followed, the pieces have fallen back into place and the Obama Administration’s policy has reflected as much. A few examples:

  • Iran Nuclear Agreement – the Obama Administration relied on Putin to cajole Iran into coming to the bargaining table for what has become one of the signature foreign policy achievements of Obama’s second term.
  • Syria Conflict – after some initial bitching about Russia’s support of Assad, the Obama Administration has started cooperating with the Russians in the effort to take out ISIS, and abandoned the dangerous and unworkable ‘no-fly zone’.
  • Ukraine Conflict – although the official U.S. position has not changed, the Obama Administration has not pushed for Ukraine membership in NATO, nor has it supported sending lethal military aid to the Ukrainian government (notably, it is this policy position in the GOP platform that led the mainstream media to conclude Trump is a Putin agent).
  • NATO Generally – in my previous post I outline some of NATO’s recent moves in the Baltics and Eastern Europe in response to Russian ‘aggression’. But the limited nature of the forces deployed there imply a signal to Russia that the forces are a symbolic effort useful to both sides: the U.S. can show how it’s ‘countering’ Russian aggression, and Russia, though building up retaliatory deployments on the border, can argue that any game playing in the Baltics would be risking WWIII.

All told, I think Obama has made the best of a bad situation and rescued U.S.-Russian relations from the brink…and we all know what is over that brink.

Likely Developments in U.S.-Russian Relations under Clinton

That brings us to the reason why Russia, and NATO for that matter, has now been mentioned more times in the 2016 election, than any previous presidential election since the fall of the Soviet Union. The reason is a well-established fact: Hillary Clinton is much more of a ‘hawk’ – arguably a neoconservative – than Obama. (Full disclosure: I supported Sen. Sanders in the primary, but am supporting Sec’y Clinton in the general election.)

Hillary’s hawkishness has led to barely-concealed mouth-frothing and transition planning by some of the more unhinged members of the U.S. foreign policy establishment. These groups – I’ll focus on the Russia-related ones – all have clear goals, which Clinton may or may not support. But the intersection of Trump and Putin, both in terms of policy goals and political expediency, has made the Clinton camp increasingly susceptible to the more anti-Russian members of the neoconservative claque in D.C. Moreover, the mainstream media – which spent the preceding year building Trump’s poll numbers through non-stop coverage – has now decided he must be defeated at any cost. And that cost appears to be Red Scare 2.0, with open and unfounded accusations of Trump as Putin agent, and a Russia policy  that is reactionary in the extreme.

Some of these D.C. ghouls just want a job, like former Acting Director of the CIA, Michael Morell, who recently penned an op-ed in the New York Times endorsing Clinton and naming Trump as a Putin agent. Morell resigned from the CIA in 2013, joining Beacon Global Strategies, a D.C.-based ‘consulting’ firm co-founded by Philippe Reines, a longtime Clinton confidante. In the initial launch of Beacon, Reines openly admitted to reporters that Beacon would serve as an incubator for intelligence officials waiting to reenter government service in a Clinton administration. For his part, Morell has stated his belief that Putin is trying to “recreate the Russian empire,” one of the more laughably absurd Russia tropes commonly believed in D.C. foreign policy circles.

The more dangerous neocon types are those who really want to “take on” Russia in places like Ukraine and Georgia, and think the concomitant risk of WWIII is worth the benefit of gaining a foothold in…those countries. One of these figures – Under Secretary of State Victoria Nuland – is most-well-known in Russia for her involvement in the aftermath of the overthrow of the Yanukovych government. Nuland is rumored to be Clinton’s Secretary of State and, if so, would be the most overtly anti-Russian SoS since the end of the Cold War. Another is Former NATO Supreme Commander Philip Breedlove, whose emails were hacked and released in June. The emails revealed that Gen. Breedlove was advocating for a more confrontational posture vis-a-vis Russia in Ukraine. Similar to Nuland, there are rumors in D.C. that Breedlove is a would-be candidate for Clinton’s Secretary of Defense.

The 2016 Campaign and U.S.-Russian Relations

Modern U.S.politics, particularly during presidential campaigns, are shaped by extreme polarization and hence political competition, non-stop media coverage that elevates decisive messaging over nuance, and a cynical manipulation of events and the competition’s behaviors in order to achieve short-term political gain. The degradation of our electoral politics and consequent failure of traditional political elites to solve the problems faced by working and lower class Americans are the proximate causes of Trump’s success. But that’s a topic for another blog.

The coming storm for U.S.-Russia relations arises out of the confluence of several developments: (i) the dubious yet politically viable allegation that Trump is a Putin agent based on the DNC hack, connections between Trump’s campaign adviser and Yanukovych, etc.; (ii) an organized cadre of foreign policy ‘elites’ supporting Clinton, which advocates a much more belligerent line against Russia; and (iii) the collective decision of the mainstream media to defeat Trump at any cost, after propping up his primary campaign with free coverage for the past year. The political gain of attacking Trump as a Putin agent enables the anti-Russian foreign policy elites to push their agenda to the Clinton campaign. Once the Clinton campaign was willing to pursue this line of attack, the now anti-Trump media was more than willing to push it as established fact because defeating Trump is the great moral prerogative of our generation.

The problem is that there is a real, influential constituency behind the anti-Russian rhetoric, which means Red Scare hysteria of the campaign is more likely to be translated into actual policy, backed by Americans who have been whipped up by said hysteria. That is why Obama, although denouncing Putin’s purported ‘meddling’ in the election, is frantically trying to reach an agreement with Russia on cooperation in Syria. Aside from recognizing the reality that Russia can undermine U.S. efforts to undermine Assad, Obama knows that a Clinton Administration will take a much harder line (e.g., suspend cooperation with Russia, impose a no-fly zone) that will in turn raise the risk of U.S.-Russia confrontation.

Anti-Russian elements currently in government service are hard at work to undermine Obama’s efforts. First, the draft of SoS Kerry’s Syria plan was leaked to the Washington Post in advance of his last trip to Moscow. Notably, the reporter to whom it was leaked – Josh Rogin – is one of the more reliably anti-Russian journalists on the foreign policy beat. The dramatic act of leaking the plan prior to any agreement can be interpreted as an attempt by anti-Russian elements in the U.S. government to undermine any likelihood of the plan’s success. Further attempts to undermine the agreement can be seen in a WSJ report days after Kerry’s Moscow trip, which described a Russian air attack on a rebel outpost used by American and British special forces. The bombing took place on June 16 – no American or British forces were present at the time – but was not reported until July 22. The timing of the leak to the WSJ suggests it was intended to influence the ongoing talks with the Russians.

It seems increasingly unlikely that President Obama will be able to fundamentally alter the U.S.-Russian relationship with respect to Syria before he leaves office. If that is the case, we will be in very dangerous territory indeed. On January 20, 2017, we will most likely have a more hawkish, anti-Russian President, backed by the most anti-Russian elements of the U.S. foreign policy establishment, voted into office during a campaign in which her competitor was widely accused of being a Russian ‘Manchurian Candidate’. These factors will enable and encourage Clinton’s worst instincts when it comes to her Russia policy and, I believe, will push us further down the path to direct confrontation outlined in my previous post.

 

Posted in Clinton, Cold War, democracy, elections, foreign policy, nato, neoconservatism, nuclear holocaust, Obama, President Obama, Putin, russia, u.s.-russia relations, War