Connect with us

Latest

Analysis

News

Syrian endgame? “De-escalation areas” turn out to be “destroy Al-Qaeda areas”

Russian plan for de-escalation areas revealed to be plan to isolate, fragment and ultimately destroy Al-Qaeda in Syria.

Alexander Mercouris

Published

on

3,530 Views

Publication of the Memorandum setting up the ‘de-escalation areas’ signed by the representatives of Russia, Turkey and Iran at the Astana conference, together with certain comments about them by representatives of the Russian and Syrian governments, have clarified their intended purpose.

It is now clear that the ‘de-escalation areas’ have nothing in common with the ‘safe havens’ constantly advocated by various people in the West – including at different times by Hillary Clinton and Donald Trump – and by the Jihadi themselves, and by Turkish President Erdogan.  Erdogan’s attempt at the joint press conference with Putin to pretend that they were was misleading in the extreme and plain wrong.

Nor is it correct to suppose (as I did) that the Russian proposal to set up the ‘de-escalation areas’ was prompted by Donald Trump’s recently re-discovered enthusiasm for ‘safe havens’.  On the contrary it is clear that the Russians have been working on this proposal for some time, almost certainly from before the alleged Khan Sheikhoun attack and the US missile strike on Syria’s Al-Shayrat air base.

It is now also clear that the ‘de-escalation areas’ are envisaged by the Russians as a mechanism to achieve two objectives that they set themselves from the moment they first intervened in Syria in the autumn of 2015, and which were the subject of repeated failed negotiations between the Russians and US Secretary of State John Kerry over the course of 2016.  These objectives are

(1) the separation of what the Russians construe as ‘legitimate’ rebel groups from Al-Qaeda and ISIS; and

(2) a ceasefire between these groups and the Syrian Arab Army – and their eventual disarmament – so that the full force of the Syrian Arab Army and the Russian air force can be concentrated against the main terrorist enemies: Al-Qaeda and ISIS.

There is already supposed to be a Russian-Turkish backed ceasefire in existence in Syria, which is backed by a Resolution of the UN Security Council.  That ceasefire has however been only sporadically honoured, with the Turkish backed Jihadi groups who have supposedly joined the ceasefire repeatedly joining Al-Qaeda in attacks on the Syrian army.

What the ‘de-escalation zones’ are intended to do is build on this ceasefire by concentrating these groups in four designated areas in (Idlib province, parts of Homs province, eastern Ghouta near Damascus and in an area in southern Syria), and compel them there to cease all military activity, whilst surrounding them there with a network of observation posts and checkpoints in what is being called a ‘security zone’, which will control entry and exit from these areas, in order to ensure that that is what they actually do.

The key provision of the memorandum is the one which sets up these ‘security zones’

4.  The security zones shall include

Checkpoints to ensure unhindered movement of unarmed civilians and delivery of humanitarian assistance as well as facilitate economic activities;

Observation posts to ensure compliance with the provisions of the ceasefire regime;

The functioning of the checkpoints and observation posts as well as the administration of the security zones shall be ensured by the forces of the Guarantors by consensus.  Third parties might be deployed, if necessary, by consensus of the Guarantors.

(bold italics added)

In other words the three Guarantor Powers – Russia, Iran and Turkey – will directly supervise the administration of the ‘security zones’ – which will encircle the ‘de-escalation zones’ – and the ceasefire between the Syrian Arab Army and those Jihadi groups who have joined it.  They will have forces present on the ground to do this, though they may in theory seek help with additional forces from other countries.  Those ‘third party’ troops  can however only come from those states which are acceptable to all three Guarantor Powers.  That in effect excludes these troops coming from the US, NATO, or the Gulf Arab states, since that would be unacceptable to Iran.

Unofficially it seems that the ‘third parties’ that are being talked about are Egypt and Algeria (both allies of the Syrian government) and possibly Pakistan.

A commentary on the memorandum published by Syria’s official news agency SANA suggests that the Syrian Arab Army will also have a role in policing the ‘security zones’ and in manning the check points

It added that the de-escalation areas will include checkpoints to ensure the free movement of unarmed civilians and the delivery of humanitarian assistance as well as economic activities and monitoring posts to ensure the implementation of the provisions of the cessation of hostilities regime.

The document noted that the representatives of the Syrian Arab Army and the armed opposition groups, which have joined the cessation of hostilities agreement, will carry out their tasks at checkpoints and monitoring posts.

(bold italics added)

This provision does not appear in the text of the memorandum which has been published.  It may however appear in a separate document.  If this is correct then the Syrian Arab Army by agreement of all three of the Guarantor powers will be reintroduced into areas currently under Jihadi control in order to help police the ceasefire there.  Supposedly it will do so alongside “representatives of the armed opposition groups”.  Whether that is actually possible remains to be seen.

An essential point to understand about the ‘de-escalation areas’ is that they do not envisage the complete cessation of military activities inside them.  It it is only the Syrian Arab Army and the Jihad groups which have joined the ceasefire which must cease fighting each other within the ‘de-escalation areas’.  This is made clear by the following provision in the memorandum

2.     Within the lines of the de-escalation areas:

hostilities between the conflicting parties (the government of the Syrian Arab Republic and the armed opposition groups that have joined and will join the ceasefire regime) with the use of any kinds of weapons, including aerial weapons, shall be ceased

(bold italics added)

By contrast military operations will continue against any Al-Qaeda and ISIS forces within the ‘de-escalation areas’

5.  The Guarantors shall:

……

take all necessary measures to continue the fight against DAESH/ISIL, Nusra Front and all other individuals, groups,undertakings, and entities associated with Al-Qaeda or DAESH/ISIL as designated by the UN Security Council within and outside the de-escalation areas

(bold italics added)

Al-Qaeda and ISIS (especially Al-Qaeda) are heavily embedded in all four ‘de-escalation areas’.  What the memorandum requires is that the Jihadi groups in these areas stand down, separate themselves from Al-Qaeda and ISIS, and cease interfering in the military operations in these areas of the Syrian Arab Army and the Russian air force against Al-Qaeda and ISIS.

In order to ensure this happens ‘security zones’ controlled in theory by the three Guarantor Powers but ultimately – since it is much the strongest power of the three – by Russia, will be set up to observe and police the areas in order to make sure that the Jihadi groups observe the ceasefire and do not interfere in the fight against Al-Qaeda and ISIS.

Moreover in order to tighten control of these areas, entry and exit from them – including for humanitarian assistance and economic aid, which Al-Qaeda and ISIS have manipulated in the past to their advantage – will be controlled by the setting up of a network of observation posts and checkpoints manned by troops from a variety of sources (the Syrian Arab Army, those Jihadi groups participating in the ceasefire, and various friendly states) but which will again be ultimately controlled by Russia.

Needless to say these checkpoints are also intended to obstruct the movements of the Al-Qaeda and ISIS terrorists within the ‘de-escalation areas’ and to prevent them either escaping from or reinforcing themselves in these areas.

The ‘de-escalation zones’ are not therefore by any stretch of the imagination ‘safe havens’.  Nor are they really ‘de-escalation areas’.  Rather they are a device to isolate and break up the terrorist concentrations of Al-Qaeda and ISIS within these areas in order to destroy them there.

It remains to be seen whether this plan will ever be put into effect.  However if it is then it is the end of Al-Qaeda in Syria.

The four ‘de-escalation areas’ cover precisely those areas of Syria where Al-Qaeda is strongest, and where it has concentrated most of its forces.  If the plan is ever implemented they will be surrounded and divided from each other, making it possible for the Syrian army and the Russians to destroy them piecemeal.

Al-Qaeda has proved exceptionally skilled up to now at thwarting all previous Russian attempts to isolate it in Syria. This is however the most ambitious and thought-through Russian plan to do it to date.  Moreover it seems Turkey (historically Al-Qaeda’s primary backer in Syria) is going along with it.  Much will depend on whether Turkey continues to do so.  If it does then it is likely this plan will succeed.

As for ISIS, though it has a significant presence in all four ‘de-escalation areas’, its primary base areas lie outside them.  Even if the ‘de-escalation areas’ are thoroughly cleansed of Jihadi terrorists, ISIS can in theory continue to survive in its strongholds in eastern Syria, in Raqqa and Deir Ezzor.  It will however be severely weakened and isolated, and as pressure on its strongholds mounts, its destruction will be just a matter of time.

It is because the ‘de-escalation area’ plan – if it is ever implemented – spells the doom of Al-Qaeda in Syria that the Jihadi groups represented in Astana opposed it so strenuously.

Al-Qaeda is by far the strongest Jihadi group in western Syria, and makes up the backbone of what is euphemistically called ‘the armed opposition’.  If Al-Qaeda in Syria is destroyed, then the Jihadis’ war against the Syrian government will have ended in defeat.  The Jihadi leaders know this, which is why the voiced such strong objection to the plan in Astana.  Their objections were however brushed aside, with Turkey – their biggest backer – signing up to the plan.

For the same reason the plan has been strongly welcome in Tehran and Damascus.  If it is ever implemented it represents for them victory in the war.

It remains to be seen whether the plan ever will be implemented.  The person on whom that depends is President Erdogan.  He has proved throughout the Syrian war to be a treacherous and unreliable partner.  However the fact that he has signed up to the plan – even if he seeks to misrepresent it – suggests that he too now finally realises that the Jihadis’ war in Syria is lost, and that it is in Turkey’s interests that it be brought to a close.

If that is indeed the case then it is justifiable to talk of the endgame being reached in Syria, with the prospect of the Syrian war being finally brought to an end.

Continue Reading
Advertisement
Comments

Latest

Russia makes MASSIVE progress on its ‘super-weapons’

Avangard hypersonic glide vehicle moves into serial production, nuclear-engine powered cruise missile tests continue, and more as Russia continues to outdo all Western military tech

Seraphim Hanisch

Published

on

On July 19th and 20th, The Russian Defense Ministry announced several milestones of progress in its advanced weapons systems programs. These programs were revealed to the world in March of this year, when Russian President Vladimir Putin gave the State of the Russian Federation speech.

Support The Duran – Browse our Shop >>

While at first the Western onlookers did not believe the amazing announcements of hypersonic weapons and nuclear-powered cruise missiles with unlimited range, subsequent releases and concurrent observation by the American military experts has shown these developments to be as real as Mr. Putin claimed they are.

TASS, the Russian News Agency, released information on these weapons systems in separate reports:

Kinzhal

The Kinzhal hypersonic missile:

Squadrons of MiG-31 fighter jets armed with Kinzhal hypersonic missiles should enter combat duty in the Black Sea region and at other Russian fleets and flotillas, said Russian military expert Viktor Murakhovsky, the editor-in-chief of the Arsenal Otechestva magazine.

Besides, a squadron (between 12 and 16 aircraft) of MiG-31 fighter jets armed with Kinzhal hypersonic missiles entered combat duty in the Caspian Sea region in April.

“I think at least one squadron of those complexes should be deployed at any fleet, in other words – at all regions where we have fleets and flotillas. We need to deploy them in the regions of the Black Sea, the Baltic Sea, the Northern Fleet. The Pacific region also should not be forgotten,” Murakhovsky said.

He said that such systems can become a “good instrument” against not only vessels equipped with high-precision weapons, but also for countering carrier attack groups.

“We know how expensive a carrier attack group can be. By employing this asymmetric method, which is unbelievably cheap in comparison with building a carrier attack group, we can neutralize this threat almost completely,” the expert said.

Burevestnik nuclear-powered cruise missile trials:

The Burevestnik is an entirely new cruise missile, powered by a nuclear engine. This gives the missile unlimited range. In theory, such a missile could be launched at a target and spend days or weeks in hidden flight using advanced guidance systems, and then close on its target at the optimal time to assure destruction of that target with maximum surprise. The TASS piece goes on to say:

The Russian Defense Ministry announced that Russia was preparing to test upgraded test prototypes of the nuclear-powered Burevestnik cruise missile with an unlimited range.

According to the expert, it is highly likely that the prototype of the missile “has already made a flight.”

“Clearly, it was something like the pop-up trials of Sarmat – a launch without the nuclear-powered engine, in other words, with an ordinary missile booster, conducted in order to assess the possibility of a launch, aerodynamics and the operability of the entire system in general,” [Murakhovsky] said.

Further reporting from TASS had this to add about the Burevestnik program:

Russia is getting ready for flight tests of the Burevestnik nuclear powered cruise missile, an official at the Defense Ministry told reporters on Thursday.

“The missile’s component makeup is being improved based on clarified requirements, while ground tests continue and preparations are being made for experimental flight tests of the improved missile,” the official said.

According to the Defense Ministry, “work on an unlimited-range missile is going according to plan.”

“In the meantime, launching systems are also being designed, while technological processes to manufacture, assemble and test the missile are being improved. This range of work will make it possible to start designing a totally new sort of weapon – a strategic nuclear complex armed with a nuclear powered missile,” the ministry official noted.

[The head] of the 12th Central Research Institute at Russia’s Defense Ministry Sergey Pertsev, in turn, said that the tests of the new cruise missile equipped with a small nuclear power unit had confirmed the accuracy of the technical decisions that Russian researchers, engineers and designers had made. In addition, the tests enabled the researchers “to receive valuable experimental data necessary for specifying a number of requirements.”

“A low-flying and low-observable cruise missile carrying a nuclear warhead, with an almost unlimited range, an unpredictable trajectory and capability to bypass interception lines is invincible to all the existing and advanced air and missile defense systems,” the Russian Defense Ministry stressed.

A further use of the nuclear engine technology is also expected in the Poseidon underwater drone, Mr. Murakhovsky stated that separate systems for the craft have been successfully tested. He further noted that the next task is to design the entire layout, build a test model and begin testing the whole platform.

The Avangard Hypersonic Missile

While the Kinzhal is a Mach-10 capable hypersonic system that can be launched from a fighter, the Avangard is a Mach-20 capable system that has intercontinental reach. There is almost no footage of this system released to the public, but the concept videos show how the system works. TASS reports this status:

Russia’s Strategic Missile Force is preparing a position area for accepting the Avangard hypersonic missile system for service as part of the efforts to strengthen the country’s military security, the Defense Ministry announced on Thursday.

“The Russian defense industry has completed developing the Avangard missile system with the principally new armament – the gliding cruise warhead. Industrial enterprises have switched to its serial production,” the Defense Ministry said.

“A set of organizational and technical measures is underway in the position area of the Dombarovsky large unit of the Strategic Missile Force to accept the Avangard missile system for operation,” it added.

The development of new strategic weapon systems “is aimed at increasing Russia’s defense capability and preventing any aggression against our country and its allies,” the Defense Ministry stressed.

The infrastructural facilities of the large unit’s position area have already been prepared for the missile system’s operation, the ministry said.

“The position area has been prepared in geodesic and engineering terms to accommodate the missile system. Work is underway to build new and reconstruct old facilities to provide for the operation and the combat use of the system. Technical and utility supply lines are being modernized and electric power, communications and command and control cables are being laid. Work has been arranged to train personnel and prepare armament, military and special hardware,” Russia’s Defense Ministry said.

Deputy Commander of Russia’s Strategic Missile Force for Armament Sergei Poroskun has said that the Avangard hypersonic missile system features combat capabilities that “make it possible to reliably breach any anti-missile defenses.”

The Okhotnik attack drone

The Okhotnik (“Hunter”) attack drone is now being viewed as a prototype for Russia’s “sixth-generation” fighter plane. TASS describes this in more detail:

According to [a defense industry] official, although the sixth generation fighter jet project “has not yet taken full shape, its main features are already known.”

“First of all, it should be unmanned and capable of performing any combat task in an autonomous regime. In this sense, Okhotnik will become the prototype of the sixth generation fighter jet,’ the source said, adding that the drone will be able to “take off, fulfill its objectives and return to the airfield.”

“However, it will not receive the function of decision-making regarding the use of weapons – this will be decided by a human,” he said.

TASS was unable to officially confirm the information at the time of the publication.

Another defense industry source earlier told TASS that the prototype of Okhotnik (Hunter) was ready and would start test flights this year.

The Russian Defense Ministry and the Sukhoi Company signed a contract for developing the 20-ton Okhotnik (Hunter) heavy unmanned strike aircraft in 2011. The drone’s mock-up model was made in 2014. According to unconfirmed reports, composite materials and anti-radar coating were used to create the Okhotnik. The drone is equipped with a reaction-jet propulsion and is supposed to develop a speed of 1000 kilometers per hour.

Peresvet laser weapons systems

TASS reported that the Russian military forces are now training for the use of the Peresvet combat laser system:

Russian Aerospace Force has accepted for service the laser complexes Peresvet and the military are now taking drills that involve the novel combat technologies, the Russian Defense Ministry said on Thursday.

“The Peresvet laser complexes have been placed at sites of permanent deployment,” the report said. “Active efforts to make them fully operational are underway.”

“To ensure their proper functioning, the necessary infrastructures and specialized facilities for housing the complexes and duty crews have been built,” the ministry said.

The crews assigned to the Peresvets have taken upgrader courses at the Alexander Mozhaisky Military-Space Academy in St Petersburg.

The Russian military strategy of “asymmetric response.”

The overall defense strategy is termed an “asymmetric response”, and Mr. Murakhovsky explained the principle in this way:

“This is an asymmetric response, in which new classes of weapons are created, instead of new types within the framework of the existing systems. Other states are not expected to have anything of this kind [in the near future],” he said.

The expert described this response as “quite an efficient one, all the more so because it requires no additional investment – all the works are being carried out within the framework of the state procurement program.”

He added that unlike the Soviet Union, Russia avoids being dragged into a direct arms race and searches for cutting-edge solutions instead of simply increasing the number of weapons.

“The development of counter-weapons to those arms [may be possible] in distant future, but it does not mean that they can be created at all,” Murakhovsky added.

Continue Reading

Latest

From McCain to Brennan, Deep State soft coup against Trump picks up steam (Video)

The Duran – News in Review – Episode 59.

Alex Christoforou

Published

on

After Trump’s meeting with Putin in Helsinki, the Deep State smells blood, and is moving quickly to depose of US President Donald Trump.

Government officials and mainstream media puppets from left and right are condemning the US President over his press conference with Vladimir Putin.

Leading the charge are the usual Deep State, suspects, starting with John McCain and ending with the man many believe is behind the entire Trump-Russia collusion hoax, former Obama CIA boss John Brennan.

RT CrossTalk host Peter Lavelle and The Duran’s Alex Christoforou examine the soft coup aimed at removing US President Trump by the November 2018 midterms. Remember to Please Subscribe to The Duran’s YouTube Channel.

Via The Independent

Conservative John McCain, who is facing a rare and terminal brain cancer, unleashed a damning statement against Mr Trump’s conference with Mr Putin, describing it as “one of the most disgraceful performances by an American president in memory”.

“President Trump proved not only unable, but unwilling to stand up to Putin,” he said.

“It is tempting to describe the press conference as a pathetic rout — as an illustration of the perils of under-preparation and inexperience. But these were not the errant tweets of a novice politician. These were the deliberate choices of a president who seems determined to realise his delusions of a warm relationship with Putin’s regime without any regard for the true nature of his rule, his violent disregard for the sovereignty of his neighbours, his complicity in the slaughter of the Syrian people, his violation of international treaties, and his assault on democratic institutions throughout the world.”

The conservative senator’s comments arrived after the US president declined to name Russia as the adversary behind coordinated attacks on the 2016 presidential election.

While discussing whether he thought Russia was behind hacks against the 2016 election — as the US intelligence community has determined —the president said: “I don’t see any reason why it would be.”

“Dan Coats [the US Director of National Intelligence] said its Russia. President Putin says its not Russia,” said Mr Trump. “I don’t know why it would be…..I have confidence in both parties. President Putin was extremely strong and powerful in his denial today.”

That set off a wave of condemnations from Democrats and Republicans alike.

“President Trump’s press conference with Putin was an embarrassing spectacle,” Bernie Sanders wrote in a tweet. “Rather than make clear that interference in our elections is unacceptable, Trump instead accepted Putin’s denials and cast doubt on the conclusions of our intelligence community. This is not normal.”

Jeff Flake, one of the only frequent Republican critics of Mr Trump in Congress, said the conference was “shameful” in a statement he posted across social media.

“I never thought I would see the day when our American President would stand on the stage with the Russian President and place blame on the United States for Russian aggression,” he said. “This is shameful.”

Former CIA Director John Brennan released a statement calling for Mr Trump’s impeachment and describing his comments as “treasonous”.

“Donald Trump’s press conference performance in Helsinki rises to & exceeds the threshold of ‘high crimes and misdemeanours,'” Mr Brennan wrote on Twitter. “It was nothing short of treasonous. Not only were Trump’s comments imbecilic, he is wholly in the pocket of Putin. Republican Patriots: Where are you???”

Elizabeth Warren also slammed the president for failing to hold Mr Putin accountable, writing on Twitter: “Russia interfered in our elections & attacked our democracy. Putin must be held accountable – not rewarded.”

“Disgraceful,” she concluded.

However, Mr Trump’s typical roster of critics weren’t the only legislators rebuking his bizarre denials of US intelligence. Lindsey Graham also criticised Mr Trump’s performance, adding that his denial of US intelligence will “be seen by Russia as a sign of weakness and create far more problems than it solves”.

“Missed opportunity by President Trump to firmly hold Russia accountable for 2016 meddling and deliver a strong warning regarding future elections,” he said.

The Republican senator added a suggestion to Mr Trump: review the soccer ball Mr Putin gave to him as a gift for “listening devices” and “never allow it in the White House.”

Thomas Pickering, a regarded statesman and the former US ambassador to Russia, told MSNBC that he was in utter disbelief after the press conference was held on Monday.

“It’s a breathtaking denial of something that clearly is so obviously true,” he said. ”it represents the epitome of President Trump’s effort at self-promotion over the notion of defending the national interest of the United States.”

Mark Warner, a Virginia senator, also suggested Mr Trump committed a clear violation of his responsibilities as president.

Mr Trump committed “a breach of his duty to defend our country against its adversaries,” Mr Warner said. ”If the President cannot defend the United States and its interests in public, how can we trust him to stand up for our country in private?”

Meanwhile the latest Deep State leak, via the NYT, claims that US President Trump was told by Obama holdovers that Putin was involved in cyberattacks during the 2016 election. US intelligence told Trump this information days before the inauguration.

Via The Gateway Pundit

The same liberal hacks who illegally leaked this information want Americans to trust them as they continue to destroy this duly elected president.

President Trump on Wednesday told CBS anchor Jeff Glor that he has no confidence in the tainted intelligence by far left hacks Clapper, Brennan and Comey.

And, once again, the timing of this leak is not an accident.

Liberals are outraged that President Trump refused to chest bump Putin in Helsinki.

The deep state leaked this information to pile on the Republican president.

The New York Times reported…

Two weeks before his inauguration, Donald J. Trump was shown highly classified intelligence indicating that President Vladimir V. Putin of Russia had personally ordered complex cyberattacks to sway the 2016 American election.

The evidence included texts and emails from Russian military officers and information gleaned from a top-secret source close to Mr. Putin, who had described to the C.I.A. how the Kremlin decided to execute its campaign of hacking and disinformation.

Mr. Trump sounded grudgingly convinced, according to several people who attended the intelligence briefing. But ever since, Mr. Trump has tried to cloud the very clear findings that he received on Jan. 6, 2017, which his own intelligence leaders have unanimously endorsed.

Continue Reading

Latest

Russia ranks HIGHER than Switzerland in these areas of doing business

Some curious things happened with several businesspeople who attended World Cup events in Russia.

Published

on

Russian President Vladimir Putin

One of them was a distinctly renewed interest in doing business inside the country, and another was the realization to what extent perceptions have been tainted by media and political rhetoric directed against any real or imagined nastiness attributed to Russia these days.

These past few weeks have been invaluable, at the very least by affording a clear picture of Russia through which almost all anxiety-ridden preconceptions were illuminated and dispelled. More disturbing was the fact that the several businesspeople I was dealing with were furious. They were livid for being played for fools, and felt victimized by the dismally untrue picture painted about Russia and Russians in their home countries, both by their own politicians and the press.

Support The Duran – Browse our Shop >>

Most felt that they have been personally sanctioned by their own countries, betrayed through lack of clear unbiased information enabling them to participate and profit from Russia opportunities these past three growth years in spite of “sanctions”.

The door to doing good business in Russia has been and is open, and has been opening wider year after year. That is not just “highly likely”, but fact. Consistently improving structures, means and methods to conduct business in Russia sustainably, transparently and profitably are now part of the country’s DNA. It is a process, which has been worked on in the west for more than a century, and one, which Russia has only started these past 18 years.

True, there are sanctions, counter-sanctions, and regulations governing them that must be studied carefully. However if you are not a bank or doing business with those persons deemed worthy of being blacklisted by some countries “sanctions list”, in reality there are no obstacles that cannot be positively addressed and legally overcome despite the choir of political nay-sayers.

READ MORE: Russia just dumped $80 BILLION in US debt

The days of quickly turning over Russia opportunities into short-term cash are rapidly fading, they are a throwback to the 1990’s. Today the major and open opportunities are in the areas for Foreign Direct Investments. The nature of FDI is long term to make regularly recurring sustainable returns on investment.

Long term, Russia always was and increasingly confirms that it is a vibrant and attractive market. There is a significant consumer market with spending power, a well-educated workforce, a wealth of resources and the list goes on. The economic obstacles encountered have largely been imposed from without, and not from the dynamics and energies of the Russian economy itself.

Eventually sanctions will end, although the timeline is anyone’s guess. Meanwhile business continues, and any long-term engagement within Russia by establishing a working presence will yield both short and long-term investment rewards. These will only be amplified when the sanctions regimes are removed. In any event, these aspects are long-term investment decisions and one of the criteria in any risk assessment.

For some added perspective, Russia is ranked by the Financial Times as the No.2 country in Europe in terms of capital investments into Europe. It has a 2017 market share of 9% (US$ 15.9 billion) and includes 203 business projects. This is 2% higher than 2016 and better that 2014/2015 when sanctions were imposed.

Another item of perspective is the Country Risk Premium. All investors consider this when calculating the scope for long-term return on investments. What may surprise some is that Russia is no longer ranked as a very high-risk country. For comparisons sake: The risk premium for Germany is zero (no extra risk), the risk premium for Italy is 2.19%, and for Russia, it is 2.54%. When compared to politically popular investment destinations like Ukraine the risk premium is 10.4%  – food for thought. Bottom line is that the risks of investing in Russia are a smidge higher than investing in Italy.

Russia is ranked 35 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The ranking of Russia improved to 35 in 2017 from 40 in 2016 and from 124 in 2010. It may also surprise some to learn that as concerns protecting the rights of minority investors, paying taxes, registering property and some other aspects of the World Bank comparisons, Russia comes out better than Switzerland (See: Rankings).

From operational standpoints, establishing an invested presence in Russia does not mean one must adopt Russian managerial methods or practices. The advantages for established foreign companies is that their management culture is readily applied and absorbed by a smart and willing workforce, enabling a seamless integration given the right training and tools.

The trend towards the ultimate globalization of business despite trade wars, tariffs, sanctions and counter-sanctions is clear. The internet of the planet, the blockchain and speed of information exchange makes it so whether we wish it or not. Personally, I hope that political globalization remains stillborn as geopolitics has a historical mandate to tinker with and play havoc with international trade.

Russia occupies a key strategic position between Europe and Asia. The “west” (US/Europe) have long had at times rather turbulent relationships with China. At the same time the Chinese are quite active investors in both the US and Europe, and western companies are often struggling to understand how to deal with China.

The answer to this conundrum is Russia: this is where East and West will ultimately come together with Russia playing a pivotal role in the relations between the west and China. At the end of the day, and taking the strategic long-term economic view, is what both Chinese and Western companies are investing in when they open their activities in Russia.

If long-term commitment and investment in Russia were simply a matter of transferring funds then I would not be bothering with this opinion article. Without a doubt, there are structural issues with investing in Russia. A still evolving and sometimes unclear rule of law, difficulties obtaining finance for investments directed towards Russia, the unique language and culture of business in the country. Nevertheless, companies that have an understanding and vision of global strategy will manage with these issues and have the means to mitigate them.

Money and other invested resources do not and should not play politics; any investment case when evaluated on objective financial criteria will reveal its fit, or lack of, within a company’s global strategic business objectives. The objective criteria for Russia over any long term horizon is both convincing and strong. This has been repeated by all of the businesspeople I have met with these past few weeks. Without doubt we shall see some new companies coming into the Russian market and objectively exploring the gains their playing fair business football here will yield.

Continue Reading

JOIN OUR YOUTUBE CHANNEL

Advertisement

Your donations make all the difference. Together we can expose fake news lies and deliver truth.

Amount to donate in USD$:

5 100

Waiting for PayPal...
Validating payment information...
Waiting for PayPal...
Advertisement
Advertisements
Advertisement
Advertisements

Quick Donate

The Duran
EURO
DONATE
Donate a quick 10 spot!

The Duran Newsletter

Trending