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Russia Shrugs off Sanctions, Czech Government Falters Over Gas Tax

Plus, tensions rise still further in Nagorno-Karabakh and bad weather traps hundreds of climbers in Kyrgyzstan.

by Piers Lawson, Ioana Caloianu, Mane Grigoryan and Madeleine Stern 24 July 2014

1. Impact of sanctions on Russia is ‘peanuts’ compared with Soviet times


Officials in Russia have united in agreement that the impact of sanctions on Russia for its role in the crisis in Ukraine would be “peanuts” compared with what the country endured during the Soviet era, Reuters reports.


Officials including top Kremlin economic adviser Andrei Belousov said growth has not been affected by sanctions.


“The sanctions in their current format don't have a macroeconomic effect,” Belousov said, according to Reuters.


Likewise, Trade Minister Denis Manturov said that whatever sanctions are imposed by the West will not leave Russia as isolated as it was during Soviet times.


“What's happening today is peanuts compared to what was then,” he said. 


But Reuters notes that Russia’s economy is facing stiff headwinds.


“The economy is on the brink of recession,” the news agency writes, with one result of the punitive measures “a broader risk aversion toward emerging markets that [has] sent equities and the ruble tumbling and spurred nearly $75 billion in capital flight so far this year.” 


Russia is widely reported to be preparing to take its grievances over the imposition of sanctions by the United States to the World Trade Organization. So far Washington has targeted Russian banks and energy and defense companies.


Meanwhile U.S. Republican Senator John McCain has said Europe’s “tepid sanctions” on Russia are “a joke,” Britain’s Daily Telegraph reports.


“They will do nothing and I predicted they would do nothing,” McCain told the newspaper. “They will continue to do nothing until the day they become independent of Russian energy. Until then they will talk.”


McCain’s frustration was echoed by other legislators in both parties. He said the muted European Union response might require Britain to impose its own sanctions, but he was not convinced the UK government had the necessary determination.


2. Weather strands 200 climbers in Kyrgyzstan’s Tian Shan mountains


About 200 foreign climbers are trapped in Kyrgyzstan’s Tian Shan mountain range, Radio Free Europe reports.


Rescue operations were suspended after a helicopter carrying a rescue team and a Russian climber crashed in Kyrgyzstan’s Issyk-Kul region on 18 July due to heavy winds, according to the country’s Association of Tour Operators, Vestnik Kavkaza reports. Those on board were evacuated in another helicopter, according to the website.


At nearly 7,000 meters high, Mount Khan Tengri is the second-highest point in the Tian Shan mountains. Photo by Chen Zhao/Flickr.


RFE writes that this summer’s climbing season in the Tian Shan range has already seen several tragic incidents:


  • A Ukrainian climber died of a heart attack during an expedition on 22 July
  •  A Moldovan climber disappeared the same day and remains missing
  • A Russian climber had to be rescued last week after suffering a stroke during a climb


At 2,800 kilometers (1,740 miles) long and as much as 800 kilometers wide, the Tian Shan range is the largest in Asia in terms of surface area, the Advantour website says. Forty of its peaks top 6,000 meters (20,000 feet).


“The difficulties faced by mountaineers are exacerbated by the weather – it can snow suddenly and for several days at a time – increasing the risks of avalanches and crevices,” according to the tour operator.


Furthermore “the snow falls both in summer and springtime” and “night and day the wind rages violently.”  


3. Gas prices hike in Crimea despite earlier Russian promises


The price of gasoline will rise by 2.8 percent in Crimea despite a Russian promise to lower it, Reuters reports.


This will be the first price change since the Black Sea peninsula was annexed in March, raising questions about Russia’s promise then of reducing prices by 30 percent, according to Reuters.


The price of unleaded gasoline, or “Al-92,” has already increased by one ruble on average this week in Crimea to about 36 rubles ($1.03) per liter.


The rising costs put the government in a difficult situation, Reuters says.


It has so far succeeded in avoiding gasoline shortages, which some in Crimea feared might happen when links with the Ukrainian mainland were severed.


“But rising costs could dampen some of the euphoria in the region over reunification with Russia,” Reuters says.


Gasoline is still getting into Crimea “thanks to the introduction of railcar shipments by ferry, via the Strait of Kerch from Russia,” industry sources told Reuters.


An unnamed employee at a Crimean fuel retail network told the news agency: “You have to pay for transportation; the petrol price would always be higher here. It’s impossible to bring it down to Russia’s level.”


To help pay for the cost of annexing Crimea, some Russian lawmakers have proposed a “solidarity tax” on wealthier segments of population, Reuters says.


In addition a bill is being drawn up by Russian legislators to increase income tax for people earning more than 1 million rubles a month.


“The main goal is to support regional budgets and that means also the budget of Russia’s new territories,” the main sponsor of the legislation, Andrei Krutov, told Reuters.


Crimea needs about 300,000 tons of diesel and 225,000 tons of gasoline each year, according to estimates by industry sources, Reuters reports.


4. Czech government divided over big fuel tax cuts


Andrej Babis
The Czech parliament is due to meet 25 July to discuss a controversial proposal for a surprise cut in gasoline and diesel taxes of almost 14 billion crowns ($686 million) that is bitterly opposed by Finance Minister Andrej Babis, Reuters reports.


The coalition government appeared to be “in disarray” over the move, which was initially approved by parliament 23 July only to be overturned soon afterward because of Babis’ objections.


He argues that the tax cuts will only serve to provide a windfall to fuel distributors and will not bring lower prices to drivers.


Prime Minister Bohuslav Sobotka remarked that many of his own Social Democratic Party’s deputies had no idea what they were voting for, the Czech Press Agency reports.


The proposal originated as a legal amendment and was originally meant only to introduce a tax refund on diesel oil to farmers. Social Democrat deputy Milan Urban then introduced a rider to the amendment widening its scope.


Sobotka described Urban as an ally of the opposition, and Babis dismissed Urban’s argument that fuel prices are too high, the agency reports.


Reuters says the proposals might interfere with the government’s target to keep the budget deficit under 3 percent in 2014 and 2015, and could also damage attempts to keep inflation in check.


UniCredit Bank economist Pavel Sobisek called the vote “an extremely dangerous way to push through the change” and warned of the dangers of coalition deputies voting for laws “fundamentally influencing budget revenues without consultation with the finance minister.”


The seven-month old coalition of Social Democrats, Christian Democrats, and Babis’ liberal ANO party has been perceived as unstable since its inception.


5. OSCE warns of rising civilian casualties in Karabakh conflict


The Organization for Security and Cooperation in Europe (OSCE) has expressed serious concern about the increase in tension and violence – including the killing of civilians – on the ceasefire line between Armenian-controlled Nagorno-Karabakh and Azerbaijan.


In a press release the OSCE decries what it calls the deliberate targeting of villages and the civilian population along border and its surrounding area.



An OSCE spokesman told TOL that the exact number of civilian casualties in recent months is not known. Reports of people treading on landmines and being caught in the crossfire between the two sides are commonplace.


Each side regularly accuses the other of firing on its soldiers across the 1994 ceasefire line.


The OSCE statement called on the foreign ministers of Armenia and Azerbaijan to defuse tensions and adhere to the terms of the ceasefire.


It said that a meeting between the presidents of both countries was vital if progress is to be made in peace negotiations.


Recently authorities in the separatist region and Armenia have stepped up their accusations against Baku. Nagorno-Karabakh forces claimed to have captured several Azerbaijani “saboteurs” earlier this month, and this week Armenian Foreign Minister Eduard Nalbandian complained of “intensified subversive activities” by Azerbaijan at a meeting with international conflict mediators.


Armenia and Azerbaijan went to war in the early 1990s over Nagorno-Karabakh, which is located wholly within Azerbaijan and populated predominantly by ethnic Armenians.


The conflict displaced more than 800,000 people and killed up to 30,000, with more than 4,000 recognized as disappeared.


Piers Lawson is a TOL contributing editor. Ioana Caloianu is a TOL editorial assistant. Mane Grigoryan and Madeleine Stern are TOL editorial interns.


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