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Russia Mulls Sanctions on West, Millions Vanish From Albanian Central Bank

Plus, investor fears of a teetering Russian economy spread to regional stocks and currencies, and Baku goes on another building spree to get ready for major sports events.

by Ky Krauthamer, Jeremy Druker, and Ioana Caloianu 31 July 2014

1. Russian Duma may target U.S. audit majors


Yevgeny FyodorovYevgeny Fyodorov
Russia may retaliate against stepped-up U.S. and EU sanctions with legislation that would restrict the operations there of companies from “aggressor countries,” Radio Free Europe reports.


Russian press reports quote draft legislation that would give “the government the right to approve a list of aggressor countries in order to defend the foundations of constitutional order, to ensure the state’s defense and security, to protect the domestic market of the Russian Federation and the development of the national economy,” RFE writes. An “aggressor country” would be defined as a state that has “imposed sanctions on the Russia Federation, Russian citizens, or Russian companies.”


According to a report in the pro-Kremlin daily Izvestia, cited by RFE, the bill seems to be targeting, in particular, auditing and consulting companies. Yevgeny Fyodorov, a legislator from the ruling United Russia party who helped draft the legislation, specifically mentioned Deloitte, KPMG, PricewaterhouseCoopers, Ernst & Young, Boston Consulting Group, and McKinsey.


At least some Russian politicians believe such a step would have the added benefit of boosting the profile and creating business for national auditing firms. “Our economy will certainly lose nothing to it,” said Mikhail Emelyanov, described by RIA Novosti as a senior lawmaker and deputy chairman of an economics and innovation committee in the State Duma. “My feeling has long been that we need more national auditing, even if we leave sanctions out of consideration. Sanctions may only serve as an impetus.”


Although Fyodorov said he would introduce the bill to the Duma this week, foreign financial analysts told RFE they doubted Russia would actually follow through. Such legislation could, they said, harm Russian companies that rely on audits from the firms targeted in the bill to be able to function on international capital markets.


2. Albania’s central bank red-faced over audacious theft


Ardian FullaniArdian Fullani
The governor of Albania’s central bank, Ardian Fullani, faced questions in parliament 30 July over the reported theft of up to 713 million leka ($6.9 million) from the bank, Balkan Insight reports.


The head of a parliamentary economic commission, Erjon Brace, said, “This theft has tainted the image of Albania’s central bank,” and vowed to bring the perpetrators to justice.


The missing money was discovered during an inventory check at the bank’s reserve storage facility, according to International Business Times. One of the two bank employees arrested in the theft said he had pilfered the money over a four-year period and spent it all gambling, according to local media cited by IBT.


Police might also investigate reported bank transfers to relatives of the suspects, according to the report.


The bank’s supervisory board said in a statement that the shortfall had not affected the institution’s financial operations. It also attributed the incident to “failure to apply procedures by a group of employees,” according to Balkan Insight.


Prosecutors intend to question Fullani and the other bank directors about the theft, according to


3. Ukrainian artist, director describe beatings, abuse by rebel captors


A Ukrainian artist who spent 10 weeks as a hostage of separatist forces says he holds no grudges against his captors. Speaking to RFE, Denis Grishchuk said, “We are all guilty, no one should be categorically blamed. … We ourselves allowed this rift to divide our nation, a rift that is now prompting people to take up arms.”


Grishchuk and fellow captives Pavel Yurov, a theater director, and journalist Irma Krat were freed when government forces took the rebel stronghold of Slavyansk in early July.


Both men are Russian speakers from eastern Ukraine, Britain’s Telegraph reported in May. Yurov is a director in Kyiv and Grishchuk works at a contemporary art center in the capital.


In RFE’s account, Yurov and Grishchuk were seized in Slavyansk on 25 April on a car journey from Donetsk to Kyiv. They got into an argument about the situation in the country with some customers in a cafe, Grishchuk said. “We were watching the news on our tablets and a woman asked us what the news said. We told her. I can’t remember precisely what words we used, but obviously it gave away our belief in a united Ukraine,” he recounted.


The pair were picked up by armed men as they left the cafe. Taken to the Ukrainian Security Service building, they were beaten and threatened after their captors found a Ukrainian flag and videos of the protests in Kyiv against former President Viktor Yanukovych, Grishchuk said.


Their cellmates during the next 10 weeks comprised a mixed bag of Ukrainian nationalists, a former Slavyansk mayor, a drunken priest, journalists, “and a U.S. Hare Krishna worshiper who sang mantras all day in his cell,” RFE writes.


Yurov said their captors were local men. A guard who escorted them from one building to another also ended up sharing their prison, Yurov said.


Yurov and Grishchuk said they plan to seek legal redress for their captivity and might file a complaint against Russia with the European Court of Human Rights.


4. Bad news and good news for CEE economies


Central and Eastern European economies, still clawing their way out of the 2008 crash, are already feeling the blowback from Western sanctions on Russia, Bloomberg reports.


Regional currencies, including the Russian ruble, accounted for six of the seven worst performers among emerging markets for the month of July, with the Hungarian forint and Romanian leu also slipping significantly. The ruble itself slid briefly to a three-month low 29 July.


Stock markets in the region are also off color: the Bulgarian, Czech, Hungarian, and Russian indexes were among the 10 biggest global decliners in July.


The EU’s eastern bloc countries “walk a tightrope by aligning themselves politically with Western Europe while maintaining economic links to Russia,” Bloomberg writes. London foreign exchange analyst Ilan Solot said, “There’s a sense by global investors of, why mess around with Central and Eastern Europe and the geopolitical risks if there are other opportunities out there.”


All is not doom and gloom for investors in the region, writes the South China Morning Post.Property values are starting to recover from the black hole of 2008-2009, although real-estate consultants Knight Frank found that most regional markets, along with those of Spain and Ireland, were still in the doldrums.


Latvia – where housing values fell by 49 percent – and Lithuania, Bulgaria, and Slovakia recorded some of the deepest property slumps averaged over the period from late 2008 to September 2013, according to Knight Frank. Data from March, however, show “a marked improvement” in Lithuania (up 8.4 percent from the 2008-2013 average), while housing markets in Latvia, Poland, and Romania also perked up.


The economic sanctions on Russia are at least partly to blame for an expected 25 percent drop in cargo volumes carried by Estonian Railways this year, company chairman Ahti Asmann said.


5. Baku brands itself as a sporting mecca


The building spree that has delivered new office towers, apartment buildings, and entertainment complexes to Baku in the past few years is set to continue as plans gel to host two major sporting events.


Construction on a 65,000-seat stadium and a water sports hall for next year’s European Games continues, Sports and Youth Minister Azad Rahimov told the newspaper Azerbaijan, according to an Azernews report.


Six thousand athletes from 49 countries will compete in 19 sports in June 2015 in the inaugural European Games. Baku residents are being bombarded with publicity about the games, Germany’s Der Tagesspiegel writes. The event, originally proposed by Azerbaijan, has received little coverage outside Azerbaijan, although European Olympic Committee President Patrick Hickey praised the facilities as “fantastic” and “superb” during a visit to Baku last year.


Work is also under way on venues for swimming, volleyball, beach football, and other events, Rahimov said.


The dramatic Crystal Hall, controversially built for the 2012 Eurovision contest on the site of a demolished neighborhood, will be fitted out for boxing, fencing, and other indoor sports.


Baku is also looking ahead to its first Formula One race, to be held on a street course in 2016, a year later than organizers hoped, Mail Online reports.


Rahimov announced the firm plans for the 2016 race, saying “Azerbaijan is a modern European country that has established a reputation as a center of sporting excellence.”

The former Soviet Union will see its first Formula One race in October in Sochi, Russia, despite calls from British politicians to scrap it as punishment for Russia’s support of Ukrainian separatists.


Baku.European.Games2015A banner promoting the inaugural European Games, set for Baku in June 2015. Image from

Ky Krauthamer is a senior editor at TOL. Jeremy Druker is TOL's executive director. Ioana Caloianu is a TOL editorial assistant.
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