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Russia Sends More Troops to Ukraine Border, Suspends Georgian Trade Agreement

Plus, Serbia’s finance minister warns the economy will sink without IMF loans and Montenegro looks to cruisers and the super-rich to rescue its tourism season.

by Ky Krauthamer, Ioana Caloianu, and Jeremy Druker 6 August 2014

1. Ukraine warily eyes Russian troop buildup


Russia has moved 8,000 troops near its border with Ukraine in the last week, bringing the total number of forces in the area to 20,000, a NATO official said 5 August, CNN reports.


Russia’s troop buildup in the area is raising concerns over a possible military intervention into the escalating conflict between Ukrainian forces and rebels in the Donetsk and Luhansk regions.


Moscow sent some 40,000 troops to the area after fighting broke out this spring but withdrew all but 12,000 by July, NATO said.


The Ukrainian National Defense and Security Council said there may be as many as 45,000 Russian troops along the border. Six attacks were launched from Russian territory in the previous 24 hours, the council claimed 5 August.


Ukrainian forces would likely face a more numerous, better armed enemy in any clash with Russia.


When the conflict began, Ukraine’s army numbered 70,000 “poorly equipped” troops, a report (pdf) by the Royal United Services Institute for Defense and Security Studies said in April, while Russia’s military is at 80 percent of a target strength of 1 million, according to the International Institute for Strategic Studies, Bloomberg reports.


Ukraine began calling up reservists and drafting new recruits in July, and the mobilization drive is no respecter of wealth or status, Bloomberg writes, describing how a young London-educated financier recently got his draft notice. Another draftee came to Ukraine in 2000 to battle, not enemy soldiers, but rival soccer players. Edmar Halowski de Lacerda of Premier League club Metalist Kharkiv, originally from Brazil, took Ukrainian citizenship in 2008 to enable him to play with the national soccer team.


“I would certainly not anticipated [being drafted] when I got a Ukrainian passport, the club told me they will try to resolve the issue for me,” he told the New York Post last month.


Luhansk.self-defendersArmed men in the rebel-held city of Luhansk check vehicles on a city street. Image from a video by Anti-Maidan/YouTube


2. Russia suspends Georgian free trade deal


Russian’s decision to suspend a free trade agreement has Georgians seeking alternative markets for their products, according to the Financial.


Moscow ended the 20-year-old agreement shortly after Georgia signed a free trade pact with the EU in June, reports. Russia has vocally opposed such EU agreements by other former Soviet republics Ukraine and Moldova, and imposed trade sanctions on each, as well as banning Polish apple imports.


Georgian opinion is divided on the impact of Russia’s measure.


Finance Minister Nodar Khaduri is optimistic that taxes on Russian imports will raise 15 million to 20 million lari ($8.7 million to $11.5 million), according to the Financial. Several entrepreneurs interviewed by the Georgian website said restrictions on the Russian market will not hurt as much as Russia’s 2006-2013 embargo on wine and mineral water imports.


Georgian exports to Russia more than tripled in the first five months of this year over the same period in 2013, contributing to a one-third increase in bilateral trade, writes. According to the Financial, the value of exports to Russia in the first half of the year was $134 million.


Wine exports, historically one of Georgia’s biggest earners, boomed after Russia lifted the embargo in 2013, but the head of a large wine export firm warned against relying too heavily on the Russian market. Zurab Margvelashvili of Tbilvino said the lesson of the embargo was that exporters must broaden their customer base. Tbilvino now ships to 30 countries instead of the 13 it used to rely on.


Wine exports almost doubled in the first half of 2014, compared with the same period last year. However, the volume is expected to drop after Russia introduces a 20 percent import duty on Georgian wines, reports.


3. Artist’s provocation moves Russia to block web searches, threaten BBC


loskutov_100Artem Loskutov
Russia’s media regulator is locked in a row with the BBC over an interview posted on the BBC Russian service calling on listeners to take to the streets for the federalization of Siberia, the Guardian reports.


The BBC World Service rejected a request by the regulator Roskomnadzor to remove the audio interview with artist and activist Artem Loskutov.


The broadcaster did decide to add background information about Loskutov and quote him as saying the call to take part in the as yet-unauthorized 17 August march in Novosibirsk was partly meant as a parody, acting Russian Service head Artem Liss wrote on the site 3 August.


Roskomnadzor also ordered the Russian news site Slon to remove an interview with Loskutov, and Russian authorities blocked links to the results of many Google searches on the phrase “federalization of Siberia,” RFE reports.


“At least 17 other websites, including popular news aggregators like and RIA Novosti, a state-run news site, apparently also originally covered the story but have now taken their reporting down,” RFE wrote 5 August.


In the added Loskutov quote, the artist described the event as “part parody, part provocation, but also, partly, a real attempt to gain autonomy” in an attempt to raise serious questions about the future of Siberia, according to the Guardian.


Roskomnadzor blocked access to the interview and threatened to do the same to the entire BBC Russian website if the material featuring Russian was not removed.


But the BBC said it had “no plans” to delete the interview, and described Loskutov as an “artist and activist known for organizing events which are, at first sight, parodies of political activity, but which also bring out serious issues about life in Russia.”


4. New Serbian finance minister pledges public spending cuts


vujovic_100Dusan Vujovic
Serbia will need three years to reach sustainable budget deficit and debt levels, new Finance Minister Dusan Vujovic said 4 August as he presented a plan to revive the country’s struggling economy, Balkan Insight reports.


The plan relies on support from the International Monetary Fund, Vujovic stressed. He said the government will sign a three-year agreement with the IMF in September.


Vujovic, who stepped down as economy minister 4 August in order to allow parliament to approve his new position, faces steep challenges. His predecessor, Lazar Krstic, resigned 12 July over Prime Minister Aleksandar Vucic’s rejection of his radical economic reform proposals, including steep cuts in public spending and reducing the number of state workers. The European Union is likely to demand deficit cuts and a smaller state role in the economy during negotiations on Serbia’s union membership, which are expected to last for several years.


Vujovic’s plan foresees slashing the deficit to 2 to 2.3 percent of GDP by 2017. This year the deficit is predicted to be four times larger, around 8.3 percent, the government’s Fiscal Council said 31 July, Bloomberg reports.


Fiscal Council chairman Pavle Petrovic said public wages and pensions must be cut by 15 percent and a way found to cut losses at unprofitable state-owned companies.


“If public wages and pensions were not reduced, Serbia would face deficit-financing problems already in the first half of 2015,” Petrovic said.


The council’s recommendations, like Krstic’s, may be too much for the government to stomach.


“Facing a third recession in five years, Premier Aleksandar Vucic’s 100-day-old government is promising a 10 percent reduction in public wages and pensions to tame the gap,” Bloomberg writes.


5. Montenegro braces for cruise ship assault


Around 400 cruise ships are expected to anchor in Montenegro’s mountain-girded Kotor Bay in the next two months. Cruise traffic could help save what is looking like an off tourism season for Montenegro, Balkan Insight reports.


“We are extremely pleased with this holiday season,” the head of the Port of Kotor, Vasil Kusovac, said. Cruise passengers pay 2 euros each to enter Kotor’s visitor-choked, UNESCO-listed Old Town. Port authorities said they expect to earn 2 million euros ($2.7 million) from cruise tourism this season.


Overall, though, “Montenegrin tourism authorities have expressed concerns that the spring floods in the region – and the impact of the crisis in Ukraine – could result in lower earnings from holidaymakers,” Balkan Insight writes, citing the National Tourism Organization’s estimate of a 10 percent fall in tourist visits this year compared with  2013.


While Kotor goes down the road of mass sea-based tourism, another resort farther up the twisty, fjord-like bay hopes to cultivate the super-yacht crowd.


Porto Montenegro is “one of the most ambitious leisure projects in Europe,” The Financial Times writes. The Taiwanese-managed resort opened in 2009 and plans are afoot to double the number of yacht berths to 490, some of which can accommodate the largest trophy boats of the super-rich.


“And with Montenegro being outside the EU, it is also very competitively priced. Berths and fuel are about half the price they are in the south of France,” the FT says.


The great unknown for both high-end and mass tourism this season is whether Russians will come or stay away.


Russians are the backbone of Montenegro’s tourism industry: last year about 300,000 Russian visitors came to this country of 700,000, “and according to local surveys, more than 40 percent of real estate in Montenegro belongs to Russians,” Balkan Insight writes, adding, “But relations between Montenegro and Russia have cooled after Podgorica joined EU sanctions imposed against Moscow over the annexation of Crimea.”


budva_350Budva, Montenegro

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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