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Plan To Ease The Citizenship Grant For All Ukrainians, Claims Russian President Vladimir Putin

Critics point to other frozen conflicts in former Soviet republics where Russia has granted citizenship to residents of separatist-held territory in order to choreograph demographic changes over time and justify future military operations.

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Russian President Vladimir Putin gestures while speaking to the media following the Belt and Road Forum in Beijing, China, April 27, 2019. VOA

Russian President Vladimir Putin says his administration is considering a plan to ease the process of granting Russian citizenship to all Ukrainians, not only those in war-torn parts of eastern Ukraine.

Putin made the remark on April 27 at an infrastructure development summit in Beijing.

On April 24, Putin announced a presidential decree that eases the process of granting Russian citizenship to anyone living in parts of Ukraine’s Donetsk and Luhansk regions that are under the control of Russia-backed separatists.

That decree drew a swift and angry response from Kyiv, the United States, Britain, the European Union, and the Organization for Security and Cooperation in Europe (OSCE), the international organization tasked with monitoring compliance with the 2015 Minsk agreements on eastern Ukraine.

Ukrainian President Petro Poroshenko said Putin’s decree “is actually about the Kremlin’s preparations for the next step of aggression against our state – the annexation of the Ukrainian Donbas or the creation of a Russian enclave in Ukraine.”

FILE - Ukraine's President Petro Poroshenko delivers a televised address after Russian authorities moved to simplify the process of obtaining Russian citizenship for Ukrainians living in areas controlled by Russia-backed separatists in eastern Ukraine, in Kyiv, April 24, 2019.
Ukraine’s President Petro Poroshenko delivers a televised address after Russian authorities moved to simplify the process of obtaining Russian citizenship for Ukrainians living in areas controlled by Russia-backed separatists in eastern Ukraine, in Kyiv, April 24, 2019. VOA

The OSCE said in a statement on April 25 that its chairmanship “believes that this unilateral measure could undermine the efforts for a peaceful resolution of the crisis in and around Ukraine.”

It said it was reiterating its “call for a sustainable, full and permanent cease-fire and its firm support for the work of the OSCE Special Monitoring Mission to Ukraine, which plays an essential role in reducing tensions on the ground, and in fostering peace, stability and security.”

In a joint statement on April 25, France and Germany – the European guarantors of the Minsk agreements – said Putin’s decree “goes against the spirit and aims” of the Minsk process, which aims to establish a stable cease-fire in the conflict in parts of eastern Ukraine’s Donbas region and then proceed to a political settlement.

“This is the opposite of the urgently necessary contribution toward deescalation,” the statement said.

European Commission spokeswoman Maja Kocijancic said the decree was “another attack on Ukraine’s sovereignty by Russia.”

“We expect Russia to refrain from actions that are against the Minsk agreements and impede the full reintegration of the nongovernment-controlled areas into Ukraine,” she said.

Ukraine’s foreign minister called Putin’s decree a form of “aggression and interference” in Kyiv’s affairs, while a Western diplomat told RFE/RL it was a “highly provocative step” that would undermine the situation in the war-ravaged region known as the Donbas.

The U.S. State Department also criticized Russia’s move, saying Moscow “through this highly provocative action, is intensifying its assault on Ukraine’s sovereignty and territorial integrity.”

army
Then, when Russia went to war against Georgia in August 2008, the Kremlin justified its deployment of Russian military forces in Abkhazia and South Ossetia by saying those forces were needed to protect Russia citizens in the separatist regions. Pixabay

Critics point to other frozen conflicts in former Soviet republics where Russia has granted citizenship to residents of separatist-held territory in order to choreograph demographic changes over time and justify future military operations.

In 2002, the Kremlin began granting Russian citizenship to residents of Georgia’s breakaway regions of Abkhazia and South Ossetia – a policy that helped raise the number of Russian passport holders there from about 20 percent to more than 85 percent of the population.

Then, when Russia went to war against Georgia in August 2008, the Kremlin justified its deployment of Russian military forces in Abkhazia and South Ossetia by saying those forces were needed to protect Russia citizens in the separatist regions.

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Russian media reports say Russia also has issued its passports to nearly half of the residents of Moldova’s Moscow-backed breakaway region of Transdniester.

That policy has raised concerns in Chisinau that the Kremlin may use a similar argument of defending its citizens in order to justify future Russian military operations in Transdniester. (VOA)

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Russia’s Alternative to Western Credit Card Debuts in London

Russia will next year diversify its foreign currency holdings in its National Wealth Fund

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Employees demonstrating a payment card
Employees speak while demonstrating a payment card during a tour at a branch of VTB bank in Moscow, Russia. VOA

A Russian backed bank payment card, introduced after Western sanctions upended Russia’s financial system five years ago and prompted Visa and Master card to deny electronic services to some of the country’s leading banks, is set for its European debut on London Wednesday, when a pilot project will be launched in collaboration with the Dutch global payment company PayXpert.

Moscow authorities hoped to get the MIR card accepted eventually in foreign markets, but progress has been slow outside Russia for the MIR payment system,  which operates outside of Western-controlled international financial systems such as Swift, which banks use to transfer money.

The pilot project with PayXpert “will lay the foundation for new promising trends in the foreign expansion of Russian payment cards,”  according to Vladimir Komlev, the head of Russia’s National Card Payment System, which operates the MIR system.

De-dollarization efforts

The effort is seen by analysts as part of the  Kremlin bid to de-dollarize the Russian economy to lessen the sting of Western sanctions. A Russian Finance Ministry official this month told Reuters that Russia will next year diversify its foreign currency holdings  in its National Wealth Fund, which supports Russia’s public pension system, aiming to lower the share of dollars in the fund’s reserves.

Dmitry Dolgin of the Dutch banking group ING said in  a report this month that de-dollarization efforts are now obvious across most sectors, including local business loans and bank-held international assets, although he said the dollar’s role  has actually increased in company and household savings and cash assets, partly because dollar interest rates have been higher than those offered for euros.

Credit Cards offers unique features
American Express, Visa and Master Card is displayed in this image. Each Credit Card offers unique features and benefits, along with unmatched privileges. Pixabay

U.S. authorities have been able advance sanctions by targeting companies that use dollars, and the establishment of electronic payment systems not tied to the dollar or largely controlled by U.S. businesses is one way for the Kremlin to reduce the impact of the West’s serial punishment of Moscow. Washington and the European Union have imposed a wave of sanctions since 2014 to punish Russia for the 2014 annexation of Ukraine’s Crimean peninsula, alleged meddling in the 2016 U.S. elections, and the poisoning of a defected Russian spy in England.

Komlev told Reuters this year that “In the next three years we want MIR cards to be operational in countries where Russians are used to traveling.” He projected MIR cards would be operational at some banks in at least a dozen countries by the end of this year. Turkish banks started to conduct transactions this year with MIR, which means both “peace” and “world” in Russian.

MIR was launched initially as a national payment system, with the first cards issued in December 2015. Russia’s leading bank, state-owned Sberbank, started issuing them in October 2016, and by the end of last year more than 70 million MIR-based cards had been issued by 64 Russian banks. The Kremlin has mandated that state welfare and pension payments must be processed through the system by next year, along with salaries paid to civil servants.

The card has a long way to go before it rivals VISA our Mastercard internationally. It is not accepted by international shopping platforms or major online booking services for airlines and hotels, although APEXX Fintech, a British start-up global payment company, said Thursday it would now start working with the MIR system. Among smartphone applications only Samsung has concluded an agreement with the MIR system.

Meanwhile, de-dollarization has been moving quickly. Russia’s Central Bank has currency swap deals in place with Iran, China and Turkey, allowing direct trade to be conducted in local currencies instead of U.S. dollars. Russia reportedly lost $7.7 billion in its bid to reduce dollars held in its reserves. Some of the dollars were turned into gold, and since January the bank has purchased 96.4 metric tons of gold.

People stand in line as they wait to enter the bank with their card
People stand in line as they wait to enter a branch of Sberbank of Russia bank. VOA

Alexei Zabotkin, head of the Russian Central Bank’s monetary policy department, has conceded that it would be impossible to completely empty the country’s foreign exchange reserves of dollars, as this would be  “fraught with excessive risks.” According to central bank data the  National Wealth Fund has $45.5 billion, 39.17 billion euros and 7.67 billion British pounds.

In August, the state-controlled Rosneft oil giant announced it would stop using the U.S. dollar for its export contracts.

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Nonetheless, analysts say there are limits on how far Russia can de-dollarize – the ruble is highly volatile and remains unattractive for investors and de-dollarization brings additional and sometimes prohibitive trading costs.

European regulators will be watching the London project closely. EU officials have been sympathetic about Russia’s de-dollarization bid, suspecting that as a spin-off the euro will be boosted as an international currency. In June the European Commission concluded that “the euro clearly stands out as the only candidate that has all the necessary attributes of a global currency that market participants could use as an alternative to the U.S. dollar.” (VOA)