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Ukraine Fears Mariupol City would be Next to Fall to Russian-Backed Rebel Forces

Moscow's detention of two dozen Ukrainian sailors seized in a naval clash just offshore in November underlines the continued threat

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The Illich Iron & Steel Works factory in Mariupol, eastern Ukraine, Nov. 30, 2018. VOA

At the height of the conflict in 2014, the people of Mariupol, Ukraine, feared their city would be the next to fall to Russian-backed rebel forces.

The threat of annexation by Moscow has subsided for now. But the front line lies just six kilometers (3.7 miles) to the east — and the conflict continues to have a big impact on everyday life in the city.

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A Ukrainian serviceman stands on board a coast guard ship in the Sea of Azov port of Mariupol, eastern Ukraine, Dec. 3, 2018. VOA

Moscow’s detention of two dozen Ukrainian sailors seized in a naval clash just offshore in November underlines the continued threat.

Faced with such challenges, how do the people of Mariupol view Sunday’s presidential election? And who holds the key to ending the conflict? Amid the election campaigns, frustration and exhaustion are palpable.

“I like any of the candidates, but not the one who is in power now. We need more authority for us to have peace, for our economy to grow, for us to be prosperous,” Mariupol resident Tatyana told VOA.

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Supporters attend a campaign rally of Ukrainian President Petro Poroshenko in the western city of Lviv on March 28, 2019, ahead of the presidential election on March 31. VOA

Aleksandr Sidorov, a soldier on leave from the front line, believes the next president can do little about the war with Russia. He’s focused on domestic issues.

“The main issue for me is for all the corrupt people to be imprisoned,” he said.

Young mother Alina Arabadzhi plans to vote for comedian-turned-presidential candidate Volodymyr Zelensky.

“Why Zelensky? Because it is a new face. Because he has no vested interests. He hasn’t been in politics a single day,” she said.

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FILE – Volodymyr Zelenskiy, a Ukrainian comic actor, is a candidate in the upcoming presidential election. VOA

The war is having a huge effect on the local economy. Mariupol used to be an export hub for the Donbas region, Ukraine’s former industrial powerhouse. Most of that region is now controlled by Russian-backed separatists and has been all but cut off.

Two giant steel plants still dominate Mariupol’s skyline, bringing prosperity but also choking pollution. The products are shipped around the world from the nearby port. However, since its forceful seizure of Crimea in 2014, Russia controls shipping access to the Sea of Azov via the Kerch Strait — effectively giving it a stranglehold on a key artery of Mariupol’s economy.

The director of the port, Aleksandr Aleksandrovich, said he is losing over $7.5 million a year in business.

“Starting in April 2018, Russia started to search all the ships which enter the Azov Sea to reach Ukrainian ports. Then after loading, they check them again when they return back to the Black Sea. The waiting time, the route time, has increased, and it’s had a great financial impact on our export clients,” Aleksandrovich told VOA.

Amid the upheaval, there has been progress in some areas. The organization, Halabuda, began as a group of volunteers taking supplies to soldiers on the front line. It has now morphed into an advice group for residents and businesses.

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Cranes are seen in the Azov Sea port of Mariupol, Ukraine, Dec. 2, 2018. VOA

“A question that concerns every single citizen of Ukraine is corruption. Compared to the corruption in law enforcement that we had five years ago, now after the reforms, we nearly eradicated corruption at the level of the traffic police,” said Halabuda founder Dmitry Chichera.

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Corruption and conflict: generational challenges with no easy answers. The people of Mariupol are desperate for change and for the war to end. They know that whoever becomes president, the threat from the east is unlikely to end anytime soon. (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)