1. Russian journalists’ killing may shed light on Kremlin’s African ambitions via mercenaries
Since the end of 2017, Africa quietly became the Kremlin’s primary geography for overseas expansion. The murder of three Russian journalists in the Central African Republic, which became the main news story in Russia this week, drew attention to these plans. A brutal civil war has been raging in CAR since 2012. The journalists planned to film an investigative report about the work of the Wagner Russian mercenaries in CAR — an illegal private military company which appears in all the countries with whom the Kremlin has formal agreements on military cooperation. As The Bell has learned, companies owned by Wagner’s proported sponsor, Evgeny Prigozhin, receive concessions for the development of local natural resources in exchange for the risky work performed by their mercenaries in conflict hot spots. Wagner mercenaries are already active in Sudan and CAR.
- News of the murder sent shock waves across Russia: one of the journalists killed, Orkhan Dzhemal, was one of Russia’s best known war correspondents, and Alexander Rastorguev was a famous documentary film director. It is unclear, who was behinfd the killing. CAR officials blame unidentified Arab speaking militants, but the Jihadist version seems just the easiest for the authorities. The film which the team was working on about Russian mercenaries in CAR received financial backing from Mikhail Khodorkovsky, former billionaire and now sponsor of the opposition. State-owned television channels and media agencies reported the murder, but did not mention what the journalists planned to film in CAR — the work of private military company Wagner in CAR, which local media agencies refer to as “an advance detachment of the Kremlin in Africa”.
- Wagner fought in Ukraine and Syria, and became infamous after its battle with American troops in Syria’s Deir ez-Zor in February 2018. Wagner’s sponsor is believed to be “Putin’s chef” Evgeny Prigozhin — a restaurateur from St. Petersburg who supplies Russia’s Ministry of Defense and is the suspected owner of the “Troll Factory” which special prosecutor Robert Mueller accused of interference in the U.S. presidential elections. In exchange for Wagner’s military actions in conflict hot spots, companies owned by Prigozhin receive concessions to develop natural resources from local governments. In Syria, they agreed on a share of oil produced from oil fields liberated from ISIS by Wagner.
- Russia began to actively pursue military cooperation with African countries in 2017. Just in the last year, military cooperation agreements were signed with Guinea, Niger, Chad and Nigeria. At the end of 2017, Prigozhin’s companies and Wagner appeared in Africa. As The Bell exclusively reported, a deal was made with the government of Sudan which looks just like the deal in Syria: Prigozhin’s structures receive concessions to gold deposits in exchange for their services: Wagner’s professional troops are engaged in training the local Sudanese army.
- The next spot became CAR. Officially, according to the agreement with the United Nations, since January 2018, 5 military and 170 civil instructors from Russia have been working in the country. UN reports do not specify which instructors status or what their exact status is. But the Russian state media reported colorfully about them. “In CAR, they celebrated the anniversary of the election of Faustin-Archange Touadéra as president. The president arrived accompanied by suspiciously white guards in camouflage without insignia. It was a week since the white people have replaced Rwandan UN patrols on the city’s streets. It soon became clear that the white guards fully control the presidential administration, the president’s fleet and armoured vehicles, and have unlimited access to his movements and to key figures in Touadéra’s circle,” — this is how state information agency “Russia Today” described in June the appearance of Russians in the CAR in an article with a headline, “Russia will take Africa without a fight”.
- Russia agreed to military cooperation with CAR at the end of 2017. On 7 October (Vladimir Putin’s birthday), President Touadéra visited Russia and held talks with Russia’s Foreign Minister, Sergey Lavrov. They agreed to a partnership to develop the country’s mineral resources. According to French and Central-Arfican media reports, structures supposedly close to Evgeny Prigozhin already registered two companies in CAR at the end of October and the beginning of November. These companies were a mining company, Lobaye Invest, and a security firm, Sewa Security Service. In January 2018, Russian instructors arrived in the country. The government housed them in a former residence of the infamous dictator Bokassa. Not far from the palace, production resumed at diamond mines — now it was controlled by employees of Lobaye Invest, according to local CAR media reports. According to these reports, Russia already agreed to develop another field — the Ndassima gold mine. The Russian journalists who were killed had made plans to film at that gold mine on the day they were attacked. Wagner troops provide security and transportation of equipment for mining at those locations with Russian interests.
Why the world should care
For the first time since the collapse of the Soviet Union, Russia is building up power in the developing countries, trying to claim its share of influence along with the U.S., European countries, China and India. Unlike the Soviet one, this influence now has no ideological overtones, and the price for Russian military aide is access to natural resources. From the chronology of Evgeny Prigozhin’s companies’ African contracts, one could suggest: last fall, before the official announcement of withdrawing troops from Syria, the Kremlin already approved the idea of gaining influence in Africa with the help of officially neutral private military companies — all with significantly less official intervention than in Syria.
2. Igor Sechin’s oil company to receive new, preferential treatment which might hit the Russian economy where it hurts.
Vladimir Putin signed a law (Russian) changing the requirements for repatriating foreign currency revenues to Russia for major exporters hit by sanctions. In reality, there is only one such exporter in Russia — state-owned Rosneft, whose hard currency operations already played a role when the rouble fell by 30% at the end of 2014. Rosneft’s new privilege may become one of the drivers of a new fall in the rouble, which is already threatened by U.S. sanctions.
- The government required major exporters to transfer export revenues to accounts in Russian banks at the end of 2014, in order to stop the rouble’s sharp fall. While the law still hasn’t been passed, Vladimir Putin also personally called (Russian) the largest companies asking them to sell foreign currency. Rosneft’s foreign currency operations were at the time suspected to be one of the reasons for the rouble fall, which caused a panic among Russians.
- Now, lifting the requirement to repatriate foreign currency revenues should help the company which, because of sanctions, cannot access long-term credit from western banks. But if now Rosneft decides to leave its foreign currency revenues ($64 billion in 2017) abroad, this would be bad news for the Russian market: the currency deficit will grow, and this would threaten the rouble.
- The special treatment for Rosneft might hurt the rouble, which is already in a risky place. All proposed new sanctions against Russia which are being discussed in U.S. Congress include a ban on the purchase of Russian sovereign debt. If the U.S. only bans investors from participating in new offerings of Russian sovereign debt, this would already lead to a 5% fall in the rouble. A ban on all operations with Russian sovereign bonds would bring the rouble down by 15%, according to Citi estimates. The draft sanctions legislation shared yesterday by Senators Lindsey Graham and Bob Menendez includes the lighter version.
Why the world should care
If you invest in the Russian market, this is a good reminder that beyond U.S. sanctions, there are a number of other, unpredictable risk factors for the entire Russian economy, including successful lobbying by the heads of state-owned companies who also happen to be Vladimir Putin’s close friends.
3. Why the Russian Forbes conflict is important for the whole world
Last week, we wrote about the unprecedented, even by Russian standards, censorship scandal at Russian Forbes: the publication’s owner, Alexander Fedotov, removed an article he didn’t like from the magazine as it went to print, the editorial team filed an official complaint against him with the prosecutor, and in response, the owner replaced the entire editorial team, and invited a former Playboy editor to become editor-in-chief of Forbes Russia.
For readers who do not follow Russian media closely, this story might seem like a one-off: it would seem that censorship is on every corner in Russia, and a magazine about the lives of billionaires isn’t exactly a thing of national pride. But Russian Forbes is a specific case, explains The Bell’s founder Liza Osetinskaya (Disclaimer: Liza was editor-in-chief of Russian Forbes for almost three years, from 2011-2013) in an opinion piece for The Moscow Times: in Russia, Forbes became one of the main investigative media publications, and information printed by Forbes was trusted so much that even the U.S. Treasury Department prepared its sanctions list on the basis of Russian Forbes’ research.
Why the world should care
Russian Forbes was and remains a leading international magazine operating under the franchise model, but so far, Forbes in the U.S. has not paid any attention to the scandal in Russia. There is still a chance to save the publication, but if it isn’t used, Russian Forbes will no longer be able to brag that the U.S. government uses its rating of Russian billionaires to compile the Kremlin List.