January 7, 2016

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Cyberattack causes power outage

FRANKFURT – Highly destructive computer malware infected power authorities in Ukraine last week and caused a power failure that affected hundreds of thousands of homes, researchers say. The outage on December 23, 2015, left about half of the homes in the Ivano-Frankivsk region of Ukraine without electricity. Researchers from security firm iSIGHT Partners, who studied samples of the malicious code that infected at least three regional operators, confirmed the malware led to “destructive events” that in turn caused the blackout. “It’s a milestone,” John Hultquist of iSIGHT told Arstechnica.com. “It’s the major scenario we’ve all been concerned about for so long.” Trend Micro researcher Kyle Wilhoit told Reuters: “This is the first time we have proof and can tie malware to a particular outage. It is pretty scary.” Antivirus provider ESET said multiple Ukrainian power authorities were infected by “BlackEnergy,” a package discovered in 2007 that has been repeatedly updated to include new destructive functions. Until now, BlackEnergy has mainly been used to spy on news organizations, power companies, and other industrial groups. A Moscow-backed group, Sandworm, is suspected of using it for targeted attacks. (RFE/RL, based on reporting by Reuters and Arstechnica.com)

Ukraine bans Russian food imports 

KYIV – Ukraine has announced it will ban food products from Russia starting on January 10, a response to a similar ban by Moscow. The sanctions, published on Ukraine’s government website on January 2, include meat, fish and dairy products, as well as vegetables and fruit. A similar Russian ban came into effect on January 1. The tit-for-tat moves come in the wake of Ukraine’s decision to implement a free-trade pact with the European Union despite Russian opposition. Russian officials said that the ban on Ukrainian food imports was necessary to protect its internal market, claiming that European products could reach Russia by way of Ukraine without paying import duty. An initial attempt to finalize the pact had failed in 2013, sparking protests in Kyiv that led to the ouster of Ukraine’s pro-Russian president, followed by Russia’s annexation of Ukraine’s Crimea, and a Russian-backed separatist uprising in eastern Ukraine. (RFE/RL, based on reporting by AP and DPA)

Leaders affirm support for ceasefire 

PARIS – The leaders of Germany, France, Russia and Ukraine have renewed their support for a ceasefire in eastern Ukraine during phone discussions between them. The office of the French presidency said in a statement on December 30, 2015, that the four leaders also reaffirmed their commitment to the “concerted withdrawal without delay of heavy weapons.” German Chancellor Angela Merkel, French President Francois Hollande, Russian President Vladimir Putin and Ukrainian President Petro Poroshenko reportedly spoke by phone for two hours in their first discussions since meeting in Paris on October 2, 2015. The four leaders emphasized the need to follow through on the Minsk peace accords over the coming year, including preparations for local elections at the start of 2016 in areas of eastern Ukraine held by pro-Russian rebels. The French president’s office also said that the foreign affairs ministers from the four countries are due to meet to discuss the peace process in greater detail by early February. (RFE/RL, based on reporting by Reuters and AFP)

Germany: ceasefire ‘increasingly fragile’

BERLIN – German Foreign Affairs Minister Frank-Walter Steinmeier warned that the ceasefire between Ukrainian government forces and pro-Russian separatists is becoming more fragile. “Even if the situation in eastern Ukraine has disappeared from the headlines, there is no reason to sit back… The ceasefire is increasingly fragile,” he said. Mr. Steinmeier condemned violations of the truce over the Christmas holiday and urged both sides to stick with their pledges to stop the war, at least temporarily. He pointed to progress in military de-escalation and the withdrawal of weapons by both sides, but said important questions remain to be resolved. These included agreeing on a special law for local elections in parts of the east controlled by separatists and improving the humanitarian situation. He called for the release of prisoners and hostages, a resumption of water supplies in the east, and the end of limits on the registration of aid organizations in the east. “We must continue to work so that the local elections take place at the beginning of 2016 and the Minsk package of measures is completely implemented,” said Mr. Steinmeier. (RFE/RL, based on reporting by Reuters and TASS)

Accusations of truce violations 

KYIV – The Ukrainian military and Russian-backed separatists in eastern Ukraine accused each other on January 1 of violating a shaky holiday truce between the warring sides. Over the past 24 hours, Ukrainian army positions in Donbas came under attacks 22 times, including assaults by mortars and grenade launchers, the Ukrainian military said. The army said there were no casualties among the Ukrainian forces. The separatists said one “serviceman” was killed in the early hours on January 1 as Ukrainian forces shelled the Donetsk airport and the Kominterenovo village. The separatists claimed Ukrainian forces had breached the ceasefire 11 times over the past 24 hours, including with shelling of residential areas that damaged five private houses. Kyiv and the separatists reached an agreement for a truce during the Christmas and New Year holidays that went into effect at midnight on December 22, 2015. Many in Ukraine and Russia celebrate Christmas on January 7. However, the warring sides accused each other of breaching the truce within hours after it came into effect. (RFE/RL, based on reporting by Interfax, TASS and unian.net)

Russia to sue Ukraine over debt 

MOSCOW – Russia says it’s suing Ukraine for defaulting on a $3 billion Eurobond debt owed to Moscow. Russia’s Finance Ministry said in a statement on January 1 that Kyiv is “in a state of default” regarding its obligations toward Moscow and legal proceedings would ensue. The ministry said it is filing a lawsuit against Ukraine with a British court. Ukrainian Prime Minister Arseniy Yatsenyuk said on December 18, 2015, there would be a “moratorium” on any debt repayments to Russia. He did not indicate when Ukraine would be ready to repay the debt, which matured in December. The debt stems back to 2013 when Russia loaned $3 billion to the Kremlin-backed President Viktor Yanukovych, before pro-European protests that led to his downfall. Kyiv says it is not a sovereign loan by one state to another but rather a transaction made via the financial markets that is subject to terms agreed with other creditors. In August of last year, Kyiv reached a restructuring deal with private creditors, including major banks, which agreed to reduce their claim by 20 percent. Moscow insists that the loan cannot be considered private debt and has refused such conditions. (RFE/RL, based on reporting by AFP and Interfax)

Gas pipeline springs leak 

KYIV – A gas pipeline leaked in the Zakarpattia region of western Ukraine, but the leak is not affecting consumers, Ukrainian gas transmission system operator Ukrtransgaz reported on January 1. Ukrtransgaz said the leak has not affected supplies to the European Union and repairs are underway. The incident, which occurred on the Soyuz pipeline near the village of Horodylove, led to a gas flare to prevent a dangerous build-up of leaked gas. But it did not result in any injuries or gas cutoffs, the gas company said. (RFE/RL, based on reporting by Interfax and RT.com)

Russia offers discounted gas price

MOSCOW – Russian Prime Minister Dmitry Medvedev approved a discount in the price of natural gas for Ukraine to bring Russian gas prices closer to prices in European markets. Russia will discount its previous gas price of $230 per 1,000 cubic meters (TCM) by $17.80, bringing it to $212.20 per TCM, an official Russian government notice said January 1. Ukraine’s Energy Minister Volodymyr Demchyshyn previously said Ukraine was ready to buy Russian gas in the first quarter of 2016 if the price was reduced to under $200 per TCM. Currently, gas is trading at a price of around $170 per TCM in European markets. “Russians understand that in order to be competitive they need to decrease the price,” Mr. Medvedev said, noting that the discount was intended to reflect “market conditions.” Whether the discount will be enough to attract Ukraine remains to be seen. Ukraine halted gas purchases from Gazprom in July 2015 after Kyiv and Moscow failed to reach a deal on gas deliveries for the third quarter of the year. (RFE/RL, based on reporting by Interfax and Sputniknews.com)

Crimean Children’s Theater closes

SYMFEROPOL – A popular children’s drama school that staged Ukrainian-language plays in Crimea is shutting down after what its founders describe as a campaign of harassment from local officials on the Russia-annexed peninsula. Svitanok (Sunrise) had taught children for more than 20 years and was a well-established institution in Symferopol, Crimea’s regional capital. Its latest performance unexpectedly landed the school in the crosshairs of local culture officials, who reportedly accused Svitanok of promoting both Ukrainian nationalism and Western symbols. Co-founder Oleksandr Polchenko says the play drew the ire of officials from the state-run Palace of Child and Youth Art, where the school is based. “The next day, the management ordered us to hand over all the texts and scripts for the show, as well as a recording,” he told RFE/RL. The play, “Songs of the Amazon,” was presented on December 19, 2015, to mark St. Nicholas Day, is based on a work by Crimean author Viktor Stus. It tells the story of Amazons – the female warriors of Greek myth – battling evil and fighting for freedom and the independence of their native land. Mr. Polchenko said officials saw alleged undertones throughout the performance. According to him, they took particular offense at the costume of a little girl wearing a golden crown and impersonating the sun, which he says they interpreted as a reference to New York’s Statue of Liberty. “They were indignant, they asked what kind of propaganda of Western values we had staged for the holiday,” he said. “They also described the embroidered clothing and the Ukrainian-language scenario as brazen Ukrainian nationalism.” Mr. Polchenko said the incident followed months of pressure on the head of the drama school, his wife Alla Petrova. “They tried to force Alla Petrova to leave in summer, and again in fall,” he said. “They conducted various inspections, they used every opportunity to find faults with her work, they insulted her, threatened her and tried to lower her salary.” Mr. Polchenko describes the campaign against Svitanok as part of efforts by Crimea’s new Russian-backed authorities – installed after Moscow’s annexation of the peninsula last year – to “eliminate anything associated with Ukrainian.” He said Ms. Petrova had chosen to resign and announced her decision to parents on December 28, 2015. “Of course parents, as well as their children, are trying to stop this destruction of all things Ukrainian on the peninsula, but they don’t understand how these Soviet-era KGB old-timers operate,” he said. (Andrei Kolokoltsev of RFE/RL, with Claire Bigg)

Petition for December 25 celebration

KYIV – Ukrainians are debating a petition to celebrate Christmas on December 25, like Western Europe, rather than continuing to mark the holy day on January 7 according to Orthodox Christian tradition. The debate reflects the tug of war between East and West over the nation’s identity that has resulted from Ukraine’s falling out with Russia since Moscow annexed Crimea and backed a separatist war in the east in 2014. Activists in favor of making the official holiday December 25, which is currently an ordinary working day in Ukraine, have started two petitions on the presidential website. If they garner enough support, President Petro Poroshenko will have to consider making the change, though the Ukrainian Parliament would have the final say. Oleksandr Turchynov, the head of Ukraine’s National Security and Defense Council, says he backs the idea because it would align Ukraine with “the majority of civilized countries.” He has suggested a transition period during which Ukrainians could celebrate Christmas on both dates. (RFE/RL, based on reporting by Reuters and TASS)

Kyiv threatens legal action over wines

KYIV – Kyiv is threatening to take legal action over the decision by a leading winemaker in Russian-annexed Crimea to put 13,000 vintage bottles up for auction. Oleksandr Liev, a Ukrainian Agriculture Ministry official, told AFP December 29, 2015, that the winemaker, Massandra, was “squandering Ukrainian heritage” and that Kyiv could launch a criminal probe into the action. He warned that Russian and foreign collectors buying the vintage wines could face “international sanctions for illegal economic actions in annexed Crimea.” Massandra is offering the wines, some of which date from 1935, for sale at the winery and online. The legendary Crimean winemaker was already at the center of a scandal in September when Russian President Vladimir Putin and ex-Italian premier Silvio Berlusconi reportedly drank a $100,000 bottle of 240-year-old sherry from the winery’s archive collection. (RFE/RL, based on reporting by AFP)

Ukraine adopts budget, tax reforms 

KYIV – Ukraine’s Parliament has approved a budget for 2016, fulfilling a key demand of the International Monetary Fund (IMF) that enables it to keep providing Kyiv with loans. Lawmakers approved a series of tax reforms and tax increases, reducing the tax on employers, unifying the tax rate on personal income, and increasing excise taxes on tobacco, fuel and alcohol, with the goal of balancing the budget. The reforms were contentious. Many deputies argued that they unfairly increased prices for Ukrainians who are already struggling to make ends meet during a deep economic recession. The IMF had warned it was critical to approve a budget that complied with the fund’s $17.5 billion bailout program before it would provide Kyiv with a third, $1.7 billion loan installment. It was not immediately clear whether the budget met all the IMF’s requirements. The Verkhovna Rada approved a budget with a deficit at 3.7 percent of economic output, the figure agreed upon with the IMF and one of its key demands. But Ukraine had promised to adopt permanent tax reforms, and the tax changes adopted December 24, 2015, were only temporary, with more action promised later. (RFE/RL, based on reporting by Reuters and TASS)

Russia issues Crimea banknote 

MOSCOW – At the end of December 2015, Russia issued a new banknote dedicated to Crimea, the Ukrainian peninsula annexed illegally by the Kremlin in 2014. The new banknote, worth 100 rubles ($1.41 U.S.), depicts a memorial to sunken ships in the port of Sevastopol, where Russia keeps its Black Sea Fleet, and the Swallow’s Nest, a clifftop castle near Yalta. The yellow-colored note also features a watermark of Empress Catherine the Great, who extended the borders of the Russian Empire in the 18th century to absorb Crimea. Russia’s central bank said in a statement it would issue 20 million of the new notes. It previously minted a 10-ruble coin to celebrate Russia’s control of Crimea. (RFE/RL, based on reporting by Reuters, AFP and Interfax)

Court extends jail for captured Russians

KYIV – Kyiv’s Holosiiv district court has extended the detention of two Russians alleged to be members of Russia’s armed forces until at least February 20. The extended arrest of Yevgeny Yerofeyev and Aleksandr Aleksandrov was requested by the state prosecutor and granted by the court on December 23, 2015. Messrs. Aleksandrov and Yerofeyev were detained in Ukraine’s Luhansk region in May 2015. Ukrainian investigators that month announced that they were suspected of terrorist activities and fighting alongside separatists in the east. The district court began hearing charges against them on November 10, 2015. The two men deny the charges. In a video published days after their capture, Messrs. Aleksandrov and Yerofeyev said they were on active duty with the Russian military in eastern Ukraine when they were captured. Moscow contends the two were no longer employed by the state when they were captured. Russia denies accusations that it is providing weapons, training, and personnel to support pro-Russian separatists fighting government forces in eastern Ukraine. (RFE/RL, based on reporting by Interfax and TASS)

Russian military intelligence chief dies

MOSCOW – The Kremlin says the head of Russia’s military intelligence agency, which is known as the GRU, has died unexpectedly. A statement posted on the Kremlin website on January 4 said that Gen. Igor Sergun, 58, had suffered a “sudden death,” but gave no details as to the cause, timing, or circumstances. The state-run news agency TASS said he died on January 3. The statement quoted President Vladimir Putin as giving his condolences, saying that Mr. Sergun had dedicated his “entire life… to serving the homeland and the armed forces.” His death comes at a time when clandestine, paramilitary and espionage agencies in Russia have taken a central role in executing key policy decisions under Mr. Putin, himself a former chief of the lead domestic spy agency, the Federal Security Service (FSB). “Sergun was an extremely important figure in the revival of the fortunes of the GRU, an agency that was pretty much at rock bottom when he took it over at the end of 2011,” Mark Galeotti, a New York University professor and authority on Russia’s security apparatus, wrote in a blog post on January 4. The GRU – formally subordinate to the Russian Armed Forces’ General Staff – is widely believed to have played a central role in the stealth operation to take control of Ukraine’s Crimea region in early 2014, when masked, camouflaged, armed soldiers appeared suddenly throughout the Black Sea peninsula. Western analysts and officials believe the agency was also instrumental in coordinating and overseeing the insurgency in eastern Ukraine, where a conflict between Russian-backed separatists and government forces has killed more than 9,000 people since it erupted in April 2014. A Russian captured in Ukraine last year said he and a fellow captive were active GRU officers when they were seized, while the Russian military said they were not serving at the time. Gen. Sergun’s position as GRU chief landed him on the sanctions lists imposed in early 2014 by both the United States and the European Union, which specifically cited his oversight of “the activity of GRU officers in eastern Ukraine.” The sanctions imposed on Sergun were “good Western recognition for the role of GRU in this conflict,” says Michael Kofman, a Russia analyst most recently with the Wilson Center’s Kennan Institute in Washington. The operations in both Crimea and eastern Ukraine have been characterized by what experts say is a resurgence of Soviet-style “hybrid” or “nonlinear” warfare, which employ conventional weaponry, but also stealth deployments, misinformation campaigns, and cyberwarfare to keep an adversary from knowing how to respond. (Mike Eckel of RFE/RL)

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