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Russia created a credit rating agency, which is great for Russia because it'll ignore one key type of risk

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russia

Sick of getting downgraded, Russia is launching its own new rating company that will be immune to geopolitical risks.

"The Russian market needs a strong credit rating agency with a high level of corporate governance and professional competence, capable of satisfying the interests of the economy [that is] authoritative enough for Russian and foreign investors," according to statement released by the Central Bank of Russia on Friday.

"Rating agencies are one of the most important elements of financial-market infrastructure and their activity should be resilient to various factors, including geopolitical risks,” according to the statement.

In other words, the statement implies that a rating agency's assessment should not be affected by factors such as geopolitical risk.

The company will be led by Ekaterina Trofimova, the first vice-president of Gazprombank, and will begin operations next quarter. It'll have 3 billion rubles (roughly $51.2 million) in capital.

This announcement comes after the S&P and Moody's cut Russia to junk in 2015. Both agencies cited the ongoing conflict in Ukraine in their statements.

At the time, the Russia's finance minister Anton Siluanov stated that the aforementioned downgrades were based on "political factors."

Moody's rating was "not overly negative, but also based on an extremely pessimistic outlook, which has no analogues today," Siluanov told the WSJ in February.

"The agency has ignored all the information provided to it about the current state of the Russian economy, its budgetary and financial policy, which has been provided to it," he added.

SEE ALSO: 10 countries sitting on massive oceans of oil

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Here are the break-even oil prices for 13 of the world's biggest producers

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Low oil prices haven't been great for countries that heavily rely on the commodity.

Governments in oil-producing states need oil's price to stay above a certain price so that they can meet their spending commitments.

In a note to clients, Deutsche Bank's strategist Michael Hsueh shared a chart that shows the fiscal break-even price per barrel for major OPEC and non-OPEC countries — the price that they need to balance their national budgets.

Libya needs the highest price, above $180/barrel, to break even. Qatar can get by with oil below $80/barrel. Russia and Saudi Arabia's break-even prices are both around $105/barrel, and Iran's is neary $130.

Meanwhile, Brent Crude is currently trading around $56/barrel — far below what these major producers would ideally like to see.Screen Shot 2015 07 20 at 9.39.38 AM

SEE ALSO: OIL EXPERT: 'A potential return of Iranian oil to the market could not have come at a worse time'

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Another suspected Russian soldier was caught with a truck full of ammunition in Ukraine

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weapons ukraine russia

Ukrainian border guards detained a soldier suspected of being a Russian army officer who was picked up while riding in a military truck packed with ammunition at the Berezove checkpoint, about 28 miles southwest of the militant-held city of Donetsk.

Guards found nearly 200 cases containing grenades and ammunition, including rocket-propelled shells, inside the military truck.

"He (the Russian officer) had no documents. But he admitted that he was a chief of an RAO (rocket-artillery weapons unit). He is responsible for ammunition supply. He said that while delivering the ammunition they had got lost," Oleksandr Tomchyshyn, a border-guards spokesman said. Another man who was detained identified himself as a pro-Russian separatist fighter.

skitch berezove ukraine russia conflict map

If he is confirmed as a Russian soldier, Ukraine is likely to use the case to bolster its charges that Russia is continuing direct involvement in the 15-month-long conflict and failing to honor a peace agreement worked out in Minsk, Belarus, in February. Meanwhile, Ukraine and Western countries contend that Russia is providing troops and weaponry to pro-Russian rebels in eastern Ukraine.

Since April 2014, at least 6,400 people have been killed in the region while Russia continues to deny such allegations, the Associated Press reports

A spokesman said the two men may have taken a wrong direction and driven toward Ukrainian forces manning a checkpoint southwest of the rebel-controlled city of Donetsk by mistake.

"We can assume that they took a wrong direction while driving, got lost, and came on our checkpoint," military spokesman Oleksandr Motuzyanuk told a briefing.

more weapons ukraine russiaThe two men wore military uniforms without insignia and carried no identity documents, he said.

In the face of what Kiev and Western governments say is undeniable proof, Moscow denies its regular forces are engaged actively in the conflict on behalf of the separatists.

Though a fragile ceasefire seems to be holding, thousands of people have been killed in the conflict in Ukraine's industrialized Russian-speaking east.

Ukraine is still holding two Russian soldiers who were captured in May and have been charged with terrorism. Russia says the two men had quit their special-forces unit to go to Ukraine on their own.

Here is a video of the truck found at the Berezove checkpoint:

(Writing by Richard Balmforth; Editing by Angus MacSwan)

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Putin fired more than 100,000 people

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putin

Vladimir Putin has fired 110,000 people.

The Russian president signed a decree two weeks ago that reduced the number of full-time staff in the interior ministry of Russia by about 10% — or 110,000 people.

Most of the cuts will be administrative staff. It will bring the total number of employees in the agency down to just above 1 million, according to CNN Money.

The interior ministry is in charge of the Russian police, paramilitary security forces, and road-traffic safety.

The interior ministry's press service also told RIA Novosti that these reduction plans will affect the management structure at the regional level and higher, according to Lenta.Ru.

"The number of departments at the district level will remain unchanged — that is, precisely those who work directly 'on the ground' and interact directly with citizens," the press service said.

Back in March, Putin signed three new decrees that slashed government salaries — including his own and that of prime minister Dmitry Medvedev — by 10% starting May 1.

Russia's economy has been badly bruised over the last year, amid tumbling oil prices and Western sanctions over alleged meddling in Ukraine. Russia's GDP has shrunk by 2.2% in 2015.

SEE ALSO: 10 countries sitting on massive oceans of oil

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Obama's Middle East strategy is based on the fantasy that Iran can help solve the region's problems

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quds day iranWith the nuclear deal finally out of the way, President Obama can now get down to what, for him, has always been the real business — engaging Iran on regional issues.

As one administration official has acknowledged, the US president sees Iran as “the key to peace” in the Middle East. But first, as Obama told Iran’s Supreme Leader Ali Khamenei in one of his letters, the formality of the nuclear deal had to be concluded. 

Obama wants to integrate Iran into a regional concert system presumably based on “equilibrium.” However, this would be akin to establishing equilibrium in Europe at the height of Napoleon’s power. Such a “balance" would naturally have been dictated by Napoleon, to the advantage of his imperial power. In other words, it doesn’t stand a chance.

But the president’s mind is set. Obama's likely next step will be to openly engage Iran on Syria. Indeed, the president addressed the matter in his first news conference after the deal was announced: “We’re not going to solve the problems of Syria unless there's buy-in from the Russians, the Iranians, the Turks, our Gulf partners … Iran is one of those players, and I think that it's important for them to be part of that conversation.” 

In fact, the administration was already laying the groundwork to bring Iran formally to the Syria table even before the conclusion of the deal. Earlier this month, the pan-Arab daily Al-Hayat reported that during his recent trip to Russia, Secretary of State John Kerry raised the subject of establishing a Syria “contact group” consisting of regional and international actors, whose task would be to provide support for a political settlement.

According to the paper, Kerry proposed including Iran in the group, alongside the US, Russia, Saudi Arabia, Turkey and Qatar. Kerry reportedly also expressed willingness to “recognize Iran’s vital interests in Syria and the need to include it in seeking a solution.” The report maintains, however, that Kerry told the Russians the deal would need to be signed first before bringing Iran in, “then there would be more readiness to discuss regional political issues.” 

To be sure, this proposal is not new. According to the Russians, Kerry first suggested including Iran in a parallel Syria track in early 2014. This soon became the administration’s public position, and Obama explicitly began to talk about the need to have Iran at the table.

For there to be a solution in Syria, “the various players involved, as well as the regional players — Turkey, Iran, Assad’s patrons like Russia — are going to have to engage in a political conversation,” Obama remarked at the G20 press conference in Brisbane, Australia last year. 

syria iranObama’s core conceit is his roundtable approach to the region, a new regional equilibrium between the major players whose legitimate stakes should be preserved.

But the notion that the solution to the Syrian rests on this balance of interests is a fallacy. It would be akin to saying that a diplomatic solution to the Lebanese war in the 1980’s needed to simultaneously recognize and accommodate the interests of Yasser Arafat, Hafez Assad, Saddam Hussein, Muammar Ghaddafi, Ayatollah Khomeini, Israel, Saudi Arabia and the Soviet Union. Such a proposal would have been met with ridicule. And it is equally fanciful in Syria.

Obama’s declared position is that all "stakeholders" must understand that they can’t win militarily, and should therefore accommodate each other’s holdings. But the Lebanon precedent shows that this is a fallacy. Notwithstanding theories about how “fatigue” eventually led to compromise and a settlement to the Lebanese war, the reality is that one side came out on top. Having spent the 1980’s waging war against the Iraqis and the Palestinians, Hafez Assad managed to neutralize all his Arab rivals.

Israel, meanwhile, retreated to a security zone in the south and gave up on shaping the Lebanese political landscape. Finally, after cornering Saudi Arabia and receiving US acquiescence, Assad completed his domination by the end of the decade. Of course, the war didn’t stop there. Assad worked hand in hand with his old strategic ally, Iran, and the two continued to wage war against Israel’s security zone throughout the 1990’s until all of Lebanon was under their control. 

Similarly, the notion of balancing diametrically opposed interests in Syria is a mirage. One coalition has to emerge with the upper hand.

By contrast, Obama has already telegraphed that he recognizes Iran’s sphere of interest in Syria. Inevitably, this means adopting a highly accommodating posture toward Iran’s client, Assad. Note, for example, how in his recent interview with Al-Arabiya, Kerry noticeably qualified his response regarding the Syrian dictator’s fate, emphasizing that a solution would “ultimately, ultimately” be without Assad. 

A Hezbollah member reacts while Hezbollah leader Sayyed Hassan Nasrallah talks on a screen during a televised speech at a festival celebrating Resistance and Liberation Day, in Nabatiyeh May 24, 2015.  REUTERS/Ali HashishoFor the past four years, Obama has been protecting Iran’s stake in Syria. Now he is openly recognizing its sphere of influence in the country.

The US president might think that by forcing Iran down everyone’s throat he is bringing “equilibrium” to the region. Under this rubric, he expects regional players to accept Iran’s new position, supported by the White House, and come to an agreement that codifies it. This is a non-starter for Washington’s old allies. 

Obama’s “equilibrium” is a fantasy. There can be no balancing of interests in Syria between the old pro-American camp and Iran. As Lee Smith reminded us, before the European powers could forge a balance of power arrangement at the 1815 Vienna Congress, Napoleon had to be defeated at Waterloo. Unlike post-revolutionary France, Iran is hardly a defeated power.

It is a country whose expanding power in a chaotic region has just been crowned by a nuclear deal with the US, whose economy will benefit greatly from the end of sanctions, and whose direct military and political sway extend to Iraq, Syria and Lebanon. And unlike the US, which has largely withdrawn from the Middle East, and wishes dearly to avoid being drawn into future conflicts, Iran has zero incentive to balance or compromise its interests in a region from which it simply cannot withdraw. 

For Iran to seek the goal of regional "balance," on someone else's terms, rather than dominance or victory on its own terms, it would need first to be defeated in Syria. And its land bridge to Hezbollah-ruled Lebanon, through which it transfers long-range rockets and missiles, needs to be severed. All of Washington's old allies agree on this point. 

But Obama will not adopt such a policy in his remaining 17 months in office. In truth, he is now more invested in protecting his relationship with Iran than he was during the negotiations. The regional players will now wait him out, in the hope that the next US president will adopt a serious containment policy that rolls back Iranian expansionism, starting with Syria.  

Tony Badran is a research fellow at the Foundation for Defense of Democracies. He tweets @AcrossTheBay.

SEE ALSO: The US and Turkey are working to establish an 'Islamic State-free zone' in northern Syria

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The oil price rout is going to inflict real pain on Russia

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Vladimir Putin Sauli NiinistoRussia may have though it was out of the woods this past spring when oil prices started to rise, but the onset of another bear market for oil presents serious economic and financial threats for the country.

Russia is facing a mounting fiscal crisis as the combination of low oil prices and western sanctions continue to take their toll. For a country that gets about 50 percent of its budget revenues from oil and gas, the sudden collapse of oil prices since June – Brent is now trading at $55 per barrel – threatens to drag the Russian economy down to lower depths.

The drop in oil prices since June is not entirely unrelated to Russian actions.

Russia decided to cooperate with the West in reaching a nuclear deal with Iran, which contributed to the fall in oil prices as markets expect new Iranian crude to be forthcoming over the next few months and into next year. Although the cooperation amounts to a self-inflicted wound, it also pushes several strategic objectives forward for Russia. A disarmed Iran removes the justification for a U.S.-backed missile defense program in Europe, a plan vociferously opposed by Russia.

And there are also economic benefits to the Iran deal for Russia, despite low oil prices. It opens up business opportunities in Iran for Russian companies. More importantly, cooperation with the West created good will, and U.S. President Barack Obama even thanked Russian President Vladimir Putin for his help. This could lead, or at least contribute to, the dismantling of western sanctions imposed upon Russia for its involvement in Ukraine.

That couldn’t come soon enough. Russia is running a large deficit and its foreign exchange reserves are depleting, down from $524 to $361 billion, or worse, depending on the accuracy of official statistics.

To make matters worse, natural gas production has taken a hit. Weak domestic demand and a shrinking export market have cut into Gazprom’s production, whichfell by 19 percent in June compared to the same month in 2014. Since Gazprom accounts for 10 percent of Russia’s economic activity, the setback is damaging to the Russian economy. In fact, Gazprom’s production dropped by 12.9 percent in the first half of 2015, year-on-year. Gazprom may only take in $106 billion in revenue this year, down almost a third from $146 billion in 2014.

The conflict with Ukraine over gas pricing, not to mention the violent standoff, is forcing Ukraine to find alternative suppliers for gas. Ukraine depended on Russia for three-quarters of its gas supply in 2014. That share is down to just 37 percent so far this year, according to a new report from Sberbank, as Ukraine has relied more heavily on European neighbors.

Russia oilAlthough progress is slow, the rest of Europe is looking to diversify away from Russian gas, which makes any rebound in demand for Russian gas questionable.

Russia’s plan to shift its sights east are also running into some headwinds. China and Russia announced a series of blockbuster deals in 2014, unveiling plans to build a massive pipeline network that would lead to huge volumes of gas exports to China. However, China’s economy is slowing. The June collapse in its stock market also raised fears of a financial meltdown, although the immediate crisis has subsided for now. Still, China’s energy demand is slowing at the same time that it is finding alternative sources of supply. Australia is bringing new LNG export capacity online this year, with more coming in the next two years.

As a result, China and Russia are postponing indefinitely the western route of the “Power of Siberia” pipeline. This complicates Russia’s plan to replace a weakening market in Europe for its energy exports.

The economic problems are starting to mount. The ruble, having somewhat rebounded in the spring after a winter rout, is again deteriorating. Russia’s regional governments are suffering. About 20 of Russia’s 83 regions are more or less in default already, amid excessive spending and ballooning debt. As the federal government pares back support for Russia’s regions, heavy debt loads are forcing dramatic reductions in spending.

As a result, the markets are watching Russia’s short-term financial problems, which are very real, but Russia is also sowing the seeds of long-term economic malaise as the country fails to invest in education, infrastructure, healthcare, and “human capital.”

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Putin's support for embattled FIFA president Sepp Blatter says something striking about how he views the world

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putin blatter

If it were up to Russian President Vladimir Putin, outgoing FIFA president Sepp Blatter would be the next recipient of the Nobel Prize. 

"I think people like Mr. Blatter or the heads of big international sporting federations, or the Olympic Games, deserve special recognition. If there is anyone who deserves the Nobel Prize, it's those people,” Putin said on Monday in an interview aired by Swiss broadcaster RTS, according to Reuters.

Putin's support comes after the two leaders' meeting over the weekend, during which Blatter said FIFA passed a resolution offering full support for holding the 2018 World Cup in Russia, according to Reuters.

"We say ‘yes’ to Russia,” Blatter said during the meeting, according to Bloomberg News. "Our support is especially important during the current geopolitical situation."

Back in early June, Blatter announced that he was stepping down from his position amid a growing FIFA corruption scandal. FIFA is currently being investigated by US, Swiss, and other law-enforcement agencies, and some analysts believe the scandal could mean Russia and/or Qatar could lose their hosting privileges.

Unsurprisingly, the scandal did not please the Russian president. In fact, he said that "this is yet another blatant attempt [by the US] to extend its jurisdiction to other states,"according to the Moscow Times.

Putin reiterated that criticism in Monday's interview, saying "the way there is this fight against corruption makes me wonder if it isn't a continuation of the bids for 2018 and 2022," according to Reuters.

"We all know the situation developing around Mr. Blatter right now. I don't want to go into details, but I don't believe a word about him being involved in corruption personally," he added.

Russian President Vladimir Putin (L) speaks to FIFA President Sepp Blatter Some analysts have suggested that Putin's criticism of the FIFA scandal (and bromance with Blatter) says something about the way he sees global order.

"[W]hile the World Cup is certainly important for Moscow, and any reversal of the decision to award it to Russia would be a humiliating blow, for Putin the scandal is in fact about much more than the World Cup," Kadri Liik, senior policy advisor at the European Council on Foreign Relations, wrote in May. "It is — as he said — about global, though it this case informal, rules of the game; the right to set those rules, to enforce them, and the extent of their jurisdictional boundaries."

"So for the purposes of the situation, FIFA officials were 'Russia’s people,' and Western authorities had launched an attack on them," she added. "For Putin, that means effectively an attack on Russia – an attempt to impose alien rules if not exactly within Russia’s jurisdictional boundaries, then at least in the sphere where rules established by Russia carry the day."

In other words, Putin's criticism of the FIFA scandal reflects the fact the he perceives the West as once again intruding on and subordinating a non-Western sphere of influence.

SEE ALSO: 10 countries sitting on vast oceans of oil

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China's slowing economy is delaying a major oil deal with Russia

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china president putin russia

The Russian media is reporting an indefinite delay in the final signing of the contract for Russia’s state-run Gazprom to supply China with gas through a new Siberian pipeline because of a decline in Chinese demand for the fuel.

The lower demand stems from an economic slowdown in China, reducing the country’s need for gas, as well as the increased availability of liquefied natural gas (LNG) from countries such as Australia. This is according to Valery Nesterov, an analyst with the Moscow investment bank Sberbank, who spoke in an interview published July 22 in the Russian-language financial newspaper Vedomosti.

In Beijing on Nov. 9, 2014 Russian President Vladimir Putin and Chinese President Xi Jinping signed a preliminary agreement under which the Kremlin-run monopoly Gazprom would eventually supply nearly one-fifth of the gas China is expected to need until 2020.

All told, the deal, nearly as huge as the countries’ $400 billion gas deal signed in May of last year, meant Gazprom would supply up to 30 billion cubic meters of gas per year from western Siberia to China in the next 30 years through the new pipeline, called the Power of Siberia-2.

Both gas deals were seen as a way to help jump-start Russia’s flagging economy, which was struggling because of a lack of economic reforms since the breakup of the Soviet Union and economic sanctions imposed by the West because of Moscow’s involvement in the strife in neighboring Ukraine.

It also was seen as a way to diversify its customer base and indemnify itself against the possibility that Gazprom’s valuable customers in Western Europe find alternative sources of gas to reduce their reliance on Russia. These clients get about 30 percent of their gas from Russia, and about half of it is delivered by a pipeline that runs through embattled Ukraine.

The Gazprom logo is seen on the side of the company's headquarters in Moscow, February 24, 2015. REUTERS/Maxim Zmeyev

At one time it seemed that China would be the ideal customer, with an ever-growing economy and thus an ever-growing need for energy. China’s gas consumption had grown by between 12 percent and 13 percent during 2013.

But during 2014 it fell by 8.5 percent. In the first half of 2015, it has recovered slightly, by 20 percent, according to Nesterov. Originally, the deal was seen as making China the biggest consumer of Russian gas.

Because of the cost of building the Russian pipeline, Gazprom was comfortable proposing that the China National Petroleum Corp. (CNPC) pay a high price for the gas, according to Sergei Sanakoyev, the president of the Russia-China Analytical Center in Moscow. But China now seems reluctant to pay that price, he said, and is willing to take its time to get Russia to agree to lower it.

“Gazprom offers CNPC a high price, explaining this by the high cost of the Power of Siberia-2 construction. China is ready to build the pipeline at a cheaper cost and at public tender, so its companies could participate and for the construction price to be transparent,” he told the Russian television network RT. “Gazprom refuses, and China does not hurry.”

Gazprom and CNPC already have signed an agreement on the broad outlines of the gas deal.

Meanwhile, further negotiations are now “non-intensive,” one official told Vedomosti, but “could be given a new impetus during Vladimir Putin’s upcoming trip to China in early September.

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Here's the event that triggered World War I

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Archduke Franz Ferdinand with his wife on the day they were assassinated by Gavrilo Princip, 28 June 1914

Riding in an open car on the morning of June 27, 1914, Archduke Franz Ferdinand, heir to the Austro-Hungarian throne, was assassinated along with his wife by a Serbian nationalist in Sarajevo, Bosnia.

On July 28th, 1914, a month after 19-year-old Gavrilo Princip killed Ferdinand, Austria-Hungary declared war on Serbia and invaded, igniting a conflict that would last five years and kill an estimated 17 million people.

Historians still debate whether the European powers would have fought a continent-wide war if Ferdinand hadn't been assassinated. But the immediate causes of the war still stemmed from the consequences of the Archduke's killing.

In the days after Ferdinand's death, Austria-Hungary — shaken by the prospect that the assassination would empower nationalists in the empire's often-unstable Balkan holdings — issued an ultimatum to Serbia demanding that Austria be allowed to send agents into the country to investigate possible connections between the kille and the Serbian government.

Serbia stalled and then mobilized its military. That's when superpower dynamics kicked in: Serbia was allied with Russia, which had a military alliance with France. Meanwhile, Austria-Hungary had an alliance with Germany, which was in turn allied with the Ottoman Empire. By the end of July 1914, Europe's military powers were mobilizing and the the continent was at war.

What could have been a containable crisis stemming from the Austro-Hungarian empire's weakening control over its periphery rapidly morphed into a conflict that killed millions. The assassination, and the fearsome and unstoppable cascade of events it unleashed, is one of history's prime examples of how countries can go to war without consciously intending to — and how seemingly manageable events can explode in ways that the existing international order can't control.

The Archduke's last words to his wife, who was hit in the stomach by a stray second shot were, "Sophie! Sophie! Don't die! Live for our children!," PBS News Hour reports

She died in the car and Ferdinand passed away about 10 minutes later. The war would begin on July 28th, and end 4 years, 3 months, and 2 weeks later, on November 11th, 1918.

SEE ALSO: These amazing colorized photos bring World War I to life

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It turns out that Russian submarine found off Sweden is probably from World War I

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Anti-submarine depth charges are seen on the deck of Swedish Koster-class naval mine-hunter HMS Ulvon at Karlskrona naval base, Sweden, on April 29, 2015.  REUTERS/Tim Hepher

STOCKHOLM (Reuters) - A submarine wreck discovered off the eastern coast of Sweden probably dates from World War One rather than last year when the military hunted for a suspected Russian submersible, the Swedish armed forces said on Tuesday.

Monday's announcement by shipwreck hunters made headlines in Sweden, coming less than a year after its navy searched for a suspected Russian submarine sighted near Stockholm in what as the country's biggest military mobilization since the Cold War.

The military said in a statement that the find was likely a Russian submarine that sank in 1916. It had collided with a Swedish ship in poor visibility, killing all 18 crew members, local media said.

The shipwreck hunters' company, Ocean X Team, had sent underwater footage of the wreck to the Swedish military. Cyrillic letters on the hull indicated it was Russian, according to Ocean X Team.

"I am 99.9 percent sure it's from 1916, but the next step is to go down again and confirm it," Dennis Asberg, a partner in Ocean X Team told Reuters.

Concerns about possible incursions by Russian submarines have increased as relations between Moscow and the West have worsened due to the Kremlin's support for pro-Russian separatists in Ukraine.

During the four-decade Cold War that ended in 1990, the Swedish navy repeatedly chased suspected Soviet submarines along its coast with depth charges.

In 1981, in an incident known as "Whiskey on the Rocks," a Soviet Whiskey-class submarine was stranded near a naval base deep inside Swedish waters after it ran aground, causing a diplomatic standoff.

(Reporting by Elias von Hildebrand; Editing by Alistair Scrutton/Mark Heinrich)

SEE ALSO: This chart shows all of the submarines currently in the Russian Navy

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Russia's ruble has been getting crushed

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fish russia

The ruble just erased nearly all of its 2015 gains.

On Tuesday, the Russian currency dropped below 60 per dollar for the first time since March.

The ruble is currently trading around 60.50 rubles per dollar, and got down as low as 60.88 per dollar during the day, according to Bloomberg data.

To date, the currency has tumbled over 18.5% since mid-May.

The ruble's drop follows the recent oil plunge: both Brent and WTI have fallen roughly 20% over the last six weeks. Currently, Brent is trading around $52.77/barrel, while WTI is around 47.34/barrel.

The ruble's plunge comes at an incovenient time, and puts the Central Bank of Russia in a tough spot.

So far, the bank has slashed rates four times this year, but some analysts believe that the ruble's plunge could inspire the bank to interrupt their rate-cuting agenda.

“On the one hand, the recession in the economy and extremely tight credit conditions argue for a rate cut,” Liza Ermolenko, an analyst at Capital Economics in London, told Bloomberg“But on the other hand, easing policy at the time when the ruble is weakening sharply could cause it to fall even further, creating risks for inflation and financial stability.”

The central bank is expected to announce on Friday whether or not it will cut interests rates further.

Screen Shot 2015 07 28 at 12.01.14 PM

SEE ALSO: 10 countries sitting on massive oceans of oil

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Former Kremlin banker: Putin 'is the richest person in the world until he leaves power'

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Vladimir Putin

The man who used to be the "Kremlin's banker" says that as long the Russian president Vladimir Putin remains in power, he's the richest person in the world.

“Everything that belongs to the territory of the Russian Federation Putin considers to be his," Sergei Pugachev told The Guardian's Luke Harding. "Everything – Gazprom, Rosneft, private companies. Any attempt to calculate it won’t succeed.

"He’s the richest person in the world until he leaves power.”

Although Putin's exact wealth is unclear, hedge fund manager Bill Browder previously estimated it at $200 billion during an interview with CNN's Fareed Zakaria

(As a reference point, that would make Putin 2.5 times as rich as Bill Gates, who is considerd to be the world's richest man.)

"After 14 years in power of Russia, and the amount of money that the country has made, and the amount of money that hasn't been spent on schools and roads and hospitals and so on — all that money is in property, Swiss bank accounts, shares, [and] hedge funds managed for Putin and his cronies."

The "first eight or 10 years about reign over Russia was about stealing as much money that he could," Browder added.

Pugachev said Putin's immense wealth is not an accident.

"Putin wanted get rich, too. He was a pragmatic person," he added. "We talked about this. He didn’t want to leave office poor."

Back during Putin's first two terms, Pugachev was a big player in Moscow. He founded Mezhpromback (International Industrial Bank) in Moscow in 1992, and soon known as the "Kremlin's banker." He even claims to have been one-third of threesome that put Putin into power.

However, relations between Putin and Pugachev soured in 2010, and he ultimately fled to London in 2011. 

putin pugachevThe fact that, as per Pugachev, Putin considers everything in Russia "to be his" might seem shocking, but it's important to note that the concept of property rights in Putin's Russia is rather different from that of the West.

"A prominent businessman ... said that Mr. Putin had eroded the very notion of property rights in Russia, even for those who displayed fealty. He said that Mr. Putin himself had described private ownership of strategic industries with the Russia word to roost.

"‘A chicken can exercise ownership of eggs, and it can get fed while it’s sitting on the egg,’ he said, ‘but it’s not really their egg,’” according to the New York Times.

SEE ALSO: Putin fired more than 100,000 people

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German and Dutch intel agencies say that they caught a physicist who was spying for Moscow

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putin angela merkel

German and Dutch authorities say they identified a Russian physicist who was spying for Moscow, according to a report by the NL Times.

The man in question was identified as "Ivan A.," a physicist who was appointed to the Dutch Eindhoven University of Technology in 2013, and visited the Max Planck Institute in Bonn, Germany, as a guest lecturer three times somewhere between 2009-2011.

The German intelligence agency's suspicions were aroused when they noticed the physicist meeting with a Bonn-based Russian diplomat once a month.

The diplomat, who Germany identified as a Russian foreign intelligence officer, according to Newsweek, reportedly gave money to Ivan A. in exchange for information during these meetings.

Ivan A. and his wife were later arrested in Düsseldorf Airport in 2014. He was released shortly after, but his photo and fingerprints were taken and a formal investigation was launched. 

The Dutch Ministry of Foreign Affairs revoked Ivan A.'s visa when he returned to Eindhoven, and he has since returned to Russia.

The NL Times notes that Ivan A. continues to deny any involvement in espionage activities, maintaining that he received the money for renting a Moscow apartment to the diplomat's friends.

SEE ALSO: 10 countries sitting on massive oceans of oil

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Putin is cracking down on dissent and the first victim is the US-based democracy group

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The National Endowment for Democracy, a U.S.-based non-profit that promotes the spread of democratic government worldwide, is the first victim of a new law in Russia that allows the country’s prosecutor general to declare foreign entities “undesirable organizations” and bar them from operating in the country.

In a statement issued Tuesday, Prosecutor General Yury Yakovlevich Chayka’s office declared, “Given the general orientation of the Fund, the prosecutor's office concluded that it is a threat to the foundations of the constitutional system of the Russian Federation, defense and security.”

The decision appears to be the first use of the new authority granted to the Prosecutor General earlier this year, and which appears to be another effort by the government of President Vladimir Putin aimed at stifling dissent.

Though structured as an independent organization with a board of directors made up of private citizens, NED it is widely seen an arm of the United States government, receiving almost all of its funding from congressional appropriations. And while its board members are not current government employees, many have had considerable careers in the government prior to joining.

A grant-making organization, NED has provided millions of dollars in financial support to civil society groups in Russia, some of which have challenged official state policies. The decision makes it illegal for Russian citizens to interact with the organization, on pain of fines or prison time.

In addition, NED’s operations in Russia will be shut down immediately. According to state-run media outlet Russia Today, when a group is designated as undesirable,  “all its assets in Russia must be frozen, offices closed and distribution of any of its information materials must be banned. If the ban is violated, both the personnel of the outlawed group and Russian citizens who cooperate with them face punishments of heavy fines, or even prison terms in case of repeated or aggravated offence.”

This vendor sells T-shirts printed with images of Russia's President Vladimir Putin at a street store in the center of St. Petersburg,

In a statement issued Tuesday, a NED spokesman said, “The law on undesirable organizations is the latest in a series of highly restrictive laws that limit the freedom of Russian citizens. This law, as well as its predecessors, contravenes Russia’s own constitution as well as numerous international laws and treaties.  The true intent of these laws is to intimidate and isolate Russian citizens.  NED remains committed to supporting human rights and fundamental freedoms throughout the world.”

Though it was the first, NED is likely not the last U.S.-based non-profit to be targeted under the new law. Russian lawmakers have compiled a “patriotic stop list” of foreign organizations that they say are “known for their anti-Russian orientation.” The list was forwarded to the Prosecutor General for follow up.

In addition to NED, the list contained such well-known entities as the MacArthur Foundation, the Ford Foundation, and the Charles Stewart Mott Foundation. There was also the George-Soros-backed Open Society Foundation, the International Republican Institute, the National Democratic Institute for International Affairs, Freedom House, the Education for Democracy Foundation, and others.

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Putin is suffocating his own nation

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putin bullets bless it

In the tumult and uncertainty that marked Russia after the Soviet Union imploded, when the state was weak and many institutions tottering, a vital lifeline was extended from the West.

The US government, as well as foundations and philanthropies, responded generously.

The financier George Soros, through his Open Society Foundations, provided small grants that sustained many impoverished scientists.

The MacArthur Foundation and the National Endowment for Democracy (NED) were vital sources of support to civil society, education and human rights.

Now, President Vladimir Putin is forcing these organizations out of Russia, using law enforcement and a parliament that he controls. Mr. Putin's larger target is to destroy civil society, that vital two-way link in any democracy between the rulers and the ruled. The latest move, announced Tuesday, is to declare the NED an "undesirable" organization under the terms of a law that Mr. Putin signed in May. The law bans groups from abroad who are deemed a "threat to the foundations of the constitutional system of the Russian Federation, its defense capabilities and its national security."

The charge against the NED is patently ridiculous. The NED's grantees in Russia last year ran the gamut of civil society. They advocated transparency in public affairs, fought corruption and promoted human rights, freedom of information and freedom of association, among other things. All these activities make for a healthy democracy but are seen as threatening from the Kremlin's ramparts.

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The new law on "undesirables" comes in addition to one signed in 2012 that gave authorities the power to declare organizations "foreign agents" if they engaged in any kind of politics and receive money from abroad.

The designation, from the Stalin era, implies espionage.

While the NED is the first organization to be labeled "undesirable," on July 5, the Dynasty Foundation, which had provided millions of dollars for science and education in Russia, reported that it was closing after being labeled a "foreign agent."

Others are feeling the chill. On July 24, the Charles Stewart Mott Foundation of Flint, Mich., an independent, private philanthropy that had supported community education in Russia and contributed more than $25 million since the early 1990s, announced that it would no longer support organizations in Russia.

The Federation Council, Russia's upper house of parliament, had put the foundation on a list of potentially undesirable organizations that was submitted to authorities. On July 21, the MacArthur Foundation, which had provided more than $173 million in grants in Russia since 1992 to further higher education, advance human rights and combat nuclear proliferation, said that it was closing its office in Moscow. MacArthur had also been put on parliament's hit list.

Mr. Putin fears competition, opposition and any cry of dissent. In pursuit of absolute power, he is suffocating his own society.

 

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Many in Russia think a major political turning point is coming

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Vladimir Putin

Russia's newest anti-NGO law, under which the National Endowment for Democracy on Tuesday was declared an "undesirable organization" prohibited from operating in Russia, is the latest evidence that the regime of President Vladimir Putin faces a worsening crisis of political legitimacy.

Putin may claim that the National Endowment for Democracy and other nongovernmental organizations are "a threat to Russia's basic constitutional order," and his labeling them as dangerous enemies, along with the Russian democrats he calls "national traitors," is his typical way of rallying political support by appealing to nationalist fears and hostilities.

But it is the regime itself that has been undermining Russia's constitutional order through repression, corruption and international aggression; and the pressures are now building toward what many in Russia believe is a major political turning point.

Putin rose to power in 1999 on a wave of anti-Chechen hysteria, but it was steady economic growth over the next decade fueled by rising oil prices that accounted for his popularity. Now that growth has come to a screeching halt, and the gross domestic product could decline by as much as 8 percent this year, according to economist Anders Aslund.

The economic crisis is beginning to be felt at the local level. Real wages fell by 9 percent in the first quarter of 2015, and social spending on health and pensions has been cut sharply, even as military spending has continued to increase. With Russia's foreign debt of $570 billion exceeding its $157 billion in liquid reserves by more than three times, Russia faces the danger of bankruptcy, especially with Western financial sanctions cutting off Russia's access to international funding.

The crisis's political repercussions could grow because of rampant elite corruption, which is essential to the functioning of Russia's system of power. An example was the corruption surrounding the Sochi Olympics that was the subject of an extensive report by Boris Nemtsov, the opposition leader who was murdered in February just steps from the Kremlin.

According to Nemtsov, the majority of construction contracts were awarded to companies with ties to Putin, and all were dramatically inflated to several times the international average for similar projects. Karen Dawisha, a leading expert on elite corruption in Russia, estimates Putin's worth, conservatively, at $40 billion.

s-400 s 400 russia russian military missile defense system kremlin armyIn addition to economic crisis and elite corruption, Russia's war in Ukraine is a third factor undermining the regime's political legitimacy. Even without meaningful assistance from the United States and Europe, the Ukrainians have fought the Russians to a standstill in eastern Ukraine, and this is a far cry from the decisive victory that Putin predicted when he annexed Crimea last year. Putin has tried to hide the casualties Russia has suffered in the conflict, knowing that the war does not enjoy widespread popular support. He also knows from Russia's experience in Afghanistan and other conflicts in Russian history that failure in war could threaten the regime's survival.

The regime's fear over its own lack of political legitimacy is apparent in the lengths to which it is going to prevent any electoral competition. Not only has Russia moved up the date of 2016 national parliamentary elections , making it more difficult for the opposition to challenge incumbent officeholders, but also it is cracking down on three regional parliamentary campaigns in which a coalition of democratic opposition parties are trying to win seats in elections to be held in September.

Russian President Vladimir Putin delivers a speech during a meeting with senior officers who attained higher ranks at the Kremlin in Moscow, October 31, 2014. REUTERS/Michael Klimentyev/RIA Novosti/KremlinIn Novosibirsk, three opposition activists are on a hunger strike protesting authorities' decision to exclude them from the ballot. In Kostroma, the opposition campaign manager is in jail and faces politically-motivated criminal charges.

These efforts to deny the opposition a chance to win a handful of seats in Russia's equivalent of a state legislature demonstrate that the regime sees any alternative to its own politics as a serious threat that must be eliminated.

This is the context in which Russia has passed the law prohibiting Russian democrats from getting any international assistance to promote freedom of expression, the rule of law and a democratic political system. Significantly, democrats have not backed down. They have not been deterred by the criminal penalties contained in the "foreign agents" law and other repressive laws.

They know that these laws contradict international law, which allows for such aid, and that the laws are meant to block a better future for Russia. They are not even frightened by the threat of being killed, which has already been the fate of Nemtsov and other Russian democrats.

The least the United States and other Western democracies can do is to continue to provide moral and political solidarity to such brave people. It serves not just their interests but our own as well.

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The former 'Kremlin banker' describes how Putin's mind works

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The man who used to be the "Kremlin's banker" argues that Vladimir Putin is a born-and-bred Sovetskiy chelovek (Soviet man)— and that has informed his view of the world.

“Everything in his consciousness flows from the Soviet Union,” Sergei Pugachev told The Guardian's Luke Harding. “He’s of this epoch. He saw [former Soviet leader Leonid] Brezhnev and the politburo. Like any simple person he formed his opinions from watching Soviet TV.”

Back during Putin's first two terms, Pugachev was a big player in Moscow. He founded Mezhpromback (International Industrial Bank) in Moscow in 1992, and soon known as the "Kremlin's banker." He even claims to have been one-third of threesome that put Putin into power.

However, relations between Putin and Pugachev soured in 2010, and he ultimately fled to London in 2011.

Pugachev said that the Russian president "isn’t a strategist" and "is still not a politician."

Instead, he "listens to the politburo that surrounds him, made up of KGB people. They are very aggressive.”

Furthermore, Pugachev argues, the influence of those KGB advisers is clear.

"I don't think he's an evil genius who wanted to set up the criminal regime that exists today," he added. "He surrounded himself with like-minded people whom he didn't know very well and who had served with him in the KGB. They immediately began enriching themselves.”

In the Guardian interview, Pugachev also highlighted a darker connection to the communist past: He believes that Putin will remain in office for life, not unlike Soviet leaders Brezhnev and Stalin.

“I don’t see any guarantees for him [if he steps down]. Putin doesn’t see them either.” 

Check out the full story on The Guardian >

SEE ALSO: Former Kremlin banker: Putin 'is the richest person in the world until he leaves power'

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Ukraine's maverick battalions are becoming a problem

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Activists of the Right Sector political party attend an anti-government march in Kiev, Ukraine, in this February 25, 2015 file photo. REUTERS/Valentyn Ogirenko/Files

(Reuters) - From a basement billiard club in central Kiev, Dmytro Korchynsky commands a volunteer battalion helping Ukraine's government fight rebels in the east. A burly man with a long, Cossack-style moustache, Korchynsky has several hundred armed men at his disposal. The exact number, he said, is "classified."

In the eyes of many Ukrainians, he and other volunteer fighters are heroes for helping the weak regular army resist pro-Russian separatists. In the view of the government, however, some of the volunteers have become a problem, even a law unto themselves.

Dressed in a colorful peasant-style shirt, Korchynsky told Reuters that he follows orders from the Interior Ministry, and that his battalion would stop fighting if commanded to do so. Yet he added: "We would proceed with our own methods of action independently from state structures."

Korchynsky, a former leader of an ultra-nationalist party and a devout Orthodox Christian, wants to create a Christian "Taliban" to reclaim eastern Ukraine as well as Crimea, which was annexed by Russia in 2014. He isn't going to give up his quest lightly.

"I would like Ukraine to lead the crusades," said Korchynsky, whose battalion's name is Saint Mary. "Our mission is not only to kick out the occupiers, but also revenge. Moscow must burn."

Such talk and recent violent incidents involving members of unofficial armed groups have raised government concerns about radicals running out of control. President Petro Poroshenko now says that all "illegal groups" must disarm because they threaten to make the country even more unstable than it already is. 

Members of the Ukrainian armed forces fire a grenade launcher, in response to what servicemen said were shots fired from the positions of fighters of the separatist self-proclaimed Donetsk People's Republic, in the town of Avdiivka in Donetsk region, Ukraine, June 18, 2015. REUTERS/Maksim Levin

"No political force should have, and will not have, any kind of armed cells. No political organization has the right to establish ... criminal groups," Poroshenko said on July 13.

The president said he might legislate for emergency powers to deal with armed groups, and that anyone armed who was not a member of the law enforcement agencies "will be classed as a terrorist."

But interviews with members of volunteer battalions and Ukraine officials suggest it will not be easy for Poroshenko to impose his will. Some battalion leaders, while ostensibly under the control of the government, are increasingly critical of Ukraine's political leaders. They want to press them to sack judges seen as favoring the rich and powerful, to oust oligarchs who control much of the economy and to prosecute the riot police accused of killing more than 100 people during protests early last year.

HAPHAZARD FORMATIONS

Most of Ukraine's almost 40 volunteer battalions grew out of squads of protesters who battled the Berkut riot police during the protests on Kiev's Independence Square, or Maidan Nezalezhnosti, which began in November 2013. 

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After the protests toppled President Viktor Yanukovich, pro-Russian separatists rose up in the east of Ukraine in April, 2014, demanding independence from the new government in Kiev, which they called a "fascist regime." In response, several leaders of the Maidan protests raced east with fellow protesters to try to stop the rebel advance.

Numerous brigades and battalions formed haphazardly, with most leaders accepting anyone willing to fight. Serhiy Melnychuk, who founded the Aidar battalion in eastern Ukraine and is now a member of parliament, said he signed up people between the ages of 18 and 62 and "from the homeless to pensioners."

Irregular though theses forces were, some acquired weapons from the Defense Ministry, officials and battalion leaders said. Others received money and equipment from wealthy oligarchs. They became powerful forces in the struggle against pro-Russian separatists. 

In an interview in Kiev, Melnychuk, wearing a cross around his neck and a wristband in the national colors of Ukraine, said that he had five men on the day the Aidar battalion formed, but 250 within two weeks. They had all fought on the Maidan and "didn't need military training," he said.

He conceded some Aidar members ran out of control. "I don't deny people were looting there (in eastern Ukraine)," he said.

Melnychuk now faces various charges from Ukrainian prosecutors connected to his time in the east. They include robbery and forming an illegal group; Melnychuk denies the charges.

Serhiy Melnychuk ukraine

In addition, the human rights group Amnesty International has documented cases of abuse which it says were committed by members of Aidar last year and "amount to war crimes." The allegations include abducting and beating men suspected of collaborating with pro-Russian separatists, and extorting money.

Last year the Ukrainian government tried to bring Aidar and other volunteer groups under its control. It ordered Aidar to reform into the 24th assault battalion as part of Ukraine's official forces. Melnychuk described that order as "criminal," but said most of his men had demobilized or come under official control by this year.

He and other battalion leaders said that their soldiers' loyalty did not always lie with the authorities and that some groups still operate beyond official control.

Melnychuk was scornful of attempts to crack down on the battalions, saying such moves had been provoked by Russia spreading propaganda. He said Russia was scared of the battalions because the volunteers inflicted the most losses on the pro-Russian rebels, "so they pretend that we eat little children for breakfast."

The political situation in Ukraine remained difficult and fragile, he said, criticizing the lack of change in government. "The (Maidan) revolution was interrupted by the aggression (in the east) and the patriots left Maidan and went to the east to protect Ukraine," he said. "Only 10 percent of people in positions of power are new; the rest are all the same, pursuing the same schemes they always did."

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Andriy Filonenko, a founder of the Tornado battalion, was equally defiant about accusations against his fighters. Eight members of the battalion have been accused of crimes including rape, murder and smuggling. Ukrainian officials say one video shows a re-enactment of how members of Tornado forced two captives to rape another man; they also say some 40 members of the battalion have criminal records.

Filonenko told Reuters the charges were ridiculous. "I don't understand all this talk about criminal records," he said. "All I know is that people spilt their blood for Ukraine, for the motherland."

Like Melnychuk, Filonenko said the "old order" was out to protect itself. He said the charges were only made after the Tornado battalion had uncovered what it said was a smuggling ring involving local politicians in east Ukraine. Officials say the charges came before Tornado's alleged smuggling discovery. 

Filonenko, who wore a black T-shirt with a red Ukrainian trident on it, defended the battalion's actions, citing the violence and lack of resources in the east. "It's a war. They're not handing out sweets," he said.

"Think of it this way: There's a task, for the task you need a vehicle to get there and back – but they don't give you any vehicle or petrol to fulfill the task ... You have to pick up wounded ... so what do you do? ... Of course, you stop a car and take it."  

"THEY STEAL A LOT"

Close to bankruptcy, Ukraine has struggled to implement reforms demanded by the Maidan protesters. Its police and courts are still widely seen as favoring the powerful, and bribes are still used for everything from avoiding speeding penalties to getting into good schools.

For some powerful interests, the rule of force, not law, remains tempting. In March, a group of armed men in combat fatigues raided the Kiev offices of the state-owned oil company UkrTransNafta. Two parliamentary deputies accused the billionaire Ihor Kolomoisky, who harangued journalists at the scene of the raid, of sending the masked men into the building after one of his allies had been sacked as chairman of the company.

A policeman stands next to an entrance to the head office of Public Joint-Stock Company UkrTransNafta in Kiev March 20, 2015.  REUTERS/Valentyn Ogirenko

Kolomoisky is widely credited with funding volunteer battalions that defended the city of Dnipropetrovsk and fought against pro-Russian separatists in eastern Ukraine.

Poroshenko moved to assert his authority, meeting Kolomoisky in the aftermath of the raid. As a result, Kolomoisky stepped down as governor of Dnipropetrovsk, in the east of the country, though he remains a powerful business figure with political influence. Kolomoisky did not respond to requests for comment.

Interior Minister Arsen Avakov told Reuters Ukraine was now "rebooting" all of its power structures to start with a "clean sheet," and at the same time trying to root out criminal elements in the battalions.

"As in all big communities of people, there are different types," he said. "We must tell the truth: Some have looted and we will punish them."

He said that some armed groups "appropriated the names" of established battalions and that "no one really knows where they are fighting or where they have fought."

Ukraine's military prosecutor, Anatoly Matios, says he is determined to take action. He told Reuters he intends to take members of Tornado battalion to court for their alleged offences.

"Who made the decision, turned a blind eye to their criminal record and allowed them to become police officers? Who gave them weapons and did not foresee the possible tragic consequences?" he said in an interview at the prosecutor's office. He said he wanted to check all police battalions "in order not to have a second Tornado."

Matios recognizes that his moves may prove unpopular. "I understand a very large part of society may even hate me for the thankless but legal work that we do. It's not comfortable at a minimum." On July 8, activists poured manure at the front entrance of his office. He described it as a paid-for protest.

Members of the Ukrainian armed forces ride atop an armoured personnel carrier (APC) in the town of Avdiivka in Donetsk region, Ukraine, June 19, 2015. REUTERS/Maksim Levin

A shoot-out earlier this month between the police and forces linked to the political group Right Sector showed the issue of independent armed groups had to be dealt with, officials said.

Right Sector, a far right Ukrainian nationalist party that runs volunteer battalions, said two of its members were killed after being set upon by police in the town of Mukacheve, western Ukraine. The Interior Ministry said the group had fired first.

After the incident, Right Sector called for the interior minister to resign and threatened to send battalions of fighters to Kiev.

Ukraine's government says that Right Sector and other groups have to decide whether they want to be political groups or combat battalions, but cannot be both. Inevitably, though, battalion commanders have political views.

In his billiard club headquarters, commander Korchynsky of the Saint Mary battalion made his disdain for the government plain. "Like the majority of Ukrainian people, I think (the new leadership) is bad ... They steal a lot. When Yanukovich was stealing, that was bad. But these people are clearing up when the country is at war, so they are guilty on two counts. This is marauding."

He said the revolution that began with the Maidan had been interrupted, but would one day be completed. He did not say when.

If so, he will have to confront Poroshenko. On July 16, the president, decried the problems posed by unspecified "internal enemies" of the country.  He told parliament: "I will not allow anarchy in Ukraine."

SEE ALSO: Many in Russia think a major political turning point is coming

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12 Russian military aircraft spotted near Latvia’s sovereign airspace

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Russian Su-24

As many as 12 Russian military aircraft were spotted Wednesday near Latvia’s sovereign airspace in the Baltic region of Eastern Europe, a statement by the Latvian Armed Forces said.

Russia has flown hundreds of aircraft and positioned dozens of ships during the last 18 months near the territory of the former Soviet republics of Latvia, Estonia and Lithuania, prompting alarm across Eastern Europe and inside NATO.

"Patrol aircraft have identified on Wednesday four Mikoyan MiG-31, four Sukhoi Su-24, three Antonov An-26 and one Ilyushin IL-76 aircraft of the Russian air force over the international waters of the Baltic Sea near Latvia’s external sea border," the statement said.

While the flights were often over international waters, many of Russia’s aircraft do not fly with flight transponders on, making it nearly impossible for other aircraft and air traffic control to locate them. This can be dangerous for commercial aircraft flying in the area.

Sweden and Denmark summoned Russian ambassadors in December to complain about one such incident when a Russian jet traveled in a commercial flight path between Copenhagen and Sweden. Russia denied it has been a hazard to commercial flights.

In light of this threat, NATO could employ what’s known as the Baltic Air Policing mission, which is a group of alliance members that monitor the otherwise unprotected skies of the three Baltic states, none of which has an air force.

Russian Ambassador to Latvia Alexander Veshnyakov met in January with Latvian government officials to discuss the issue. “All flights of the Russian Air Force and the movements of warships were made in strict accordance with international legal norms,” Veshnyakov said, before adding the maneuvers of the Russian armed forces "were conducted transparently within the framework of international agreements and arrangements." 

In June, a U.S. sailor recorded footage of Russian jets flying over a U.S.-led NATO mission in the Baltic Sea.

SEE ALSO: This new nuclear-armed US bomb may be the most dangerous weapon in America's arsenal Read more:

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