Ukraine Spy Chief: Sanctions Hurting Putin's War Chest

KIEV, Ukraine -- EU and US economic sanctions on Russia had a much bigger impact than previously thought, Ukraine's spy chief has said.


Yehor Bozhok, the SZRU chief at its headquarters, nicknamed 'The Forest', outside Kiev.

"One of the estimates which we managed to learn, Russian internal estimates, is that Western sanctions ... forced the Russian budget to lose $173bn [€151bn] already, which is quite a lot," Yehor Bozhok, the head of Ukraine's foreign intelligence service, the SZRU, told EUobserver in an interview in Kiev in January. 

"This is their [Russia's] internal assessment, which they prefer not to make public," he said.

The figure covered the period from mid-2014 to the end of 2018, he added.

The EU and US imposed sanctions on Russian banks, energy firms, and arms companies after Russia invaded Ukraine and annexed Crimea.

They expire on 31 July unless EU states renew them by consensus.

Russia denies being at war in Ukraine and has previously said the sanctions had no effect on its economy.

The Russian embassy to the EU declined to comment on Bozhok's figure.

If true, it would be more than half of Russia's state budget for 2019.

It is much larger than estimates based on open sources by leading EU and US think tanks, which say Western sanctions might have been to blame for between 0.5 percent to 10 percent of Russia's economic contraction in 2014 and 2015.

The SZRU figure sounded "incredibly big", an EU diplomat said.

It sounded like "science fiction" to Richard Connolly, from the Chatham House think tank in London. 

Even Russia itself would be hard pressed to calculate a precise figure, Connolly said, because other factors, such as oil prices, the ruble exchange rate, and capital outflows complicated the maths.

Bozhok also cited other Russian data he said his spies had obtained.

"Just for 2019, to intervene in the Ukrainian elections, Russian special services received a top-up of $350m [€305m]," he said.

Ukraine is to hold presidential elections on 31 March and Russia was spending the money on bribing politicians, funding subversive groups, and propaganda designed to harm pro-Western candidates, he added.

Russia is also channeling funds to anti-EU radicals in Europe to meddle in the European Parliament elections in May and to aggravate divisions in the long term, Bozhok said.

"It's in the scale of hundreds of millions of euros a year," he told EUobserver.

"This is one of our tasks - we try to trace subversive Russian activity in Ukraine and in Europe," he said.

"I'm trying to be helpful, because European unity is in our interest - if the EU loses, we lose," he added. 

Russian money was also being spent on feeding and arming the 32,000 fighters that Ukraine says Russia has in the so-called Donetsk People's Republic (DPR) and Luhansk People's Republic (LPR) in Russia-occupied east-Ukraine.

It is also keeping 48,000 Russian soldiers on Ukraine's eastern border in a state of high readiness, Bozhok added.

"By imposing sanctions, the West is not only supporting Ukraine, it is hedging the risk that Russia will use the same money for asymmetric operations against EU countries," he said.

"How do you stop Russia? By ensuring the Kremlin's resources for foreign operations are depleted," he added.

Lieutenant general Serhiy Nayev, the commander of Ukrainian forces in east Ukraine, echoed the spy chief.

"The intensity of Russian aggression in east Ukraine was reduced because of European sanctions," he told EUobserver in a recent interview in Kramatorsk, near the front line.

He said that if Russia won in Ukraine, it would be more likely to attack other European countries, such as Poland or the Baltic states, in future.

"We are in the avant-garde of the fight against Russia," Nayev said.

"We're fighting on Ukrainian territory, but we're defending all of Europe," he added.

NATO path 

Bozhok and Nayev want Ukraine to join NATO and the EU.

That may be a distant prospect, but the best way to start the ball rolling was to forge relations between Ukrainian and Western spies, Bozhok said.

"This is the path that all new NATO members passed through - until there is trust between the special services and until they start working together, there is no real integration," he noted.

The SZRU started out by sharing "analytical studies" with intelligence services in Germany, Poland, Romania, the UK, and the US, he added.

But Bozhok now attends wider meetings of EU states' spy chiefs, in which he also shares "operational material" - hard facts on Russian activities - he said.

"You have to bring something to the table," he noted.

The information includes details of Russian funding for far-right and far-left EU political parties and subversive groups in Europe.

The money comes from Russian firms, fake NGOs, and pro-Kremlin oligarchs rather than from Russia's official budget, Bozhok said.

Its "point of entry" into the EU was usually eastern Europe, because Russia still had lots of agents there from Soviet times, he added.

"If we see strange things happening in France, it doesn't mean the way to this started in France," he said.

French media have shown that a French far-right party, the National Rally, got Russian money via the Czech Republic and Cyprus.

But Russia has also created a "Trojan horse" in Europe by recruiting agents in martial arts and paramilitary clubs, Bozhok warned.

"It's very easy to buy a radical, because they're not used to receiving much money," he said.

SZRU analysis of rioting during soccer finals in France in 2014, in Catalonia last year, and in the recent 'yellow vest' protests in France indicated that violence was spearheaded by tactical groups who melted away just before the police arrived.

"The yellow vests had people with links to these paramilitary clubs in their droves," Bozhok said. 

Putin's brain 

Back on home ground, the SZRU chief said one Kremlin faction, led by Vladislav Surkov, a senior aide, was advising Putin to escalate fighting ahead of the Ukrainian elections.

"There are several proposals on the table, but the only one who decides is Putin and no one knows what goes on in his head," Bozhok said.

History might give a clue to Putin's thinking, Bozhok added, however. The SZRU recently declassified some of its archives for a new book celebrating its work.

This included a memo written by Leon Trotsky, a Russian politician, in December 1919 after the Ukrainian People's Republic declared independence from Russia in 1917.

"This or that way, we need to return Ukraine to Russia. Without Ukrainian oil, iron, raw materials, bread, and [access to] the Black Sea, Russia cannot exist, it will choke," Trotsky wrote.

When Russia tried to quash Ukrainian independence, it created the so-called Ukrainian Soviet Republic (USR) in Kharkiv, east Ukraine, in 1917.

Russian troops went to the USR to fight, but Russia denied it, the same way it denies involvement in the DPR and LPR today, the archives showed.

"Military activities at the territory of Ukraine are being directed between armed forces of the Ukrainian People's Republic and the Ukrainian Soviet government, which was established on the territory of Ukraine and which is totally independent from Moscow," Georgy Chicherin, another Russian politician, said in a diplomatic cable in January 1919.

Russian agents at the time also smuggled millions of rubles into Ukraine in diplomatic pouches to bribe military officers and fund "subversive activities", Bozhok said.

"It's a 100-percent copy of what's happening today and it brought us to the conclusion that Putin is not so innovative," Bozhok added.

"He didn't invent anything new, he just literally used the whole technology used by Soviet Russia in 1917," Bozhok said. 

Soviet history also contained lessons for Putin's thinking on sanctions, he added.

"There's a [financial] red line beyond which he [Putin] would never go ... the Soviet Union collapsed because it ran out of money," the SZRU chief said.

Source: euobserver

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