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Life of the company suspected of supplying equipment to Crimea

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A few months ago, Europe was shaken by yet another scandal involving probable supplies of dual-use goods to Crimea. The defendant in the affair was a Cypriot holding, whose Lithuanian subsidiary “Run Engineering” was suspected of supplying water purification equipment. A few months later, holding owner Marina Karmysheva has not received any proper explanation from the Russian counterparty company “Voronezh-Aqua” yet and decided to provide an exclusive update on the situation.

Marina Karmysheva is one of many Russian economists who left the country in the early 2000s. At that time, when store shelves were empty and the financial market was much less civilized than now, a professional with expertise in finance and law had a small chance of successful career.

“At the time of my departure from Russia, I had accumulated considerable knowledge of investment strategies, and I was sure that I could build a successful career in a European country or with foreign partners. The crisis of 1998 finalized my decision. Not long before the crisis, I had got to know some European partners in the fields of shipbuilding, cargo transportation, and construction, and saved funds for relocating,” says Marina. “I also began to think about starting my own business.” Sale of her property was Marina’s final break from Russia.

A life-changing opportunity came in 2008, when one of the large and long-established investment companies in Cyprus basically stopped all its activity. “The audit report, which I had reviewed before the deal, showed that all financial indicators had decreased by dozens of times. The company had neither turnover nor assets, but at the same time it had all the infrastructure: active accounts, recognized name and experience of work at the international level.”

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Marina used the investment capital accumulated during the previous years of her work in Cyprus and the funds from the sale of her property in Russia to execute the deal at face value and to restart the company's activity. The sale of securities by Cyprus tax residents is tax exempt, which helps financial and investment companies of the country to quickly restore their turnover. Marina's company was one of them. “Historically, the group’s main activity has been investment in securities representing international business without a specific country orientation. While, for example, construction business is totally local in nature and is run exclusively in Cyprus,” says Marina. “Some time ago, in addition to securities trading, we started commodity trading (trading in natural resources) as well."

At the same time, work experience had shown the need to diversify the business. It shaped the foundations of the company's new strategy: investing a considerable part of profits from its operations in financial markets into projects in those areas of economy that have future fundamental value or innovative and social nature.

“Housing, water, electricity - these markets are subject to fluctuations like any others but tend to recover faster. I was looking for projects that would have stable demand. Besides, when the RLA group started engaging in construction projects, we were looking for ways both to ensure a stable supply of high-quality fresh water to our own facilities and to try this experience in the development of the water-supply infrastructure in general."

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This is how the idea of ​​investing in Run Engineering originated. At that time, the country was going through the harsh experience of the drought of 2008, when cities had no running water for days. Drinking water was delivered by tankers from Greece, it often got spoiled during shipment, and there was not enough equipment for high-quality purification treatment.

“This sad experience underscored the enormous value of clean drinking water and perspectives for this area of work all over the world. So, we decided to develop this business with emphasis on innovation,” says Marina.

The company's new focus has brought good results. Companies that pay over 30 million a year in taxes are considered significant everywhere.

However, Russian journalists’ suspicions have called into question 20 years of business.

“After the publications, we contacted the office of the company “Voronezh-Aqua” for clarifications but have not received any. It became evident that this company is defective not only in executing timely payments, but also in maintaining the European business tone. We are deeply disappointed with Voronezh-Aqua’s behavior and absence of reaction. The publications allege that the equipment has probably ended up in Crimea. And we hoped that Voronezh-Aqua would address these allegations.”

To protect its reputation, Run Engineering hired an independent law company that audited its documentation and confirmed that there had been no violations from its side. These clarifications were necessary for European partners and banks to continue cooperation.

“Russian journalists stated “probably,” “presumably.” However, we deemed it necessary to provide clarifications, audit results, and documents to all our partners,” says Marina.

Marina's partner companies say that the essence of the events has got distorted as they were being reposted by the Russian press. This made the Cypriot holding break its silence. “First, we turned to international and national experts. Now we are considering the possibility of a lawsuit against Voronezh-Aqua,” says Marina. Her company plans to pursue legal action for deliberate distortion of information.

If such a process takes place, it could become a precedent in relations between Russia and Europe. “And it will make Russian partners take on more responsibility in their relations with European companies,” comments Marina.

One of the questionable issues was the use of photographs of the company's industrial facilities on Voronezh-Aqua’s website. Specifically, it stated that an industrial facility located in Lithuania was the property of the Russian company.

Run Engineering found out about Voronezh-aqua’s claims that it runs an assembly shop within the European holding’s facilities from media publications. “I guess the company wanted to raise its status in the eyes of other clients, as I know that there are a lot of large Russian manufactures among them. And European equipment in this field is highly valued. Voronezh-aqua’s representatives participated in the technical workshops and project details discussions: ordinary part of work of engineers in the framework of such contacts; but no one would have allowed to present our facilities at another site as its own, it is simply unacceptable for us,” says Marina.

The European company was also unpleasantly surprised to find out that Voronezh-Aqua was not quite open about its plans for the further use of the equipment. “As a matter of fact, we still don't know where this equipment is and how fair the accusations are,” says Marina.

The incident with the equipment for water-purification systems resembles the situation with the supply of turbines several years ago, when the supplier company didn’t manage to obtain from the Russian legal system any clarifications and satisfaction on the intended purpose of the equipment and legality of its use in the temporarily occupied territory of Crimea.

The details of both cases are similar. Companies manufacture universal equipment that can be used both in factories and at municipal facilities, that is, wherever water is needed.

“The sale terms are standard: it is a detailed technical description of our equipment and methods of installation. At the same time, there are no mechanisms to control trade relations between the countries that would allow us to trace its use and whereabouts up to the destination,” says Marina.

Experience of Run Engineering has shown that in the context of sanctions against the illegal annexation of Crimea, international and intergovernmental regulations are essential. The ongoing conflict between Run Engineering and Voronezh-aqua is confirming it. “Following the prominent international events of 2014, we hired a team of lawyers with world renowned expertise in international relations. It is common in the business practice of companies that are even bigger than ours. At the same time, international expertise seems to be insufficient if articles with the words “probably” and “presumably” are getting published,” says Marina.

Such regulations, which Russia will have to abide by out of respect for international law and the foundations of international trade, should prevent not only the use of equipment for unintended purposes but also errors in documentation.

We are talking about the administrative violation case committed by an employee of a customs brokerage company facilitating customs clearance of the export documentation. When he was registering one of the Run Engineering shipments, the broker made a mistake: he did not note that the cargo included dual-use goods, and customs officials were not provided with a license for exporting these goods.

The company did have that license, as it was later recorded in the court documents. The court ordered the brokerage company to pay a fine. “International regulation would bring clarification regarding such errors as well,” says Marina.

“We have hired a group of international lawyers who are considering the possibility of pursuing legal action against Voronezh-Aqua for distorting information about our cooperation. We hope that this will become a high-profile case in the Russian court. If Russian companies intend to build fair relationships with European partners, such as our holding, they should comply with the generally accepted code of ethics,” says Marina. An important aspect in our work with international lawyers is the fact that there is still no clarity regarding the location of the equipment.

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Armenia

Russia is trying to broker peace between Armenia and Azerbaijan

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The events of the last year in the long-standing confrontation between Armenia and Azerbaijan over the disputed territory of Nagorno-Karabakh give some hope to believe that Russia's mediation efforts in this matter are having some success. At least, the meeting of the leaders of the three countries held on November 26 at the residence of the Russian president in Sochi was perceived with cautious optimism, writes Alexi Ivanov, Moscow correspondent.

The initiator of the trilateral meeting of the leaders of Russia, Armenia and Azerbaijan was the Russian side. The agenda of the meeting included discussion of the implementation of the agreements of November 9 last year and January 11 this year, as well as further steps to strengthen stability in the region.

The meeting in Sochi is timed to coincide with the anniversary of the signing of the ceasefire agreement and all military operations in the Nagorno-Karabakh conflict zone in November 2020.

The conflict between Azerbaijan and Armenia over Nagorno-Karabakh escalated in the fall of 2020 and quickly shifted to hostilities. Both sides suffered losses in manpower and equipment, civilian buildings were destroyed.

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In November 2020, a ceasefire agreement was concluded with the mediation of Russia. Armenia was supposed to return to Azerbaijan part of the territories that came under the control of Yerevan back in the early 90s, leaving the Lachin corridor for communication with Nagorno-Karabakh. Russia has brought peacekeepers into the region. Baku and Yerevan have agreed on the principle of "all for all" in the exchange of prisoners in the Nagorno-Karabakh conflict zone.

The exchange of detained persons began in December 2020. Despite the agreement, there have been repeated clashes between Armenia and Azerbaijan. On November 16, 2021, fighting with the use of armored vehicles and artillery took place again on the border of Armenia and Azerbaijan. This is the most serious incident between the two countries over the past year: both sides suffered losses, several Armenian soldiers were captured.

Aliyev said that Azerbaijan is ready to begin the delimitation of the border with Armenia. "We also publicly offered the Armenian side to start working on a peace treaty to put an end to the confrontation, to recognize each other's territorial integrity, sovereignty and to live in the future as neighbors and learn to live again as neighbors," he added.

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In Sochi the leaders of the countries discussed the process of implementing the agreements of November 9 last year and January 11 this year. In addition, the heads of the three countries outlined further actions to strengthen stability and establish peaceful life in the region. As noted in the Kremlin, special attention was paid to the restoration and development of trade, economic and transport ties.

Putin also held separate talks with Aliyev and Pashinyan. Since the signing of the agreement on the cessation of hostilities between Armenia and Azerbaijan, clashes have repeatedly occurred.

Since November last year, the ceasefire in Karabakh has been supported by about two thousand Russian peacekeepers. There are 27 observation posts of the Russian military in the region, most of all in the zone of the Lachin corridor, which connects Karabakh with Armenia.
In addition, the Russians are engaged in mine clearance of the former war zone.

According to Armenian Prime Minister Pashinyan, "Russian peacekeepers and the Russian Federation play a key role in stabilizing the situation in Nagorno-Karabakh and in the region." At the same time, Yerevan believes that the situation on the line of contact with the Azerbaijani armed forces is not as stable as the Armenian side would like. After November 9 last year, several dozen people have already died on both sides, incidents occur in Nagorno-Karabakh, and since May 12, 2021, as the Armenian Government is convinced, a crisis situation has actually developed on the Armenian-Azerbaijani border.

In November 2021, another border dispute (this time away from Karabakh) turned into bloodshed and artillery duels and was stopped only after Moscow's intervention.

Thus, Baku today seeks to establish land communication with its enclave, the Nakhichevan Republic, the road to which should pass through Armenia. At the same time, the main task for Yerevan today is to return home all Armenian prisoners of war.

Following the talks in Sochi, the leaders of the three countries adopted a joint statement, in which, in particular, they reaffirmed their commitment to further consistent implementation and strict compliance with all the provisions of the statements of November 9, 2020 and January 11, 2021 in the interests of ensuring stability, security and economic development of the South Caucasus.

Both Baku and Yerevan highlight the important contribution of the Russian peacekeeping contingent to the stabilization of the situation and ensuring security in the region.

Armenia, Azerbaijan and Russia confirmed their determination to work towards the establishment of a bilateral Commission on the delimitation of the state border between the Republic of Azerbaijan and the Republic of Armenia with its subsequent demarcation with the advisory assistance of the Russian Federation at the request of the parties.

The Armenian and Azerbaijani sides highly appreciated the activities of the Trilateral Working Group on unblocking all economic and transport ties in the region. They stressed the need to launch concrete projects as soon as possible in order to unlock the economic potential of the region.

According to President Putin, Russia will continue to provide all necessary assistance in the interests of normalization of relations between the Republic of Azerbaijan and the Republic of Armenia.

Presidents of Russia and Azerbaijan Vladimir Putin and Ilham Aliyev and Prime Minister of Armenia Nikol Pashinyan have agreed to create mechanisms for demarcation and delimitation of the border between the two Transcaucasian republics by the end of the year. 

Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan, after telephone talks with the head of the European Council Charles Michel, agreed to hold another round of talks this year, namely, on December 15 in Brussels within the framework of the EU and Eastern Partnership summit, the European Union said in a statement. 

"The head of the European Council Charles Michel proposed to hold a meeting between Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan in Brussels on the sidelines of the EU-Eastern Partnership summit. The leaders agreed to hold a meeting in Brussels to discuss the regional situation and ways to overcome tensions

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Russia

Russia and Ukraine both step up military alert with combat drills

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A serviceman of the Ukrainian Armed Forces takes part in military drills at a training ground near the border with Russian-annexed Crimea in Kherson region, Ukraine, in this handout picture released by the General Staff of the Armed Forces of Ukraine press service November 17, 2021. Press Service of General Staff of the Armed Forces of Ukraine/Handout via REUTERS/File Photo

Russia staged military drills in the Black Sea, south of Ukraine, on Wednesday (24 November) and said it needed to sharpen the combat-readiness of its conventional and nuclear forces because of heightened NATO activity near its borders, write Maxim Rodionov, Mark Trevelyan, Alexander Marrow and Pavel Polityuk.

Ukraine, which with its ally the United States has said it believes Russia may be preparing an invasion, staged exercises of its own near the border with Belarus. Read more.

The increase of military activity on both sides follows weeks of rising tension that have raised the risk of war between the two neighbours, even though Russia denies aggressive intent and Western intelligence sources have told Reuters they do not see any invasion as imminent. Read more.

The United States and NATO have signalled their backing for Ukraine in ways that Moscow considers provocative, including through warship manoeuvres this month in the Black Sea and a delivery of U.S. patrol boats to the Ukrainian navy.

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British Foreign Secretary Liz Truss told Reuters on Wednesday it would be "a grave mistake from Russia" to attack Ukraine. Read more.

Russian fighter planes and ships practiced repelling air attacks on naval bases and responding with air strikes during military drills on Wednesday in the Black Sea, Interfax reported.

Separately, the news agency quoted Defence Minister Sergei Shoigu as saying the need for Russia to further develop its armed forces was dictated by "the complicated military and political conditions in the world and the growing activity of NATO countries near Russia's borders".

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He said raising the armed forces' capabilities, supporting the combat readiness of nuclear forces and strengthening the potential of non-nuclear deterrence were among the priorities.

Shoigu on Tuesday complained that U.S. bombers had rehearsed a nuclear strike on Russia from two different directions earlier this month and complained that the planes had come too close the Russian border, drills the Pentagon said had adhered to international protocols.

Ukraine on Wednesday held what it called a "special operation" at the border with Belarus, including drone exercises and military drills for anti-tank and airborne units.

It has deployed 8,500 extra troops to its border with Belarus, saying it fears being drawn into the migrant crisis, which has seen the European Union accuse Minsk of flying in people from the Middle East and pushing them to enter neighbouring Poland. Belarus denies fomenting the crisis. Read more.

Kyiv also worries that the border with Belarus, a close Russian ally, could be used by Russia to stage a military assault.

The head of Ukraine's military intelligence told the Military Times outlet this weekend that Russia had more than 92,000 troops massed around Ukraine's borders and was preparing for an attack by the end of January or beginning of February.

Moscow has dismissed such suggestions as inflammatory, said it was not threatening anyone and defended its right to deploy its troops as it wished.

Intelligence sources, diplomats and analysts say Moscow may be using the escalation of tension with Ukraine as part of a wider strategy to exert pressure in Europe, including by backing Belarus in the migrant crisis and using its influence as the continent's top gas supplier to press for quick regulatory approval of its new Nord Stream 2 pipeline to Germany.

"It feels... more like another piece of coercive leverage that the Russians are heaping onto this strategic situation in Eastern Europe," said Samir Puri, senior fellow in hybrid warfare at the International Institute for Strategic Studies.

"It may well have value in that alone, rather than having to be followed through with a full-scale invasion which would be politically disastrous for Putin."

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Russia

Kremlin accuses West of artificially whipping up Ukraine tensions

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People remove debris inside a machine-building plant, which local workers said was damaged by recent shelling, in the rebel-controlled town of Yasynuvata (Yasinovataya) in the Donetsk region, Ukraine November 21, 2021. REUTERS/Alexander Ermochenko

The Kremlin on Sunday (21 November) accused the West of artificially whipping up tensions around Ukraine with repeated statements suggesting Russia was poised to launch an attack on its neighbour and told Washington and its allies to stop a military build-up nearby, writes Maxim Rodionov, Reuters.

US Secretary of State Antony Blinken said on Saturday (20 November) his country has real concerns, widely shared with partners in Europe, over Russian activities at the Ukrainian border, after Ukraine said it feared Russia might be preparing an attack.

US, NATO and Ukrainian officials have been making similar statements for nearly two weeks, referring to what they say are unusual Russian troop movements in the proximity of Ukraine.

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Moscow has dismissed such suggestions as inflammatory and complained about what it says is increasing activity in the region by the NATO alliance.

In comments due to be broadcast later on Sunday on state TV, Kremlin spokesman Dmitry Peskov said "a provocation" in the area could not be ruled out given all the U.S. rhetoric.

"This hysteria is being artificially whipped up. We are being accused of some kind of unusual military activity on our territory by those who have brought in their armed forces from across the ocean. That is, the United States of America," Peskov said.

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"It's not really logical or polite."

Peskov suggested Ukraine was probably looking for a way to solve its own problems by force.

Russia annexed Ukraine's Crimean peninsula in 2014 and Russian-backed separatists seized a swath of eastern Ukraine that same year.

Peskov said Russia wanted NATO to stop "concentrating a military fist" near Russia's own borders and to stop arming Ukraine with modern weapons.

The Kremlin said in September that NATO would cross a Russian red line if it expanded its military infrastructure in Ukraine. Read more.

A ship carrying two refitted former US Coast Guard patrol boats designed to beef up the Ukrainian Navy transited the Dardanelles strait on Saturday. Read more.

Ukraine, which strives to become a NATO member, received a large consignment of US ammunition earlier this year and Javelin anti-tank missiles, prompting criticism from Moscow.

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