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West is Unlikely to Slap Heavy Economic Sanctions on Russia. Why?

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The tone of the statements made from Brussels and Washington and their decisions taken with regard to the Russian Federation, Russian businesses and officials imply that West is unlikely to go beyond ‘cosmetic’ sanctions.

Escalation of the Crimean conflict and the risk of further infiltration of the Russian troops into the continental part of Ukraine have raised a concern about international mechanisms of deterrence of the Kremlin policy, economic sanctions being among them. Although Brussels and Washington made rather harsh statements earlier, it is quite improbable that they will really dare impose heavy sanctions on Moscow. This means that the world community now lacks efficient instruments of influence allowing adequate response to the aggression of the countries with nuclear weapons.

The Russian Federation is the third biggest trade partner of the EU (next to the US and China) with the USD 417.4 billion sales turnover in 2013. That is why the sanctions in question may have the reverse effect and thus cause direct loss of about USD 170 billion to European producers. Considering the current state of the EU economy, the results will be grave. At the same time, it is quite remarkable that where the trade is concerned, the biggest losses will be incurred by the Eastern European countries (except Romania), which will result in yet greater misbalance in the EU economy, strengthen the effect of the centrifugal forces impeding stable economic development of the EU countries, and exacerbate economic issues within the EU in general.

Russia is one of the world’s biggest oil producing countries and the world’s second biggest ‘black gold’ exporter. It supplies most of its oil and gas to the EU countries. Hence, the only way to affect Russian economy is slapping sanctions on it that would target Russia’s energy sector. And this implies refusal from Russia’s natural gas supplies resulting in reduction of its state revenues. In 2013, the country’s earnings from oil export amounted to USD 162 billion, from natural gas export — USD 67 billion.

There are more factors which prevent the EU from ‘punishing’ Russia, such as location of Russia’s sufficient energy assets in Europe, complete influence of 11 EU countries on energy supplies from Russia, close partnership with Germany and the Netherlands in the area of gas supplies.

Out of 485 billion cubic meters of gas consumed by the EU countries annually, Russia supplies about 160 billion cubic meters which is almost one third of the total volume. According to the forecast suggested by governments and energy companies, by 2013 consumption may increase up to 585 billion cubic meters annually, and imports from Russia — up to 175 billion. Therefore, Russia’s share in gas supply to the EU will remain about the same.

In its turn, the dynamic of oil import by the EU 2001 through 2013 shows that, despite general decrease in volumes, Russia’s share has never decreased ever since 2005 — it was Kazakhstan, Libya and Saudi Arabia that reduced their exports. Import of natural gas is currently, quite oppositely, increasing steadily, Russia’s share still being the largest.

Talks about compensation of losses caused by lifting some Iran sanctions are absolutely groundless and economically unjustified.
Therefore, ban on Russia’s energy imports will be a blowback to Europe resulting in further aggravation of the current economic crisis. Brussels has no chance to arrange for quick diversification of natural gas supplies. At the same time, sanctions against Russia will result in raising prices for energy resources, which, vice versa, will increase Moscow’s revenues. Moreover, Europe will face economic recession once again, thus negating all anti-crisis programs implemented by Brussels during the last several years. In its turn, this will raise social issues.
So neither the US nor the EU will impose an embargo on oil and gas imports from Russia just because the consequences thereof will have too negative an effect on the global market which is expected to see growth of oil consumption up to 92.5 million barrels daily in 2014. Iran’s Minister of Petroleum Bijan Namdar Zangeneh agrees with this forecast.

Russia’s budget for 2014 was calculated based on the average annual oil price of USD 93 per barrel. In case sanctions become a reality, the prices will well exceed USD 130, and the raise will continue. This will bring Russia additional USD 37 from each exported barrel of oil at the least. Let us not forget that in 2013 Russia exported about 234 million tons of oil and liquid gas.

Imposing sanctions against the key Russian energy companies — Gazprom, LUKoil and Rosneft —also seems quite doubtful. Most of them signed field development contracts with a number of American and European oil and gas producing companies. Therefore, the blow to Russian oil and gas producing companies will affect their western partners whose business interests are concentrated in this country.

According to Bob Dudley, the Group Chief Executive and a director of BP — which is one of the largest foreign investor in Russia’s oil producing industry owning a 20% share in one of the world’s biggest oil exporters Rosneft — his company is not going to stop investments in Russia. He underlined that BP is immensely interested in investing in this country. BP produces one fourth of its oil and keeps one third of its oil and gas reserves in Russia.

President of the French company Total Christophe de Margerie promised to continue investing in the USD 26.9 Yamal LNG project where Total’s share amounts to 20%, its project partners being Novatekom and CNPC (China). The partner plan on starting liquid natural gas supplies from the arctic field in 2017. “We are there for a long term,” Margerie told reporters at the IHS CERAWeek energy conference. “Total and Yamal will definitely survive through this crisis and I hope not too many others.” At the same conference, Paolo Scaroni, the Chief Executive of Eni, said that sufficient gas reserves give Russia powerful instruments of influence on Europe. He believes that the worst possible scenario would be complete termination of gas supplies from Russia through Ukraine.

On March 5, after Russian troops invaded Crimea, top managers of the British energy producing company BP and the French Total promised to continue investing in Russia, and CEO of the Italian Eni underlined once again that huge gas reserves allow Moscow to hold control over the whole Europe.

According to Rainer Steele, Chairman of the Board of Directors of Gazprom’s partner Wintershall, sanctions against Russia will not settle the issue and will be ineffective. Philipp Mißfelder, member of the German Parliament, also said that sanctions against Russia will affect Germany, and that sanctions are never a good method for export-oriented Germany. German Minister for Foreign Affairs Frank-Walter Steinmeier doubted that Europe would even dare expel Russia from the G8.

Direct EU investments in Russia’s economy are yet another issue. Thus, foreign direct investments from the Netherlands in Russia amount to 12% of the overall investment outflows from Amsterdam, 4.3% from Germany, 3.4% from France, 30% from Cyprus (mostly reinvestments), 3.8% from Ireland.

Investment outflows from Russia to the EU are also quite considerable: 37% — Cyprus, 15.9% — the Netherlands, 2.5% — Great Britain, 2.2% — Germany. This shows that blocking of bilateral financial flows between Russia and the EU is not reasonable from the economic point of view.
According to the disclosed secret documents of the British Parliament, Downing Street also recommends to refrain from closing the British market for Russia, and to not go beyond visa restrictions and exclusion for certain Russian officials. In particular, one of the documents tells that Britain should not impose any trade sanctions or close London’s financial centre for Russian capital.

These recommendations also include evasion of the issue of participation of the North Atlantic Alliance in settling the Crimean conflict. This means that the EU will resort only to some political instruments available to the OSCE and the UN that will be targeted at certain persons and not the whole country.

All in all, Britain and Germany will attempt to not affect their own economy, and this is what will determine further London’s behaviour. We believe that Britain and Germany will only act as diplomats in the Crimean conflict, and they might even try to lobby some nominal sanctions about which the US Senator John McCain gave a hint in his interview after his meeting with the British representatives during which he expressed his disappointment about London’s official standpoint and ignoring history’s lessons on the part of Europe. Basically, he said that the US would like but could not possibly impose certain effective sanctions, and Europe is not ready for such serious measures.

Russia only ranks number 20 among the countries consumers of the US products and is not among the top ten of the countries exporters of goods and services to the US. Therefore, Washington has only financial leverages at its disposal in this situation. Moreover, sanctions similar to Iranian, for example, will affect, and most probably, block economic cooperation between Russia and the EU — scenario which is unacceptable for Brussels. This means that neither the US has any flexible economic leverages against Moscow at their disposal.

That is why Washington now counts on, first of all, imposing sanctions by its European partners aimed at limiting access for the Russian President’s wingmen and partners to their bank accounts and financial flows within the territory of Europe. Therefore, they expect some upward pressure, sparking discontent among the political elite which would make it possible to prepare grounds to exert influence on the Kremlin. However, it is not probable that such measures will turn out to be effective.

It is fair to say that the international checks and balances system elaborated back in 1945 is efficient no more, and the depth of integration of the global economy no longer allows control over the countries with nuclear weapons and critical shares in the global export. In view thereof, despite all the strivings of the world community, there are no more ‘innocent’ leverages to exert effective pressure on such players as Moscow, Washington and Beijing. Any instruments which may help achieve the desired results are going to bring serious consequences for the global economy and the initiators of the sanctions. At the same time, as the ‘Crimean precedent’ may be used without any dramatic consequences only by three countries, and Washington and Brussels understand that no mass chain reaction will follow, and most incidents may be precluded by means of traditional diplomatic and economic instruments.

This means that the world is gradually approaching the new round of the Cold War which today, as strange as it may sound, may have a stimulating effect on the development of the key national economies.

Therefore, according to our forecast, West is likely to resort to financial aid for Ukraine instead of further complicating relations with Russia, thus preventing the risk of economic loss in the context of the current crisis. This means that neither Washington nor Brussels will dare impose serious economic sanctions against Russia. Hence, these instruments are unlikely to considerably influence the Kremlin’s policy with regard to Ukraine in the medium term.

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Russia: The Winner of the latest airstrikes against Syria

Wang Li

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On April 21, one week after the U.S.-led airstrikes against Syria, Russian FM Lavrov said that Russia would sell S-300 anti-aircraft missiles to Syria unconditionally. Since Moscow denounced the recent US-led missile strikes as an “aggression” against Syria and violated international law, selling S-300 missiles to Syria seems to be logical.

As it is well-known, the powerful weapon of S-300 has a range of up to 125 miles and the capability to track down and strike multiple targets simultaneously with lethal efficiency. It would mean a quantum leap in Syria’s air defense capability and pose a strong challenge to any upcoming menace from airstrikes. Before U.S-led airstrikes against Syria last week, Moscow had refrained from providing Damascus with such advanced S-300. Yet, now Russia openly rejects Western demands to halt such sales.

As a matter of fact, Russia had made explicit warnings to shoot down U.S. missiles prior to the airstrikes and even to target the missile-launchers. These threats are part of a wider Russian strategy aimed at showing the entire world – and the Middle East in particular – that Moscow stands by the Assad regime no matter what horrors it unleashes. Russia was supported widely by the world with an argument for the role of the United Nations and the field–trip investigation of the alleged chemical-weapons sites in Syria. Meanwhile, Russia was sure to demonstrate the extent and the efficiency of its deterrent capabilities, including S-300 missiles system, which is regarded as the key to any nuclear power.

Ironically, U.S.-led airstrike against Syria aimed to damage Assad’s chemical-weapons program and to deter the murderous regime in Damascus from unleashing alleged chemical weapons on its own people. Yet in reality, the strikes are more of an indication of “Russia’s success at causing Western powers to limit their actions and opt for extreme caution in their response to Assad’s regime”. Since Russia’s actions are guided by a cold, hard logic, by standing firm alongside its Syrian client, it sent a message globally that any Middle Eastern state which aligns with Russia will gain the essentially unconditional backing of a great power whose overall purpose is to rebuild its global power status and boost the value of Russia as a trusted great power.

In diplomatic field, Russia also shows its position. On the same day of U.S.-led airstrikes against Syria, a sovereign state and also a client state of Russia, President Putin denounced the attack as “the U.S. is deepening a humanitarian catastrophe.” In both legal and moral terms, U.S.-led coalition’s military action openly violated international law, norms and practices. As the fully-armed nuclear powers and the permanent members of UN Security Council, the U.S., Britain and France deliberately ignored the high authorities of the United Nations. Just one day ago, Secretary-General Guterres called for the creation of an independent panel that “could determine who used chemical weapons in Syria, as the absence of such a body increases the risks of a military escalation in a country already driven by confrontations and proxy wars.” Yet, the three powers arrogantly rejected the appealing from international community.

In summary, Russia has appeared as a winner with dual identities: one is a defender of a small country worn by the 8-year civil war; other is a strong military power which has potentials to challenge the hegemony of the United States and its key allies. Although China did not openly align with Russia militarily, Beijing and Moscow once again insured their consensus on the Syria crisis. First, Russia alongside China and many other states denounced the military strikes on Syria by the US, UK and France as a violation of the basic principle of prohibition of use of force in international law and run contrary to the UN Charter. Second, the use of force against Syria on the ground of “punishing or retaliating against the use of chemical weapons” does not conform to international law. In this case, we shall not forget the precedent of the Iraqi issue. That historical lesson should be learned because it is very irresponsible to launch military strikes on a sovereign state on the ground of “presumption of guilt”. Third, China and Russia are more convinced than ever before that they must deepen their strategic partnership of coordination in light of the latest U.S. national security report defined Beijing and Moscow as “global competitors”. Because of this, Russia, working with China, Iran and many other states, is definitely able to challenge the United States and its key allies globally.

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Russia’s demise in the Age of Information

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We live in the time, where different pieces of information swarm around us, making it almost impossible to escape it.

Over the course of mass media’s existence, its role in opinion and attitude shaping has increased dramatically, particularly because of how much more accessible it has become.

With an average person finding themselves listening to evening news after coming back from work, or even those, who bravely say “I do not watch TV”, but feed their need for information on the internet, we are surrounded by data flow.

And it is hard to stay neutral, as we involuntarily choose sides, depending on what agenda we are most exposed to.

A study conducted by the University of Southern California, used the analogy of an 85 page long newspaper and showed that in 1986, around the time of the Soviet Union’s downfall, people were receiving about 40 newspapers full of information, while in 2007 the number rose to 174.

There is nothing new about the fact that mass and social media provide valuable tools for politicians, who seek to push their own rhetoric into the crowd’s minds. Those, who manage to master the art of using these tools, are arguably capable of creating their own reality.

The classic example which is known by the majority, is 1997 movie, Wag the Dog, where such use of media is being shown in all its glory, even if it is exaggerated.

The West has been the dominant power on the global arena ever since the end of the Cold War, where after the collapse of the Soviet Union, Russia started to integrate into the world politics as  a renewed player, with a new ideology and new political appearance.

The modern post-Soviet era world dictates certain requirements for contemporary participants, among them are free trade, technology exchange, advancement towards green energy solutions and a strong emphasis on free mass media. These are a part of the modern political courtesy, post League of Nations table manners, if you will.

Practice shows that those who choose to turn their countries into resources-only based economies, and to completely or partially ignore these requirements, will forever be on a passenger seat in this car called “global politics”. This is not what Russia is ready to settle for though.

While Russia’s President, Vladimir Putin, managed to incorporate the country’s mighty natural resources industries into global economics, giving him a strong political leverage, he chose to be very selective when it comes to anything else.

Power and straightforwardness are seen as few of the main things that Russia respects, and its politicians are proud of the fact that they refuse to participate in this so-called free media theater. But is this sense of pride justifiable?

Russia’s Foreign Minister, Sergei Lavrov, mentioned that he was amazed to see mass and social media being used as the main sources that shed light on chemical weapons being used in Douma, Syria.

“Apart from social media accounts and the video that was shared there, there are no other pieces of evidence, which can be seen as ridiculous by some specialists” – he stated during Russia’s XXVI Assembly of Foreign and Defense Policy Council.

Mr. Lavrov’s speech was brought to the international audiences by pro-Kremlin news channel, Russia Today and failed to make any ripples on the surface of people’s opinion, which was already heavily bombarded by horrible images of the chemical attack, the whole rhetoric of people’s suffering and the West’s responsibility to protect.

Social media or not, nowadays, people like to believe in the power of freedom of speech and share the awareness. After all, it was Twitter that brought us the Arab Spring.

Another prime example of storm clouds gathering around Russia’s reputation is the latest poisoning of Russia’s former military intelligence officer, Sergei Skripal. The incident took place in the middle of UK’s very peaceful city of Salisbury and has awoken the memories of a similar poisoning from several years ago of Alexander Litvinenko, who used to be a part of Russia’s Federal Security Service.

Mr. Skripal’s poisoning happened exactly two weeks before Russia’s presidential elections, which is hardly the best international PR campaign for President Putin.

The event was quickly used by the Western media to even further demonize the people’s vision of Russia’s politicians, portraying them as very conniving and not trustworthy.

Yet, OPCW-designated laboratory, based in Spiez, Switzerland has officially confirmed, that the poison, used on Mr. Skripal, shows traces of certain elements, which can be found only among NATO’s arsenal.

The news were delivered through Russia’s highest possible diplomatic level – the Foreign Minister Sergei Lavrov. One would assume that this scandalous piece of information would get an intense coverage by the mass media. But the reality shows the absolute opposite.

It is not enough to simply “share the truth” with the world, this truth has to be imbedded into people’s minds through constant exposure and endless repetition, just like certain Western media repeats time and time again that Russia is a criminal state.

If you run a quick internet search of Mr. Skripal’s poisoning, the vast majority of non-Russian speaking newspapers and media channels would give you same old information about the attack itself and the following clean-up, while Russian sources would be screaming about Western conspiracy and the revelations from the Swiss lab.

If this information is indeed that vital (and it is), why don’t we see it on every TV channel here in the West? Where are the Russian foreign public relations specialists, pressing BBC, CNN and the others to get a minute of their time to spread this information, even though it is against those news outlets’ agendas?

Russia’s politicians, who are mainly Soviet-era raised, seem to be stuck in the late 80’s mindset, where people were not that exposed to the power of media and where the country had very little ability to influence anything that the average person “consumes” outside the Soviet Union.

It is not any longer enough to win only your citizens’ hearts, but as an international political player, Russia has to realize the importance of the global public’s believes and opinions.

The country’s Foreign Ministry actively chooses to be passive about this information war. This war is conducted not only behind the curtains, not only on the floor of the UN’s Security Council, it is also in people’s minds.

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Vladimir Putin welcomes new ambassadors in Moscow

Kester Kenn Klomegah

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Russian President Vladimir Putin has assertively reminded 17 newly arrived foreign envoys to make efforts to facilitate the development of multifaceted relations with Russia in every possible way, strengthen political dialogue, boost trade and economic relations, deepen humanitarian and cultural ties.

“The role of diplomacy and diplomats are particularly important,” he explained and gave the assurance that Moscow was committed to constructive dialogue with its foreign partners and would unreservedly promote a positive agenda.

“For our part, we are ready to welcome your constructive initiatives, you can count on the support of Russian authorities, state institutions, business circles and the public,” Putin said, addressing the foreign ambassadors in a special ceremony held in the Alexander Hall of the Grand Kremlin Palace.

The 17 newly appointed ambassadors are from Austria, Benin, Côte d’Ivoire, Cuba, Egypt, El Salvador, Ghana, Italy, Jordan, Nigeria, Montenegro, Republic of Congo, Saudi Arabia, South Korea, The Gambia, United Arab Emirates and Vietnam.

During the speech, Putin strongly reminded them about the growing challenges and threats confronting the global community and urged them to play a pivotal role in ensuring sustainable development, global peace and stability.

“As for Russia, it will continue to consistently be committed to strengthening global and regional security and stability and fully comply with its international obligations, build constructive cooperation with partners based on respect relying on international legal norms and the United Nations Charter,” the Russian leader said.

According to Putin, “diplomats are called upon to facilitate the joint search for answers to large-scale challenges and threats, such as terrorism, drug trafficking, organized crime, proliferation of weapons of mass destruction and climate change.”

In addition to supporting greater security, stability and delivering promptly on its international obligations, Putin also emphasized the readiness of Russia to continue boosting overall ties both at bilateral level and on the world stage with African countries. According to the longstanding tradition, the Russian leader said a few words about the interaction with the individual countries in the welcome speech.

Of particular importance, Putin noted that Russia was interested in broadening ties with the Federal Republic of Nigeria.

“We very much appreciate our relations with Nigeria, an important partner for us on the African continent. We support the further expansion of mutually beneficial Russian-Nigerian ties, including cooperation on hydrocarbon extraction and aluminum production, as well as in the military-technical field,” he told the new Nigerian ambassador, Professor Steve Davies Ugba, who had arrived with an accumulated experience in corporate affairs and several years of academic teaching in the United States.

He went on to inform the gathering that the foundation for the cooperation between Russia and Ghana was laid over 60 years ago. “We have accumulated a great deal of experience in working together in both the trade and economic sphere and in politics. Currently, we are developing promising projects in the nuclear and oil industries, and we are discussing the prospects of supplying Ghana with Russian airplanes, helicopters and automobiles,” Putin said.

Oheneba Dr. Akyaa Opoku Ware, Ghana’s ambassador to the Russian Federation, was one of those who presented credentials to Putin. By profession, she is a qualified medical doctor from The Royal College of Surgeons in Dublin and was appointed as an ambassador to the Russian Federation and former Soviet republics by President Nana Addo Dankwa Akufo-Addo on September 13, 2017.

With regards to the Arab Republic of Egypt, Putin offered a bit more saying that the strategic partnership with Egypt is being strengthened. In August, Russia and Egypt will mark the 75th anniversary of the establishment of diplomatic relations. Cooperation between Russia and Egypt is very active and includes the construction of the first nuclear power plant in Egypt, the establishment of a Russian industrial zone in the Port Said region, and the deepening of military and defense industry cooperation.

“I would also like to point out that regular flights between the capitals of the two countries have been resumed. We continue to work on resuming the rest of the flights,” he pointed out.

Last December, fruitful talks with President Abdel Fattah el-Sisi were held in Cairo, he noted, and added that they both maintained regular dialogue on a range of topics, including relevant international and regional issues because both countries have had close or similar positions. Quite recently, Putin heartily congratulated the President of Egypt on his resounding victory at the recent elections.

According to diplomatic sources, Mr. Ihab Talaat Nasr, the new Egyptian ambassador to Russia, has replaced Mr. Mohammed al-Badri who completed his mission late October 2017. Previously, Ihab Nasr was the Deputy Minister of Foreign Affairs of Egypt responsible for European affairs.

The Gambia was in the Kremlin for the first time in the country’s history with the official opening of an embassy in Moscow.  Madam Jainaba Bah, a Senior Member of the United Democratic Party (UDP), became the first resident ambassador of The Gambia in the Russian Federation.

“Our ties with the Republic of The Gambia are traditionally constructive. The Russian side is interested in expanding economic cooperation, including by increasing the supply of machinery and agricultural products to the republic. We will continue to expand the practice of training Gambian specialists at Russian universities,” the Russian leader explained.

Significantly, Putin underscores the fact that friendly cooperation is maintained with the Republic of the Congo. Bilateral cooperation covers a number of major projects, including the construction of a 1,334 km oil pipeline. In February, Rosatom and the Science Ministry of the Congo signed a memorandum of understanding. Over 7,000 citizens of the Congo have received higher education at Soviet and Russian universities.

Talking about Republic of Côte d’Ivoire, he said that Russia’s relations with the Republic of Côte d’Ivoire would continue to develop in traditionally constructive spirit.

“We mainly interact with the Republic of Côte d’Ivoire in the trade and economic sphere. Russia supplies to this country chemical and food products and imports cocoa and its derivatives. As part of our humanitarian efforts, medicine and medical equipment from Russia are regularly sent to the Republic,” Putin told the new ambassador, Mr. Roger Gnanga, who had served in diplomatic post in Washington.

Currently, Côte d’Ivoire is a non-permanent member of the UN Security Council. Russia also stands ready to work with the Ivorian side at the UN.

Interestingly, Benin has frequently changed its ambassadors. Mr. Noukpo Clement Kiki, the newly appointed Ambassador of the Republic of Benin to the Russian Federation, is a professional teacher and administrator for over 20 years. Quite recently, he had a short diplomatic stint in Canada and now transferred to Moscow.

Relations with Benin are developing in a constructive spirit. Russia cooperates on energy and transport. Russia exports food and chemical products. Over 2,500 citizens of Benin have graduated from Russian universities, according to Putin.

Whatever the possible shortfalls, Putin optimistically expects that, with active participation of the 17 newly arrived ambassadors, these relations will develop dynamically for the mutual benefit of the peoples of their individual countries and Russia, and in the interests of international stability and security.

“I am confident that your time in Russia will allow you to better know our country and its rich history and culture, and will leave you with new unforgettable impressions,” Putin, elected for another six-year presidential term and to be inaugurated into office on May 7, told the gathering.

In conclusion, Putin congratulated the new foreign envoys with the official beginning of an important and honorable diplomatic mission, and with the hope that their activities in the Russian Federation will be productive and promote the development of relations between the countries they represent and the Russian Federation.

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