Hungary for sanctions
Hungary agrees to extend EU sanctions against Russia
Hello from the Bear Market Brief.
This week in the news:
The European Council extended sanctions against Russia for another six months, despite initial opposition from Hungary.
Russian refugees in the Kursk Region staged protests to demand adequate housing certificates from the government.
North Korean soldiers are no longer fighting on the frontlines in Kursk, likely due to heavy casualties.
Ukraine is looking for alternative funding sources after the U.S. paused foreign aid programs.
— Sara Ashbaugh, Editor in Chief
New and extended EU sanctions
The European Council agreed to extend sanctions against Russia for another six months, in spite of initial opposition from Hungarian Prime Minister Viktor Orban. The Hungarian government agreed to support the Council’s decision in exchange for specific language in the Council meeting’s conclusions about solidarity between EU member states in the field of energy security. This, however, amounted to a de facto backtracking from Orban, whose government was blindsided by U.S. President Donald Trump threatening Russia with further sanctions shortly after his inauguration. Orban had long opposed EU sanctions, calling them harmful for Hungary and Europe, and trusted that the Trump administration would promptly move to offer sanctions relief to Russia in exchange for ceasefire or peace negotiations.
According to Bloomberg, EU member states are also discussing a full ban on the import of Russian energy by 2027, but the publication of the plan to make this happen has recently been pushed back from February to March. The reduction of purchases of Russian gas, including liquefied natural gas (LNG), is supposed to happen in lockstep with U.S. sanctions already affecting several key LNG projects in Russia, which were originally meant to produce exports for European markets. However, according to data reviewed by the Russian business news site RBC, Russia increased its LNG exports by 4% in 2024 to a record-high volume of 33.6 million tons. More than half of this went to the EU, which itself increased its imports from Russia. LNG shipments to Europe have increased even as Gazprom stopped delivering pipeline gas to most of its European export markets, highlighting that the EU has failed to develop viable alternatives.
The upcoming sixteenth sanctions package, however, will likely contain a phased ban on importing Russian aluminum—further exacerbating the problems of the sector in Russia—as well as expanding sanctions on more Russian banks and on vessels transporting Russian oil. Previous EU sanctions on Russian vessels importing grain have had negative effects on Russia’s agricultural exporters, and recent U.S. sanctions on tankers in the so-called “shadow fleet” have reportedly disrupted deals with Chinese and Indian buyers, at least for the time being.
— Andras Toth-Czifra
Search efforts continue at the site of a deadly plane crash near Ronald Reagan Washington National Airport in Washington, D.C. On Wednesday evening, a U.S. Army Black Hawk helicopter collided with an American Airlines passenger plane over the Potomac River, plunging both aircraft into near-freezing waters. All 64 people aboard the plane and 3 aboard the helicopter are presumed dead. According to TASS, this includes several Russian figure skaters who were attending a development camp in Wichita, Kansas. Championship skaters Evgenia Shishkova, Vadim Naumov, and Inna Volyanskaya were reportedly on board the plane when it crashed. (photo: Michael A. McCoy for NPR)
Turmoil in Kursk
Residents of the border districts of the Kursk Region affected by the ongoing incursion of the Ukrainian army held renewed protests over the past week, forcing acting Governor Alexander Khinshtein to meet with them. Refugees claimed that many of them have yet to receive housing certificates promised by the federal and regional governments, and that for many, these certificates turned out to be inadequate to solve their housing problems. Khinshtein promised to take steps to resolve the problem, but apart from setting up a “Coordination Council” to address the issue, he was unable to promise any immediate relief. Notably, he was subjected to angry interjections similar to what his predecessor, Alexey Smirnov, had to endure during his short-lived governorship. The governor was also forced to admit this week that the regional government was heavily indebted to a company providing meals for refugees.
Days later, Khinshtein came up with the idea of having the state-owned development corporation DOM.RF build specialized refugee settlements for those unable to use housing certificates in the Kursk Region, but the timeline of this is unclear. It also appears that the move is at least partially motivated by a desire to keep disgruntled citizens away from the regional capital.
Meanwhile, corruption cases related to the construction of the region’s defensive fortifications, which proved inadequate last year, are continuing. This week, the Prosecution estimated the damages to be recovered from the former leaders of the Kursk Region Development Corporation and its business partners at 3.2 billion rubles. The officials are accused of using the special legal regime in force in the border region to award building contracts to their associates at inflated prices. The region’s government, meanwhile, estimated the full damage from fighting at 750 billion rubles, more than eight times the region’s annual budget.
Khinshtein, a former journalist and ultraconservative lawmaker with links to Russia’s national guard, was appointed in December 2024 as a crisis manager. While he has made a lot of symbolic decisions since then (such as introducing a ban on foreign holidays for local officials or personally inspecting prices in supermarkets) in an attempt to score publicity points, he has been unable to calm down protests prompted by the authorities’ response to the Ukrainian incursion.
— Andras Toth-Czifra
North Korean troops withdraw from the frontlines
Reporting from The New York Times suggests that the North Korean soldiers who were fighting alongside Russians in Kursk have been pulled from the frontlines. According to anonymous Ukrainian officials, North Korean troops have not been seen on the front for two weeks. The BBC received similar reports from a Ukrainian special forces spokesman, who told journalists that North Korean soldiers have not been seen on the frontlines for several weeks. This is likely because the North Koreans have suffered heavy casualties fighting for Russia; of the approximately 11,000 North Korean troops deployed last October, Western officials estimate that 3,000 are wounded or missing and 1,000 have been killed.
Although the North Korean troops are from an elite unit called the “Storm Corps,” their lack of battle experience makes them ill-equipped to fend off Ukrainian attacks. South Korean intelligence officials say that the North Koreans are unprepared and particularly vulnerable to Ukrainian drones. According to Ukraine, the North Korean soldiers are disorganized and lack coordination with Russian troops, which also puts them at risk. “Quite frankly they don't stand a chance. They are being thrown into the meat grinder with little chance of survival. They are cannon fodder, and the Russian officers care even less for them than they do for their own men,” former British Army tank commander Colonel Hamish de Bretton-Gordon told the BBC.
The withdrawal may not be permanent, however. U.S. officials believe the North Korean troops may be re-trained and re-deployed in new ways to avoid heavy casualties. Furthermore, Ukrainian General Oleksandr Syrskyi warned that despite their losses, the North Korean soldiers still pose a threat. “They are numerous…They rely on their numbers,” he said.
Neither Russia nor North Korea has confirmed the presence of North Korean soldiers in Russia.
— Sara Ashbaugh
Ships such as Lithuania’s “Jotvingis,” pictured here, have begun patrolling the Baltic Sea for threats to critical underwater infrastructure as part of NATO’s new Baltic Sentry mission. Concerns about hybrid warfare escalated recently after several submarine cables connecting European countries were damaged by ships affiliated with Russia’s shadow fleet. In addition to its 50 crewmembers, Jotvingis also has a naval drone to inspect underwater cables for damage. “It's like our backyard. If we feel it’s under threat, it's bad for our people, and we will react,” the Jotvingis’s Captain Arunas told The Moscow Times. (photo: Théodore Donguy)
Ukraine seeks alternative funding sources for programs previously supported by USAID
On Wednesday, the Verkhovna Rada of Ukraine announced that it has initiated parliamentary consultations with European colleagues regarding the potential replacement of American aid to prevent the destabilization of key state processes. This move follows an executive order from the White House that mandated a 90-day pause in U.S. foreign assistance funding to assess whether the aid aligns with American interests. On January 26, USAID Ukraine received an order to suspend all projects and related expenditures.
Since February 24, 2022, USAID has provided $2.6 billion in humanitarian aid, $5 billion in development assistance, and more than $30 billion in direct budget support to Ukraine, according to the agency’s official website. USAID-supported programs are vital for strengthening democratic institutions, fostering independent media, and developing civil society in Ukraine. Additionally, USAID has channeled direct budgetary funding to the Ukrainian government to cover the salaries of teachers, civil servants, and healthcare workers.
On January 28, Ukrainian President Volodymyr Zelenskyy addressed the situation, stating that he had instructed government officials to provide reports on the suspended American support programs following the executive order. Zelenskyy added that part of the funding for these programs could be secured from the state budget. The following day, he reported that he had already tasked the responsible ministries with taking over the financing of certain projects in the energy sector, veteran services, health programs, cybersecurity, and border security. Zelenskyy also mentioned that the audit of the suspended programs is ongoing and emphasized that “Ukraine and its European partners should be the most active in humanitarian, security, and social areas.” Earlier, Ukraine’s leader clarified that the executive order does not affect U.S. military aid to Ukraine.
— Lisa Noskova
On the podcast
Where does the U.S. stand in the world as Trump (re)assumes office? How is his approach towards Ukraine shaping up? Stephen Wertheim, Senior Fellow in the American Statecraft Program at the Carnegie Endowment for International Peace, joins Aaron Schwartzbaum to explore the broader context and drivers of how policy towards Russia will, and will not, be made.
Quickfire: Regions
The Russian authorities’ nationalization campaign continued this week with two major enterprises newly in the crosshairs of the Prosecution. Prosecutors argued that the owners of Moscow’s Domodedovo Airport—who allegedly hold foreign passports as well as Russian ones—violated the law by controlling a strategically important enterprise, and Prosecutors are seeking to transfer the airport to state ownership. The Prosecution is also seeking to transfer the ownership of the Gazprom Neftekhim Salavat petrochemical firm based in Bashkortostan (as well as the stakes of eight companies servicing Gazprom Neftekhim Salavat). Its beneficial owner, a former Gazprom manager, is wanted for embezzling funds from the state-owned gas company and also holds a foreign passport. According to jurists talking to Kommersant Daily, while owners sometimes fight back, the vast majority of such nationalization cases are decided in favor of the state. Interpreting the law in such a way to justify nationalizing the assets of double citizens in a range of industries would represent a significant shift in the nationalization campaign.
The Rosseti electricity grid operator is reportedly asking the authorities to turn regions of the Siberian Federal District into a single tariff zone, where tariffs would be set by the Federal Antimonopoly Agency (FAS). The company’s Siberian branch would otherwise be on the verge of bankruptcy and at risk of shutting down necessary repairs due to debts on electricity bills. The expectation is that FAS would be able to increase electricity tariffs more rapidly than regional authorities, for which this has become a political liability. (Albeit Rosseti Siberia does not control the network in the Irkutsk Region, where a recent move to redraw subsidies and ease pressure on the region’s electricity network has triggered protests.) The proposal highlights continued problems with the increased pressure on Russian utility networks, which is, to a significant extent, the consequence of Russia’s forced trade pivot to Eastern markets.
Several regions have started implementing or proposing new symbolically pro-war education policies, likely as a sign of loyalty and to comply with the list of key performance indicators approved by the Kremlin at the end of last year. Vyacheslav Gladkov, the governor of the Belgorod Region bordering Ukraine, proposed banning teenagers from studying at state universities and vocational schools if they broke the law “in relation to the assessment of the state’s actions within the framework of the special military operation”—that is, if they criticize the war or share information about crimes committed by Russian soldiers. Meanwhile, the city of Vologda extended the practice of “important conversations”—“patriotic” propaganda classes in schools launched after the full-scale invasion of Ukraine—to kindergartens. Both Gladkov and the governor of the Vologda Region, Georgy Filimonov, are known for their active political PR (and Filimonov also for his eagerly ultraconservative views). However, it is likely that such absurd initiatives will also proliferate in other regions in the near future.
— Andras Toth-Czifra