Yermak-McFaul Working Group on Russian Sanctions. Progress Update #1, May 4 compared to Apr 19

Shapoval
14 min readMay 5, 2022

Action Plan on Strengthening Sanctions against the Russian Federation, April 19, 2022

Prepared by KSE Institute

On May 4, the EU presented the 6th package of sanctions (package needs to be voted), which would include:

- Russian oil embargo in 6–8 months. Exceptions are made for Hungary and Slovakia — they should stop purchasing Russian oil by the end of 2023 (Bulgaria and Czech Republic may ask for similar exceptions);

- Sberbank, Rosselhozbank, Credit Bank of Moscow and some other will be sanctioned, including SWIFT cut-off;

- Ban on broadcasting a number of Russian TV channels in the EU;

- Sanctions against Belaruskalii, the Belarusian Potash Company and the oil refinery Naftan;

- “Black lists” against high-ranking military officials and officials that committed military malice near Bucha and who are responsible for the destruction of Mariupol;

- Prohibit the sale or transfer of real estate to citizens and legal entities of RF in the EU.

Additionally, the EU proposes to impose sanctions against Patriarch Kirill.

1. Expand Oil and Gas Sanctions — no new sanctions; Poland refused from RF gas in response to RF cut off

RF. On Apr 27, Gazprom halted gas supplies to Bulgaria (Bulgargaz) and Poland (PGNiG), since both companies refused to pay for gas in rubles. Against this background, gas prices in the EU rose by 21%, to $1350 per thousand m3.

Bulgaria.
Bulgaria has threatened to block transit of Russian gas to Serbia and Hungary. Bulgarian GoV intends to review contracts with Gazprom, including those for the transit of gas through the Turkish Stream pipeline to Serbia and Hungary.

Poland. In response to the cutoff Polish PM said that Poland can already refuse Russian gas. The day before, Poland suggested taxing oil and gas from Russia in Europe. PGNiG called the cutoff of supplies a breach of contract.

Moldova. Moldova hasn’t yet received a response from Gazprom regarding the postponement of the obligation to conduct a debt audit — supply of Russian gas from May 1 is questionable. In case Gazprom stops supplying, the country plans to buy gas from international traders — 7 international companies, including Romania, Poland and the Netherlands.

2. Increase Transportation and Insurance-Related Sanctions — new sanction from USA (ban RF vessels from US ports), Norway (close its borders and ports to Russian trucks and ships)

USA. The White House issued a proclamation banning Russian-affiliated vessels from entering U.S. ports, effective Apr 28, 2022. Banned vessels include Russian-flagged vessels, vessels owned by Russian persons, and vessels that are Russian operated. The order authorizes the U.S. Department of Homeland Security to issue regulations to implement the ban.

The US Department of Commerce’s Bureau of Industry and Security (BIS) issued an order temporarily denying all export privileges for the Russian cargo aircraft carrier Aviastar due to “ongoing violations” of the United States’ export controls on Russia. Aviastar is headquartered in Moscow and provides various cargo services to Russia. The temporary denial order (TDO) states that Aviastar used US-origin aircraft subject to the Export Administration Regulations (EAR) on recent flights into Russia without authorization from BIS, in violation of US controls on the export of aviation-related items to Russia. The TDO prohibits Aviastar from participating in any transactions subject to the EAR, including exports from the United States and re-exports of items subject to the EAR from abroad, for 180 days. In particular, this means that the airlines cannot operate U.S.-manufactured aircraft nor obtain U.S.-manufactured parts for purposes of even routine repair or maintenance on their aircraft, whether manufactured in the United States or elsewhere.

Norway. Norway announced that it will Close its borders and ports to Russian trucks and ships from 7 May. Russian fishing vessels, which often land their catch at ports in northern Norway, will receive exemptions from sanctions.

3. Impose New Financial Sanctions — new sanction from USA (SDN on Transkapitalbank, Investtradebank; virtual currency mining company Bitriver AG + 10 RF subsidiaries ), UK (10 defense companies asset freeze) and Poland (+ 37 entities on top of EU lists), Switzerland (ban on trusts registering by Russians), New Zealand (assets freeze and dealing with securities ban) against the CBR, the Russian Direct Investment Fund (RDIF) plus against 8 largest and 8 other banks linked to oligarchs (8 SOEs), + 4 in defense (1 RF SOE and 1 RB SOE) and 2 in shipbuilding (1 RF SOE))

USA. The US OFAC designated Public JSC Transkapitalbank (“TKB”) and its subsidiary, Investtradebank, on its Specially Designated Nationals and Blocked Persons (“SDN”) List. U.S. persons are broadly prohibited from conducting business with the banksor with entities that are owned 50% or more by the newly designated SDNs without authorization from OFAC. U.S. persons must also formally “block” (freeze and report) any property or interests in property of the banks.

OFAC for the 1st time designated RF virtual currency mining company Bitriver AG and its 10 Russia-based subsidiaries as SDNs. This prohibits U.S. and U.S. citizens from operating on Bitriver or its property and interests, and requires US individuals to formally freeze any property or interests owned by Bitriver that they own or control.

New Zealand. Sanctions (assets freeze and dealing with securities ban) against the CBR, the Russian Direct Investment Fund plus sanctions against 8 largest and 8 other banks linked to oligarchs (8 SOEs), Russia’s defence sector and annexation of Crimea. These major institutions make up approximately 80% of Russia’s total banking assets. The sanctioned entities are: Alfa-Bank, Bank Rossiya, Bank Otkritie (SOE), Black Sea Bank for Development and Reconstruction, Credit Bank of Moscow, Gazprombank (SOE, 50+1), GenBank, Industrial Savings Bank, Novikombank (SOE), Russia Agricultural Bank (SOE), Russian National Commercial Bank (SOE), Sberbank (SOE, 50+1), Sovcombank, SMP Bank, Vnesheconombank SOE, VTB (SOE, 60+1). Regulations designating companies and organizations in the defense sector (Kronshtadt Group, Makeyev Rocket Design Bureau (SOE), Minsk Wheel Tractor Plant (MZKT) (Belarus SOE), Wagner Group) and shipbuilding (United Shipbuilding Corporation (SOE), Zelenodolsk Shipyard Plant) which have contributed to the assault on Ukraine’s sovereignty and territorial integrity.

UK. Added 10[1] defense companies to the sanctions list of asset freeze targets.

On May 4, UK additionally sanctioned 32 entities[2] (subject to an asset freeze) in media, defense, technology and electronics, shipbuilding, among sanctioned — VGTRK, Zvezda, KAMAZ, Mikron. 8 SOEs + 2 with shares in RF ownership.

Poland. Introduced Poland-specific list of designated parties subject to measures not covered by EU Regulations 765/2014 and 269/2014, covering 37 entities[3]. In addition to the measures under EU legislation related to freezing assets and suspension of transactions, the Act also foresees the possibility of exclusion from public procurement proceedings.

Switzerland. With the decision of 27 Apr, Switzerland implemented new measures adopted by the EU on 8 Apr. In particular, support within the framework of a Swiss national programme of Russian organisations which are publicly owned or controlled will be prohibited. With immediate effect, trusts may no longer be registered in Switzerland for Russian nationals or natural or legal persons resident in Russia. Various services for such trusts will also be prohibited.

4. Designate the Russian Federation as a Sponsor of State Terrorism — no new sanctions; USA considers possibility

USA. Biden administration is considering naming Russia a state sponsor of terrorism but officials haven’t determined the Kremlin’s actions meet the legal standard for the designation — Blinken told lawmakers on Apr 27 (Source: WSJ)

5. Strengthen Individual Sanctions against these Categories of Individuals — new sanction from USA, Canada, Australia, EU, UK (+31) and Poland (Putin’s, Lavrov’s daughters, Nabiullina in lists), + New Zealand (+170) + Australia (+76 + 34), Switzerland (+2). No sanctions against Kabaeva

Data from NAZK. As of May 4, 1,486 persons under Western sanctions, 6,997 persons are still not covered.

USA. OFAC designated 29 individuals involved in attempts to evade sanctions imposed by the United States and its international partners on Russia. Among the designated individuals are Deputy Governors of the CBR Mikhail Alekseev and Ksenia Yudaeva, Board members of Bank Otkritie, Konstantin Malofeyev, and military personnel, individuals linked to Bank Otkritie, a network of individuals that support Malofeyev’s activities, including those related to sanctions evasion and misinformation campaigns. Alina Kabaeva, the woman believed to be Putin’s girlfriend and the mother of at least three of his children, avoided sanctions due to a last-minute decision of the National Security Council.

Canada. On 19 April, Canada listed an additional 14 oligarchs, close associates of the Russian regime, and members of their families. This includes President Putin’s two adult daughters and CBR Chief Elvira Nabiullina[1]. On April 26, Canada amended its sanctions measures by designating an additional 203 individuals determined by the Government of Canada to be current senior officials or current or former members of the People’s Councils of the so-called DPR and LPR.

EU. Added Serhiy Vitaliyovich KURCHENKO and Yevgeniy Viktorovich PRIGOZHIN to its Russia sanctions list.

UK. Added 16 individuals[2] to the sanctions list of asset freeze targets.

Important. In its analytics NAZK notes that the UK fast-tracked on 19 individuals and entities in alignment with G7 and the EU to target Russia’s military and defense capabilities. Notable individuals and entities that have been sanctioned: Sergei Korolyov (Federal Security Service of Russia); The CEO of Russian Railways Oleg Belozyorov was also sanctioned, Kalashnikov Concern; Arzamas Machine-Building Plant; Military Industrial Company; GTLK (transport). Family members — asset freeze was imposed on Anzhelika Khan, wife of UK-sanctioned oligarch German Khan. The latest UK sanctions also targeted Russian military officials (Generals) committing atrocities on the front-line in Ukraine, and individuals outside of Putin’s military who are actively supporting his illegal invasion of Ukraine.

On May 4, the UK additionally sanctioned +31 individuals[3] with asset freezes and travel bans. Many of sanctioned individuals are actors from mainstream media organisations (Oleg Dobrodeev (Director General of VGTRK), Alexander Malkevich (General Director of the Saint Petersburg TV channel), Sergey Mikhailov (Director General of the Russian News Agency TASS), Vladimir Sungorkin (Director General and Editor-in-Chief of Komsomolskaya Pravda), Eugeny Poddubny (war correspondent at All-Russian State Television and Radio Broadcasting Company), Alexander Kots (war correspondent for Russian newspaper Komsomolskaya Pravda), Dmitry Steshin (journalist and special correspondent for Komsomolskaya Pravda), propagandist Nailya Asker-zade, mistress of banker Kostin, host Mikhail Leontiev), senior executive officers or member of the board of directors of designated banks — Dmitry Gusev (Chairman of Sovcombank), Irina Kashina, Mikhail Kuchment, Oleg Mashtalyar, Alexey Panferov (all Sovcombank), Mikhail Zadornov (Head of Otkritie Bank), Dmitry Levin, Tatyana Nesterenko, Viktor Nikolaev (all Otkritie Bank)) and political elite (members of the Federation Council of the Russian Federation — Yelena Avdeeva, Viktor Kress, Aleksandr Nekrasov, Valery Ponomaryov, Eduard Rossel, Iliyas Umakhanov, Putin’s aide Maxim Oreshkin).

Poland. Poland-specific list of designated parties subject to measures not covered by EU Regulations 765/2014 and 269/2014 covered 15 individuals[4]. These individuals are added to the list of foreigners whose stay in Poland is undesirable. For 7 of them[5] funds and economic resources are completely frozen, ban to provide, directly or indirectly, and funds or economic resources is imposed. In addition to the EU measures legislation related to freezing assets and suspension of transactions, the Act also foresees the entry on the list of foreigners whose residence in the territory of Poland is undesirable.

Switzerland. On 3 May 2022, the Federal Department of Economic Affairs EAER added Serhiy Vitaliyovich KURCHENKO and Yevgeniy Viktorovich PRIGOZHIN to its sanctions list (financial sanctions + ban on entry and transit). The measures come into force at 6 p.m. on 4 May 2022.

Australia. The Australian GoV imposed sanctions on 147 more people, which include Russian senators, and daughters of Vladimir Putin and Russian Foreign Minister Sergei Lavrov.

On 3 May 2022, the Australian government imposed sanctions on 76 members of the State Duma of the Federal Assembly of the Russian Federation, who voted in favor of the resolution recognizing the independence of “LPR” and “DPR”.

The Australian Government has also imposed targeted financial sanctions and travel bans on 34 senior members of the Russian-led movements in Ukrainian regions Donetsk and Luhansk, the so-called “People’s Council of the People’s Republic of Donetsk” and “People’s Council of the People’s Republic of Luhansk”.

New Zealand. Regulations designating 170 members of the upper house of RF Federation Council, and extending further prohibitions on those already sanctioned.

1. Intensify Sanctions on State-Owned Enterprises — UK (sanctions against 5 defense SOEs), New Zealand (2 RF SOEs, 1 RB SOE in defense and shipbuilding)

UK. Added 4 state owned defense companies plus one with controlling stake 25+1 shares owned by RF[6] to the sanctions list of asset freeze targets.

On May 4, UK additionally sanctioned 32 entities, including 8 SOEs + 2 with shares in RF ownership[7] (subject to an asset freeze) among sanctioned — VGTRK, Avangard JSC, Moscow institute of physics and technology, N.A. Dollezhal order of lenin research and design institute of power engineering JSC, The Dalzavod ship repair centre JSC, Zvezda, KAMAZ.

New Zealand. Regulations designating companies and organizations in the defense sector (Makeyev Rocket Design Bureau (SOE), Minsk Wheel Tractor Plant (MZKT) (Belarus SOE) and shipbuilding (United Shipbuilding Corporation (SOE).

2. Expand Export Controls and Ban Imports — new sanction from UK (import — silver, wood, high-end, export — trade sanctions measures relating to internet services and online media services)

UK. Expanded the list of products facing import bans — silver, wood products and high-end products from RF including caviar. A further package of goods are subject to additional 35% duties, when imported from RF and RF (~ £130 mln worth).

On 29 Apr, the UK introduced new trade sanctions measures relating to internet services and online media services. This instrument introduces requirements that: Social media services, including video sharing platforms, must take reasonable steps to prevent content that is generated, uploaded to or shared by a designated person being encountered by a UK-based user; Internet access services, including fixed and wireless broadband providers, must take reasonable steps to prevent UK-based users from accessing websites provided by a designated person. This will likely take the form of URL blocking; Application stores, including those on smartphones, must take reasonable steps to prevent UK-based users from downloading or otherwise accessing an application provided by a designated person.

The instrument confers powers on the Secretary of State to designate persons to whom these online restrictions will apply. The instrument also confers on the Office of Communications (OFCOM) the power to impose civil monetary penalties, of up to £1 mln on a person who fails to comply with the new trade sanctions. Failing to comply with the new sanctions is also a criminal offense.

On 4 May, the UK announced a ban on services exports to Russia, including management consulting, accounting and PR services.

Switzerland. With the decision of 27 Apr, Switzerland implemented the new measures adopted by the EU on 8 Apr. The new measures include far-reaching sanctions on goods, including a ban on imports of lignite and coal as well as on goods that are important sources of revenue for Russia (e.g. timber, cement, seafood, caviar). In addition, there are export bans on goods that can help strengthen Russia’s industrial capacities (e.g. industrial robots or certain chemical products).

3. Impose Secondary Sanctions — no new sanctions

China. The Chinese UnionPay payment system backs away from Russian banks on secondary sanctions fears.

4. Increase Transparency to Discourage Trade with and Investment in Russia — no new sanctions; USA prepares respective bill

USA. A bill to oblige public companies to disclose their ties to Russia and other aggressor countries was registered.

10. Deepen Coordination of Sanctions and Link Sanctions Relief to Peace and Reconstruction — USA and Canada are preparing legislative acts to use sanctioned assets for compensation to Ukraine

USA. On Apr 29, the Biden Administration announced a legislative proposal aimed at empowering the U.S. GoV to seize and forfeit property linked to Russian elites. Specifically, the proposed system would enhance and streamline the seizure and forfeiture of Russian oligarch assets and provide for the liquidation and redistribution of proceeds to support Ukraine.

Canada. On 02.05, Canada proposed new power to seek forfeiture of sanctioned persons’ assets. Currently, the Special Economic Measures Act (“SEMA”) and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (“Magnitsky Law”) allow the Governor in Council to make orders under certain conditions, such as where a grave breach of international peace of security has occurred or gross and systematic human rights violations have been committed in a foreign state. Such orders may include causing certain property located in Canada to be “seized, frozen, or sequestrated”. The proposed amendments to SEMA would allow proceeds received from the disposition of forfeited property to be used for the following purposes: the reconstruction of a foreign state adversely affected by a grave breach of international peace and security; the restoration of international peace and security; and the compensation of victims of a grave breach of international peace and security, gross and systematic human rights violations or acts of significant corruption.

MONITORING TABLE

[1] Petr Olegovich Aven, Oleg Viktorovich Boyko, Mikhail Maratovich Fridman, Mikhail Safarbekovich Gutseriev, Igor Viktorovich Makarov, Elvira Sakhipzadovna Nabiullina, Sergey Roldugin, Alexander Torshin, German Borisovich Khan, Alexander Ponomarenko, Katerina Vladimirovna Tikhonova, Maria Vladimirovna Vorontsova, Maria Aleksandrovna Lavrova, Yekaterina Sergeyevna Vinokurova.

[2] Belozyorov, Oleg Valentinovich (Chief Executive Officer Of Russian Railways), Bogdanovsky, Nikolay Vaselyevich (First Deputy Chief Of The General Staff Of The Armed Forces Of Russia), Chupriyan, Aleksandr Petrovich, Flyustikov, Valery (Commander Of The Special Operations Forces), Khan, Anzhelika (Wife Of German Borisovich Khan, A Prominent Russian Businessman), Kiva, Ilya (A Former Member Of The Ukrainian Parliament), Konashenkov, Igor Yevgenyevich, Korolyov, Sergei Borisovich, Korotchenko, Igor Yurievich ((1) Chairman Of The Public Council Under The Ministry Of Defence Of The Russian Federation (2) Editor-In chief Of The National Defence Magazine (3) Director Of The Centre For Analysis Of The World Arms Trade (4) Military Rank — Reserve Colonel),
Kuprin, Anton Valerevich (Captain Of The Frigate “Admiral Essen’’ Of The Russian Black Sea Fleet), Obnosov, Boris Viktorovich (Linked To: Tactical Missiles Corporation Jsc), Omurbekov, Azatbek (Commanding Officer Of The Russian 64th Separate Motorised Rifle Brigade), Pimanov, Aleksei Viktorovich ((1) Director General Of Managing Organisation Creative Association Red Star (2) Head Of The Krasnaya Zvezda Media Holding), Romanov, Arkadiy Yurevich, Serdyukov, Andrey Nikolayevich (Commander Airborne Forces Of The Russian Federation), Volozhinsky, Andrei Olgertovich)

[3] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1073104/Notice_Russia_040522.pdf

[4] Bakalczuk Tatiana, Deripaska Oleg, Fridman Michaił, Gucerjew Michaił, Gucerjew Sait-Salam, Kantor Wiaczesław Mosze, Kaspierski Jewgienij, Melniczenko Aleksandra, Melniczenko Andriej, Mordaszow Aleksiej, Nieczajew Aleksiej (Nechayev Alexy Gennadyevich), Nuraliev Boris, Raszidow Timur, Sieczin Igor Iwanowicz (Sechin Igor Ivanovich), Vekselberg Victor.

[5] Bakalczuk Tatiana, Gucerjew Sait-Salam, Kaspierski Jewgienij, Melniczenko Aleksandra, Nuraliev Boris, Raszidow Timur, Vekselberg Victor.

[6] Aleksandrov Scientific research technological institute Niti, Federal state unitary enterprise Dukhov automatics research institute, JSC GTLK, JSC Kalashnikov concern (25+1), Rocket and space center progress JSC.

[7] VGTRK (SOE), ALL-RUSSIAN PUBLIC ORGANIZATION SOCIETY FOR THE PROMOTION OF RUSSIAN HISTORICAL DEVELOPMENT TSARGRAD, ANALITICHESKII TSENTR KATEKHON OOO, AO NII VEKTOR (SOE), AVANGARD JSC (SOE), BAIKAL ELECTRONICS JSC, CHEBOKSARY ELECTRICAL EQUIPMENT PLANT, CROCUS NANO ELECTRONICS (14,32% SOE), FORSS TECHNOLOGY LTD, GARANTEX EUROPE OU, INFOROS, INTEGRAL SPB,IZMASH UNMANNED SYSTEMS, JOINT STOCK COMPANY MIKRON (6.5% SOE), KAMAZ (SOE), KRANARK LLC, MCST JSC, MOLECULAR ELECTRONICS RESEARCH INSTITUTE, JOINT STOCK COMPANY, MOSCOW INSTITUTE OF PHYSICS AND TECHNOLOGY (SOE), MPI VOLNA LLC, N.A. DOLLEZHAL ORDER OF LENIN RESEARCH AND DESIGN INSTITUTE OF POWER ENGINEERING JSC (SOE), OOO VOLGA GROUP, PELLA-MASH LLC, RADIOAVIONICA JSC,RSB GROUP, SOUTHFRONT, STRATEGIC CULTURE FOUNDATION, DALZAVOD SHIP REPAIR CENTRE JSC (SOE), SPECIAL TECHNOLOGY CENTRE LLC, T-PLATFORMS,TSARGRAD OOO, ZVEZDA PJSC (SOE)

[1] Aleksandrov Scientific research technological institute Niti, Central research institute of machine building JSC, Federal state unitary enterprise Dukhov automatics research institute, JSC Arzamas machine-building plant, JSC GTLK, JSC Kalashnikov concern, Llc Military industrial company, Promtech-Dubna JSC, Radiotechnical and information systems concern, Rocket and space centre progress JSC.

[2] VGTRK (SOE), ALL-RUSSIAN PUBLIC ORGANIZATION SOCIETY FOR THE PROMOTION OF RUSSIAN HISTORICAL DEVELOPMENT TSARGRAD, ANALITICHESKII TSENTR KATEKHON OOO, AO NII VEKTOR (SOE), AVANGARD JSC (SOE), BAIKAL ELECTRONICS JSC, CHEBOKSARY ELECTRICAL EQUIPMENT PLANT, CROCUS NANO ELECTRONICS (14,32% SOE), FORSS TECHNOLOGY LTD, GARANTEX EUROPE OU, INFOROS, INTEGRAL SPB,IZMASH UNMANNED SYSTEMS, JOINT STOCK COMPANY MIKRON (6.5% SOE), KAMAZ (SOE), KRANARK LLC, MCST JSC, MOLECULAR ELECTRONICS RESEARCH INSTITUTE, JOINT STOCK COMPANY, MOSCOW INSTITUTE OF PHYSICS AND TECHNOLOGY (SOE), MPI VOLNA LLC, N.A. DOLLEZHAL ORDER OF LENIN RESEARCH AND DESIGN INSTITUTE OF POWER ENGINEERING JSC (SOE), OOO VOLGA GROUP, PELLA-MASH LLC, RADIOAVIONICA JSC,RSB GROUP, SOUTHFRONT, STRATEGIC CULTURE FOUNDATION, DALZAVOD SHIP REPAIR CENTRE JSC (SOE), SPECIAL TECHNOLOGY CENTRE LLC, T-PLATFORMS,TSARGRAD OOO, ZVEZDA PJSC (SOE)

[3] ACRON PAO, AXIOMA DR IT, BARTER COAL, BELOIL Polska, EUROCHEM POLSKA, „FABERLIC BALTIJA SIA” Sp. z o.o., ODDZIAŁ W POLSCE, FABERLIC EUROPE, GO SPORT POLSKA, IRL Polska, KAMAZ, KASPERSKY (KASPERSKY LAB), KASPERSKY Lab Polska, Kaspersky Store, K Dystrybucja, KTK Polska, MAGA DYSTRYBUCJA 2, MAGA FOODS, MEDMIX POLAND (do 3.03.2022 r. — SULZER MIXPAC POLAND), NEGRINIO LIMITED, NORICA HOLDING Sàrl, Novatek Green Energy, OAO NOVATEK, OAO PhosAgro, Opansa Enterprises Limited, PAO Gazprom, PhosAgro POLSKA, PHOSINT LIMITED, Rainbee Holdings Limited, SEVERSTAL DISTRIBUTION, SIA SEVERSTAL DISTRIBUTION, Oddział w Polsce, SUEK Polska, SULZER PUMPS WASTEWATER POLAND, SULZER TURBO SERVICES POLAND, WILDBERRIES, „1C-POLAND”.

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Shapoval

Head of KSE Institute, Member of Editorial Board of VoxUkraine.