Russia Update: Will West Remove Russia from SWIFT After Mariupol?

January 26, 2015
A fire near an apartment building in Mariupol, with St. Nicholas Cathedral in the distance. January 24, 2015. Screen grab from video taken by Azov Battalion.

Welcome to our column, Russia Update, where we will be closely following day-to-day developments in Russia, including the Russian government’s foreign and domestic policies.

The previous issue is here, and see also our Russia This Week story The Guild War – How Should Journalists Treat Russian State Propagandists? and special features ‘Managed Spring’: How Moscow Parted Easily with the ‘Novorossiya’ Leaders, Putin ‘The Imperialist’ A Runner-Up For Time’s ‘Person of the Year’ and It’s Not Just Oil and Sanctions Killing Russia’s Economy, It’s Putin.

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Russian diplomats are lying about the Russian military presence in Ukraine, says an independent Russian journalist. But the West won’t supply the proof of Russian tanks and troops demanded by Moscow.

Unnamed Russian State Media Outlet Reportedly Worked With Accused Spies

We’re still analyzing the Justice Department’s complaint against three alleged Russian spies, one of whom has been arrested in New York City. One piece of the document struck us immediately however — the fact that a Russian state owned news outlet is alleged to have conspired with the accused. On one occasion, one of the accused, Evgeny Buryakov, reportedly helped formulate questions to be used by this news service in intelligence gathering:

Buzzfeed’s Rosie Gray has broken down that part of the document.

The news organization in question, according to the complaint, is known to have assisted in intelligence-gathering efforts before…

Sporyshev told Buryakov that the news organization had asked for three questions on the topic of the New York Stock Exchange, according to a call intercepted by the FBI.

Gray adds this important detail:

The complaint does not name the news organization in question. Russian government-owned news outlets active in the U.S. include RT, which has a Washington-based RT America branch that employs American journalists, RIA-Novosti, and ITAR-TASS, which appointed a former top official at the SVR, Russia’s foreign intelligence agency, to an executive position in 1999. Voice of Russia used to have a bureau in Washington, until it shut down in June 2014. A 2005 book, The KGB’s Poison Factory, by a former officer of the Russian intelligence agency GRU, asserts that RIA-Novosti and ITAR-TASS have continued providing cover to spies since the fall of the Soviet Union.

The Buzzfeed article did not mention that RT has offices in New York.

Buryakov also reportedly posed as an employee at a Russian bank.

Business Insider reports:

The bank where Buryakov allegedly falsely posed as an employee was not named in the complaint. However, the website of Russia’s Vnesheconombank identifies a man named Evgeny Buryakov as a “deputy representative” at the bank’s office on Manhattan’s Madison Avenue. According to the site, that office is the “representative office of Vnesheconombank in the USA.”

The man named Evgeny Buryakov who worked at Vnesheconombank did not immediately respond to messages sent to his email address. Business Insider also called Vnesheconombank’s Manhattan office on Monday. A woman who answered the phone would not confirm whether an employee there had been arrested and referred us to the bank’s press office in Russia.

James Miller

US Charges Russian Spies in New York

The US Department of Justice has charged three Russian men who worked in New York with espionage; two of them who had diplomatic immunity have left the country already and the third is in custody.

The Guardian reports:

Federal prosecutors in New York
have unveiled criminal charges against three men for their alleged
involvement in a spying scheme for Russia’s foreign intelligence

According to a criminal complaint, Evgeny Buryakov, Igor Sporyshev
and Victor Podobnyy conspired in the United States to gather
intelligence on behalf of Russia and to recruit New York City residents to help.

The Daily Beast reports:

The FBI said it arrested three alleged Russian spies in New York on
Monday as part of a ring trying to recruit New York residents and
collect economic intelligence. Evgeny Buryakov, Igor Sporyshev, and
Victor Podobnyy allegedly work for the Russian SVR intelligence service.
In May 2013, they “discussed transmitting to SVR headquarters in
Moscow” intelligence that Buryakov gathered during his cover job as an
employee in the Manhattan office of a Russian bank. Podobnyy’s cover job
was that of a member of the Russian mission to the United
Nations. Sporyshev’s cover was as a trade representative

According to the complaint published by Attorney General Eric Holder on the web site of the Department of Justice:

Attorney General Eric Holder, Assistant Attorney General for National
Security John P. Carlin, U.S. Attorney Preet Bharara for the Southern
District of New York and Assistant Director Randall C. Coleman of the
FBI’s Counterintelligence Division announced charges today against
Evgeny Buryakov, aka “Zhenya,” Igor Sporyshev and Victor Podobnyy in
connection with Buryakov’s service as a covert intelligence agent on
behalf of the Russian Federation (Russia) in New York City, without
notifying the U.S. Attorney General of Buryakov’s status as an agent of
Russia, as required by federal law.  Buryakov was placed under arrest
earlier today in Bronx, New York, and is scheduled to appear before U.S.
Magistrate Judge Sarah Netburn in federal court in Manhattan later
today.  Sporyshev and Podobnyy no longer reside in the United States and
have not been arrested.  By virtue of their prior positions in the
United States on behalf of Russia, both of them were protected by
diplomatic immunity from arrest and prosecution while in the United

“These charges demonstrate our firm commitment to combating attempts
by covert agents to illegally gather intelligence and recruit spies
within the United States,” said Attorney General Holder.  “We will use
every tool at our disposal to identify and hold accountable foreign
agents operating inside this country – no matter how deep their cover.
 I want to thank the dedicated men and women of the FBI’s
Counterintelligence Division and New York Field Office, the National
Security Division’s Counterespionage Section and the U.S. Attorney’s
Office for the Southern District of New York for their skilled handling
of this complex and highly sensitive matter.”

The Justice Department describes how the Russians used tradecraft typical of spies when they scheduled meetings with each other:

These meetings were nearly always preceded by a short telephone call
between Buryakov and Sporyshev, during which one of the men typically
told the other that he had an item to give to him.  Typically, during
these telephone calls, which were intercepted by the FBI, the item in
question was referred to as some non-specific ticket, book, list or
other ordinary item (e.g., umbrella or hat).

Subsequently, at each meeting surveilled by the FBI, Buryakov and
Sporyshev met and sometimes exchanged documents or other small items.
 Notably, despite discussing on approximately 12 occasions the need to
meet to transfer “tickets,” Buryakov and Sporyshev, were – other than
one occasion where they discussed going to a movie – never observed
attending, or discussing in any detail, events that would typically
require tickets, such as a sporting event or concert.  In fact, Buryakov
and Sporyshev used this coded language to signal that they needed to
meet, and then met to exchange intelligence information.

The complaint also details how the alleged Russian spies tried to recruit American university students:

In numerous recorded communications, Sporyshev and Podobnyy discussed
their attempts to recruit U.S. residents, including several individuals
employed by major companies, and several young women with ties to a
major university located in New York City (University-1), as
intelligence sources for the SVR.  On these recordings, the defendants
discussed the potential value of these sources and identified particular
sources by use of a “source name,” which appears to be a coded name. 
In addition, during these recordings, Sporyshev and Podobnyy discussed
the efforts of other SVR agents to recruit a number of other
Russian-origin individuals associated with University-1 as intelligence

For example, Sporyshev and Podobnyy discussed Podobnyy’s efforts to
recruit a male working as a consultant in New York City as an
intelligence source.  During this conversation, Podobnyy explained his
source recruitment method, which included cheating, promising favors and
then discarding the intelligence source once the relevant information
was obtained by the SVR: “This is intelligence method to cheat. . . .
You promise a favor for a favor.  You get the documents from him and
tell him to go [expletive] himself.”

Previously in 2010, the FBI arrested 10 “illegals,” Russians accused of arranging long-term stays in the US for the purpose of espionage, and traded them for captured Americans accused of espionage. Among them was Anna Chapman, an attractive real estate entrepreneur with an extensive network in the US. Chapman later posed on the cover of the Russian version of Maxim magazine in Agent Provocateur lingerie and has been involved in a number of publicity stunts to promote the Kremlin, including a trip to help train Russian troops aiding the separatists in southeastern Ukraine.

‘Government Policy is Police Torture’ – Human Rights Lawyer
EU, US May Impose New Sanctions on Russia After Attack on Mariupol
Kommersant, the Russian business daily, says that following the assault on Mariupol on Saturday by Russian-backed forces in which 30 people wre killed and more than 90 injured, the West is contemplating further sanctions against Russia.

A source close to the US State Department told Kommersant that this might include expelling Russia from the SWIFT system of international banking.

This week, the foreign ministers of 28 countries of the European Union will hold an emergency meeting on Ukraine, to be chaired by Latvia, the current EU chair. Kommersant‘s sources differed in their views about whether this meeting might bring new sanctions. One source admitted (translated by The Interpreter):

“Most likely the ministers will only make a hard statement assessing the situation in the southeast of Ukraine, but will not make decisions on sanctions — the current escalation in Donbass was unexpected for the majority in Brussels, and they don’t have a clear plan of action.”

Until recently, the EU was even considering removing the current sanctions, put in place in March 2014 after the forcible annexation of Crimea, in March of this year. Now that has to be postponed.

Another source said that no sanctions would be imposed, but they would call on the heads of states to coordinate such measures during a February 12 summit or earlier. “There is a potential for expansion of the sanctions,” he said, without giving details.

‘s sources in the EU are convinced that Russia supports the separatists, so it bears responsibility for the escalation of violence in the Donbass:

If before, in the cases of the shelling of civilians in buses in Volnovakh and Donetsk, the OSCE did not directly name those responsible, with the attack on Mariupol, they made an unambiguous statement: the residential areas of Mariupol were shelled from the east and northeast, from areas controlled by the militants.

Federica Mogherini, High Representative of the European Union for Foreign Affairs and Security Policy had an unusually harsh reaction to the Mariupol shelling, especially given that only recently, on January 19, she was calling on her colleagues to think of resuming practical cooperation with Russia.

Last Saturday night, she said:

“I call therefore openly upon Russia to use its considerable influence over separatist leaders and to stop any form of military, political, or financial support. Further escalation…would inevitably lead to a further grave deterioration of relations.”

A Kommersant source explained why Mogherini had made such a sharp statement. After progress achieved last week in the “Normandy” format of the four countries (Russia, Ukraine, Germany and France), they expected the situation would stabilize. This source commented:

Now the EU suspects Moscow of a double game: on the one hand, it takes steps for diplomatic regulation of the crisis, but at the same time, doesn’t renounce support for the separatists who are undermining the efforts of the negotiator.

By contrast, German Foreign Minister Frank-Walter Steinmeier said: “Efforts for de-escalation need to be continued. I hope that – even after the past three days – not everything is lost”.

President Barack Obama said at a news conference in New Delhi where he is meeting with Indian Prime Minister Narendra Modi, that he was “deeply concerned” and that the separatists had “Russian backing, Russian equipment, Russian financing, Russian training and Russian troops”.

He added: “I will look at all additional options that are available to us short of military confrontation and try to address this issue.”

Kommersant’s State Department source said that expulsion from SWIFT “would be very painful for Russia,” and that such measures had been taken by Iran. But the source did doubt that the EU would likely agree to such measures, and then the US would have to act alone.

The only thing the US could do there, however, is prevent mutual SWITF transactions between American and Russian banks, but it could not act on European banks.

The issue of expulsion of Russia from SWIFT has come up before.

In October, in a statement on its website, SWIFT itself (the initials stand for the Belgium-based Society for Worldwide Interbank Financial Telecommunication) said:

SWIFT and its stakeholders have received calls to disconnect institutions and entire countries from its network -– most recently Israel and Russia. SWIFT will not make unilateral decisions to disconnect institutions from its network as a result of political pressure.

Any decision to impose sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators. SWIFT will not respond to individual calls and pressure to disconnect financial institutions from its network.

So SWIFT would only enforce sanctions against Russia once the EU decided to impose them, as it did with Iran.

Another Kommersant source close to the State Department said, “the US will try as always to advance a diplomatic decision although so far that has not had the necessary effect. But as for another route [besides sanctions], our possibilities are far from exhausted. Whoever thinks that is mistaken,” said the source.”

Emergency meetings will also be held at OSCE and NATO. A source within NATO told Kommersant that “the mood there is very serious, a lot of questions have accumulated for Russia. We get the feeling that Russia takes us for fools. But Russia must understand: complete loss of faith on the part of the West will have very negative consequences.

The UN Security Council was unable even to issue a presidential statement to condemn the Mariupol attacks, as Russia and the US could not agree on the text.

President Petro Poroshenko has also been working the phones with world leaders, and has reached an agreement to go back to the “Geneva format,” which means the EU and US participate in the peace talks. A source in the Ukrainian presidential administration said, “For us, it is fundamentally important that the US be involved in the talks. Unlike Paris and Berlin, they do not depend on Moscow regarding energy deliveries or anything else.”

— Catherine A. Fitzpatrick