I. U.S. and Russian priorities for the bilateral agenda

Nuclear security:

• “We have seen the rise of vicious non-state groups with no regard for human life. They actively seek weapons of mass destruction, I am sure. And these weapons are increasingly accessible,” U.N. Deputy Secretary-General Jan Eliassons said at the  Security Council open debate on stopping the proliferation of weapons of mass destruction by non-state actors on Dec. 15. “The nightmare scenario of a hack on a nuclear power plant causing uncontrolled release of ionizing radiation is growing,” according to Eliassons. (U.N., 12.15.16)
• U.S. Special Operations Command (SOCOM) will take a new, leading role coordinating the Pentagon's effort to counter weapons of mass destruction. SOCOM has long had a hand in efforts to counter weapons of mass destruction and trains extensively to respond in case what is called a "loose nuke" ends up in the hands of terrorists. (The Washington Post, 12.23.16)
• The RT-1 reprocessing plant at the Mayak Production Association in the Russian town of Ozersk received the first shipment of spent fuel from the VVER-1000 reactor. According to the press release issued by the company, the spent fuel shipment from the Rostov nuclear power plant was delivered to Mayak on Dec. 16. (IPFM Blog, 12.19.16)

Iran’s nuclear program and related issues:

• No significant developments.

Military issues, including NATO-Russia relations:

• A Pentagon memo outlining the incoming Trump administration’s top “defense priorities” identifies U.S. President-elect Donald Trump’s primary concerns as defeating the Islamic State, eliminating budget caps, developing a new cybersecurity strategy and finding greater efficiencies. But the memo, obtained by Foreign Policy, does not include any mention of Russia, which has been identified by senior military officials as the No. 1 threat to the United States. (Foreign Policy, 12.20.16)
• U.S. President-elect Donald Trump said: "Let it be an arms race," when asked for clarification of his Dec. 22 Twitter post calling for an expansion of U.S. nuclear weapon capabilities. "We will outmatch them at every pass and outlast them all," Trump said in an interview with MSNBC, the network reported one day after the tweet that alarmed non-proliferation experts. On Dec. 22, Trump said: "The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes." Trump spokesman Sean Spicer said that there would not be an arms race because the president-elect would ensure that other countries trying to step up their nuclear capabilities, such as Russia and China, would decide not to do so. (Reuters, 12.23.16)
• Russian President Vladimir Putin said on Dec. 23 that a statement by U.S. President-elect Donald Trump that the United States should expand its nuclear capabilities was not a surprise because Trump had said the same thing during the election campaign. Putin said Russia was not seeking a new arms race or to develop new nuclear warheads, but was instead seeking ways to improve its armaments so that they could pierce missile defenses. Putin also said that any new Russian nuclear weapons would stay within the limits of existing treaties. Repeating his Dec. 22 comments, Putin said that the Russian armed forces were now strong enough to repulse any attacker. “Of course the U.S. has more missiles, submarines and aircraft carriers, but what we say is that we are stronger than any aggressor, and this is the case,” Putin said. On Dec. 22, Putin told an annual end-of-year meeting with defense chiefs: “We can say with certainty: We are stronger now than any potential aggressor. Anyone!” But on Dec. 23, he hinted that he was not including the U.S. as a potential aggressor. "The Russian Federation today is stronger than any potential—listen carefully—aggressor. This is very important. I did not say this by accident yesterday," he said. "What is an aggressor? It is someone who can potentially launch an attack against the Russian Federation." (AP, 12.22.16, New York Times, 12.23.16, RFE/RL, 12.23.16)
• Douglas Lute, the U.S. ambassador to NATO, told ABC news on Dec. 18: “I don’t believe that anyone in Russia today intends to attack NATO.” But Lute also said “I worry about attempts by Russia ... to influence political campaigns, flooding allied capitals, the news media with misinformation or disinformation and all these with an attempt to fragment internally our societies, perhaps distort our political processes and to sow discontent and a lack of cohesion across the allies.” (AP, 12.19.16)
• Russia will expand nuclear missile patrols near its borders with Europe as it develops its military to respond to increasing “threats” in 2017, senior commanders have announced. The commander of the Strategic Rocket Forces, Sergei Karakayev, told journalists that in 2016, his service received everything necessary for the deployment of 23 RS-24 Yars missiles, both silo-based and road-mobile. The missiles were deployed to five regiments: the road-mobile missiles to divisions in Yoshkar-Ola, Irkutsk, Novosibirsk and Nizhny Tagil, the silo-based missiles to Kozelsk. (Russianforces.org, 12.16.16, Independent, 12.16.16)
• NATO ambassadors welcomed a Finnish proposal for a March meeting with Russian experts to develop new air-safety measures in the Baltic Sea region. NATO ambassadors met with Russia's envoy to the alliance, Alexander Grushko, on Dec. 19 for a lengthy discussion of air-safety measures, Ukraine and Afghanistan. Grushko said after the meeting that working within the Baltic group represents a "professional, de-politicized approach" to air safety. The ambassadors also discussed transparency over military exercises. In spite of the meeting, NATO and Russia remain at loggerheads over Ukraine, the alliance’s top official said on Dec. 19. (Wall Street Journal, 12.19.16, AP, 12.19.16)
• Russian state media is reporting that the Kremlin has said nearly all communication channels between the U.S. and Russia are frozen. “Almost every level of dialogue with the United States is frozen. We don’t communicate with one another, or we do so minimally,” Kremlin spokesman Dmitry Peskov said. (Independent, 12.21.16)
• U.S. President-elect Donald Trump has picked Vincent Viola to be secretary of the army. Viola founded several businesses, including Virtu Financial, an electronic trading firm. (RFE/RL, 12.20.16)

Missile defense:

• By removing a single word from legislation governing the military, the U.S. Congress has laid the groundwork for both a major shift in U.S. nuclear defense doctrine and a costly effort to field space-based weaponry. Bipartisan majorities in Congress have removed the word “limited” from the nation’s missile defense policy. (Los Angeles Times, 12.21.16)

Nuclear arms control:

• No significant developments.

Counter-terrorism:

• Russian President Vladimir Putin vowed to step up the fight against terrorism after the assassination of Russia’s ambassador in the Turkish capital of Ankara.  Ambassador Andrey Karlov was assassinated at an Ankara art exhibit on the evening of Dec. 19 by a Turkish special forces police officer shouting “God is great!” and “don’t forget Aleppo, don’t forget Syria!” in what Russia called a terrorist attack. The gunman also wounded at least three others in the assault before he was killed by other officers in a shootout. Karlov got a hero's funeral in his home country, with President Vladimir Putin placing flowers by his coffin. U.S. President-elect Donald Trump called the shooting “a violation of all rules of civilized order.” He said a “radical Islamic terrorist” had assassinated the diplomat. U.S. Secretary of State John Kerry condemned the attack and offered condolences to Moscow. China’s foreign minister Wang Yi called the killing a “barbaric act of terrorism.” The U.N. Security Council condemned “in the strongest terms” the “terrorist attack” and called for the perpetrators, organizers and sponsors to be brought to justice. A team of 18 Russian investigators landed in Ankara to look into the shooting of the slain envoy. Turkish and Russian investigators will jointly probe the attack on Karlov, the first Moscow envoy to be killed in his post in almost 90 years. Turkey has informed the United States that it believes followers of the U.S.-based Muslim cleric Fethullah Gulen were responsible for the assassination. Gulen denied any responsibility. For more than 10 years the Turkish authorities have not allowed the Zaslon special squad to protect Russian diplomats in the country, despite the fact that its main objective is to guarantee security for embassy workers.  (Bloomberg, 12.20.16,  RFE/RL, 12.20.16, The Moscow Times, 12.20.16, New York Times, 12.19.16, RFE/RL, 12.20.16, AP, 12.20.16, New York Times, 12.20.16,  AP, 12.20.16, Bloomberg, 12.20.16, TASS, 12.21.16, RFE/RL, 12.22.16, Rosbalt/RBTH, 12.22.16, RFE/RL, 12.21.16)
• The Islamic State has claimed responsibility for a shootout with police in Russia’s Chechen republic, the online monitoring organization SITE Intelligence Group has reported. Gunmen opened fire on traffic police in the Chechen capital of Grozny on two separate occasions on the evening of Dec. 17 and during the afternoon on Dec. 18. Three police officers were killed in the incident, Chechen officials confirmed. The Kremlin-backed head of Chechnya, Ramzan Kadyrov, had indicated on Dec. 18 that a total of 11 gunmen were killed. Earlier, authorities in Chechnya said they had determined that the alleged leader of the group had ties to IS. Law-enforcement officials said on Dec. 19 that Said-Ibragim Ismailov, who was among seven suspected militants killed in the violence, had been in online contact with what they called his commander in Syria. (The Moscow Times, 12.20.16, RFE/RL, 12.19.16)
• Russian student Varvara Karaulova has been jailed for 4 1/2 years after being found guilty of attempting to join the Islamic State. (The Moscow Times, 12.22.16)
• Russian President Vladimir Putin has expressed condolences to German Chancellor Angela Merkel and President Joachim Gauk over the tragedy at a Christmas market in Berlin, the Kremlin press service said on Dec. 20. At least 12 people were killed and about 50 injured on the night of Dec. 19 when a truck plowed into the market. (TASS, 12.20.16)
• "Ten years ago you wouldn't have found Kalashnikovs in Western Europe," said Nils Duquet, senior weapons researcher at the Flemish Peace Institute. "For criminals, Kalashnikovs are not that interesting. You can't really rob a store with it," said Duquet. "But for terrorists, Kalashnikovs are ideal. They kill many people in a short time frame." (The Washington Post, 12.20.16)

Conflict in Syria:

• Russian President Vladimir Putin says it’s necessary to establish a cease-fire across the entire territory of Syria, to be followed by peace talks. Putin, speaking at an end-of-year news conference Dec. 23, said that now that Syrian government forces have taken full control of Aleppo, “the next stage should be a cease-fire on the entire territory of Syria and the launch of talks on a political settlement.” Putin said on Friday that Russia, Iran, Turkey and Syrian President Bashar al-Assad had agreed that the Kazakh capital of Astana should be the venue for new talks to try to resolve the conflict in Syria. Putin also said the evacuation of Aleppo would not have been possible without the help of Russia, Iran and Turkey or the good will of Assad. At least 34,000 people, including more than 4,000 rebel fighters, were evacuated from eastern Aleppo in a weeklong operation. (Reuters, 12.23.16, AP, 12.23.16, RFE/RL, 12.23.16)
• Russia, Iran and Turkey are ready to act as guarantors to a future settlement between the Syrian government and the opposition, Russian Foreign Minister Sergei Lavrov said on Dec. 20, as hundreds more residents left the opposition’s last foothold in eastern Aleppo. The United States was notably absent from the meeting between the foreign ministers of Turkey, Russia and Iran. These foreign ministers said in Moscow on Dec. 20 that they’d agreed on a joint approach to Syria that includes pressing for peace talks and a cease-fire. Lavrov then declared that there was now a consensus that regime change should not be the priority in Syria, and he read a joint declaration by the three foreign ministers that affirmed a dedication to Syrian sovereignty, territorial integrity, opposition to terrorism and commitment to a secular and pluralistic Syrian political structure. There was no mention about the fate of Assad.  (AP, 12.20.16, Bloomberg, 12.20.16, TASS, 12.20.16, The Washington Post, 12.22.16)
• The United States has welcomed an agreement by Russia, Iran and Turkey to work toward drafting a peace deal in Syria, but expressed some skepticism that it would come to pass. U.S. Secretary of State John Kerry has earlier clashed inside the administration with Defense Secretary Ashton Carter. Kerry negotiated an agreement with Russia to share joint military operations, but it fell apart. "Unfortunately we had divisions within our own ranks that made the implementation of that extremely hard to accomplish," Kerry said. "But I believe in it, I think it can work, could have worked.” “It’s late now obviously because of what's happened to Aleppo," he said. "But the fact is we had an agreement in which Russia gave us a veto over their flights and over what they were doing in the area, had we set up a joint cooperative effort." (The Boston Globe, 12.18.16, RFE/RL, 12.21.16)
• U.S. President Barack Obama called on Dec.16 for access to humanitarian aid and impartial international observers in the besieged Syrian city of Aleppo and said "this blood and these atrocities" are on the hands of Russia, Iran and the Assad regime. The U.N. Security Council has unanimously adopted a resolution stipulating the deployment of international observers to Syria’s Aleppo in order to coordinate the evacuation of civilians from the war-torn eastern part of the city. (TASS, 12.19.16, Wall Street Journal, 12.16.16)
• After months of behind-the-scenes wrangling, the U.S. Congress has produced new bipartisan legislation on Syria that combines input from the House and Senate. The legislation, introduced this month by Sens. Marco Rubio (R-Fla.) and Robert P. Casey Jr. (D-Pa.) would sanction the Assad regime, Russia and Iran for war crimes and crimes against humanity in Syria while providing a framework for U.S. assistance to Syria going forward. (The Washington Post, 12.18.16)
• The U.N. General Assembly has voted to establish an investigative body that will assist in documenting and prosecuting the most serious violations of international law in Syria, including possible war crimes and crimes against humanity. The 193-member world body adopted a resolution Dec. 21 by a vote of 105 to 15 with 52 abstentions over strenuous objections from Syria and Russia. (AP, 12.21.16)
• Russian Defense Minister Sergei Shoigu said Russian aircraft had flown 18,800 sorties in Syria since the start of the Kremlin's operation there last year, destroying 725 training camps, 405 sites where weapons were being made and killing 35,000 fighters. (Reuters, 12.23.16)
• Ali Shamkhani, the secretary of Iran's Supreme National Security Council, has revealed that Iran and Russia are sharing a military base in Syria where they are coordinating their support for Syrian President Bashar al-Assad's regime. He said "the use of Iran's air space" by Russia earlier in 2016 was part of the same framework of cooperation. (RFE/RL, 12.20.16)
• Russian special-operations forces have played a pivotal part in the Syrian ground offensive to retake Aleppo, a role shielded by secrecy about their operations there. Russian special forces have been operating in Aleppo for almost two months, helping the Syrian army with a focus on targeting rebel leaders in the eastern half of the city. (Wall Street Journal, 12.16.16)
• Maj. Sanal Sachirov, commander of a Russian airborne battalion, has been killed in Syria, the news site Meduza reported Dec. 19. Sachirov’s funeral was held on Dec. 13 in the southern Russian village of Yashkul. News of the death of a Russian officer in Syria first appeared on social media networks on Dec. 12, but could not be confirmed. Sachirov served in the 56th Separate Airborne Brigade stationed in the town of Kamyshin in the Volgograd region. On Dec. 16, Meduza confirmed the death of another Russian serviceman Eduard Sokurov. He was posthumously awarded a medal for courage. Sokurov was reportedly killed in Syria on Oct. 1, 2015. (The Moscow Times, 12.19.16)
• On Dec. 9, the Kremlin marked the Day of Heroes of the Fatherland with a lavish event. The guests included Dmitry Utkin, who uses the nom de guerre "Vagner" and is believed to be the head of an unregistered private military contracting agency called ChVK Vagner. At least 600 mercenaries are estimated to have fought with Vagner in Syria since 2014. (RFE/RL, 12.16.16)
• Four Syrian organizations have accused Russia of committing or being complicit in war crimes in Syria, saying Russian air strikes in the Aleppo area had killed 1,207 civilians, including 380 children. (RFE/RL, 12.16.16)
• Russia is fighting on the wrong side in Syria and has turned close neighbor Ukraine into a "hostile state" through its aggression, Kremlin foe Aleksei Navalny has said in an interview. (RFE/RL, 12.21.16)

Cyber security and allegations of Russia’s interference in U.S. elections:

• Brushing off accusations that Russia interfered in U.S. elections, Russian President Vladimir Putin said Dec. 23 that the U.S.’s Obama administration and the Democratic Party were attempting to blame their electoral failure on "external factors." "The Democratic Party lost not only the presidential elections, but elections in the Senate and Congress … Is that also my work?" Mr. Putin said at his annual press conference. “Nobody believed he would win except for us," he said of U.S. President-elect Donald Trump. Putin praised Trump for “keenly” feeling public sentiment to win the election. (Wall Street Journal, 12.23.16, AP, 12.23.16)
• Determined to stop Russia's interference in the presidential campaign, at least one of U.S. President Barack Obama's senior advisers urged him to make the ultimate threat to Russian President Vladimir Putin: Mess with the vote and we will consider it an act of war. But Obama opted not to issue a warning that specific when he spoke to Putin about the hacking during a September meeting at the G-20 summit in China. A month later, the U.S. used the latest incarnation of an old Cold War communications system—the so-called "Red Phone" that connects Moscow to Washington—to reinforce Obama's September warning that the U.S. would consider any interference on Election Day a grave matter. (NBC News, 12.19.16)
• Asked directly about statements by U.S. President Barack Obama that he had warned Russian President Vladimir Putin to stop hacking in the United States, Putin said that he would not reveal the contents of a private conversation. Russian presidential spokesman Dmitry Peskov has called on the White House to present the Kremlin with proof of Russian interference in the U.S. presidential elections. "It's time to either stop talking about [these claims] or present some evidence. Otherwise it looks obscene," Peskov told the RIA Novosti news agency on Dec. 23. (The Moscow Times, 12.16.16, New York Times, 12.23.16)
• Ben Rhodes, the deputy national security adviser to U.S. President Barack Obama, said in a Dec. 15 interview with MSNBC that the cyberattacks, which U.S. intelligence has accused Russia of directing, would have required Russian President Vladimir Putin's approval. (RFE/RL, 12.15.16)
• Over the past four months, American intelligence agencies and aides to U.S. President Barack Obama assembled a menu of options to respond to Russia's hacking during the election, ranging from the obvious—exposing Russian President Vladimir Putin's financial ties to oligarchs—to the innovative, including manipulating the computer code that Russia uses in designing its cyber weapons. But while Obama vowed on Dec. 16  to ''send a clear message to Russia'' as both a punishment and a deterrent, some of the options were rejected as ineffective, others as too risky. The idea of exposing Putin's links to oligarchs was set aside after some aides argued that it would not come as a shock to Russians. Still, there are proposals to cut off leaders in Putin's inner circle from their hidden bank accounts in Europe and Asia. There is an option to use sanctions under a year-old executive order to ban international travel for senior officials in the Main Intelligence Directorate (GRU), the Russian military intelligence unit. (New York Times, 12.18.16)
• U.S. Senate Majority Leader Mitch McConnell is rejecting calls for a special Senate investigative committee focused on possible interference in U.S. elections by Russia and other countries. McConnell says a finding by U.S. intelligence officials that Moscow hacked Democratic emails in a bid to help U.S. President-elect Donald Trump’s campaign “is a serious issue, but it doesn’t require a select committee.” Senators including Chuck Schumer (D-N.Y.) and John McCain (R-Ariz.) have called for a special Senate committee to investigate efforts by Russia, China and Iran to meddle in U.S. elections. (AP, 12.20.16)
• FBI Director James B. Comey and Director of National Intelligence James R. Clapper Jr. are in agreement with a CIA assessment that Russia intervened in the 2016 election in part to help U.S. President-elect Donald Trump win the White House, officials disclosed Dec. 16, as U.S. President Barack Obama issued a public warning to Moscow that it could face retaliation. (The Washington Post, 12.17.16)
• The director of the Central Intelligence Agency (CIA), John Brennan, is warning against in-kind retaliation by the U.S. government for Russian hacking during the election."I don't think we should resort to some of the tactics and techniques that our adversaries employ against us. I think we need to remember what we're fighting for. We're fighting for our country, our democracy, our way of life and to engage. And the skullduggery that some of our opponents and adversaries engage in, I think is beneath this country's greatness." (NPR, 12.22.16)
• Fresh signs emerged Dec. 18 that U.S. President-elect Donald Trump could embrace the intelligence community's view that the Russians were behind a computer-hacking operation aimed at influencing the November election. Senior Trump aide Reince Priebus said Trump could accept Russia's involvement if there is a unified presentation of evidence from the Federal Bureau of Investigation (FBI) and other agencies. Priebus said he couldn't predict how Trump might respond if the intelligence community and law enforcement presented him with a unified report about the alleged Russian hacking operation. (Wall Street Journal, 12.18.16)
• Russian hackers tried to penetrate the computer networks of the Republican National Committee using the same techniques that allowed them to infiltrate its Democratic counterpart, according to U.S. officials who have been briefed on the attempted intrusion. But the intruders failed to get past security defenses on the RNC's computer networks, the officials said. And people close to the investigation said it indicated a less aggressive and much less persistent effort by Russian intelligence to hack the Republican group than the Democratic National Committee. Only a single email account linked to a long-departed RNC staffer was targeted. (Wall Street Journal, 12.16.16)
• “Where’s the evidence?” asked Kellyanne Conway, close Trump adviser. Asked about U.S. President Barack Obama’s vow to retaliate against the Russians, Conway said: “It seems like the president is under pressure from Team Hillary, who can’t accept the election results.” (The Washington Post, 12.17.16)
• Former U.S. President Bill Clinton voted for his wife, Hillary, as a New York Electoral College member on Dec. 19 and afterward blamed "the Russians" and the FBI for her loss to U.S. President-elect Donald Trump. (RFE/RL, 12.20.16)
• Former Defense Secretary Bob Gates said Dec. 18 he still wasn't convinced that Russians were trying to specifically aid U.S. President-elect Donald Trump, but he said their involvement in the operation seems undeniable. (Wall Street Journal, 12.18.16)
• James Woolsey, a national security adviser to U.S. President-elect Donald Trump who served as CIA director under former U.S. President Bill Clinton, said on ABC’s “This Week” that “there’s [a] strong chance the Russians are behind it.” (Bloomberg, 12.19.16)
• John Podesta, speaking on NBC on Dec. 18, teased the idea of collusion between U.S. President-elect Donald Trump’s advisers and Russia as an “open question,” something senior Trump aide Reince Priebus rejected as “insane.” “Of course we didn’t interface with the Russians,” Priebus said. “This whole thing is a spin job.” (Bloomberg, 12.19.16)
• In June, CrowdStrike disclosed that a Russian cyber group it dubbed Fancy Bear used malware to gain access to the U.S. Democratic National Committee. Since then, CrowdStrike researchers have discovered a version of the same code designed to infiltrate an Android mobile application used by Ukrainian artillery forces to rapidly pinpoint targeting data for the D-30 Howitzer, a Soviet-era weapon, Dmitri Alperovitch, CrowdStrike’s chief technology officer, said in a phone interview. (Bloomberg, 12.22.16)
• Groups that hacked the U.S. Democratic National Committee are active in France, the country’s cyber-security watchdog said, urging political parties to put up defenses ahead of next year’s presidential election. (Bloomberg, 12.22.16)
• Former National Security Agency contractor Edward Snowden has remained in contact with Russian intelligence services since he arrived in Moscow three years ago, according to a declassified report on a congressional investigation released Dec. 22. (AP, 12.22.16)
• In a twist on the peddling of fake news to real people, researchers say a Russian cyber forgery ring has created more than half a million fake internet users and 250,000 fake websites to trick advertisers into collectively paying as much as $5 million a day for video ads that are never watched. (New York Times, 12.21.16)

Energy exports from CIS:

• Representatives of 12 Russian oil companies will form a working group to monitor implementation of agreements on oil production reduction in the first half of 2017. (TASS, 12.16.16)

Bilateral economic ties:

• No significant developments.

Other bilateral issues:

• Russian President Vladimir Putin says he hopes to have a meeting with U.S. President-elect Donald Trump and discuss how to improve ties. Putin, speaking at a news conference Dec. 23, said the meeting could happen after Trump completes forming his team. The Russian leader says he agrees with Trump’s assessment of the current low level of U.S.-Russian relations, adding that they “can’t be worse.” Putin has also sent a holiday letter to Trump. The letter, dated Dec. 15 and released by Trump on Dec. 23, expresses desire for greater cooperation between the two countries. Trump says he hopes the U.S. and Russia will be able to “live up to” the overtures expressed by Putin and that “we do not have to travel an alternate path.” (AP, 12.23.16, Politico, 12.23.16)
• The U.S. government says it has extended the economic sanctions on Russia to include eight more entities and seven individuals linked to the annexation of Crimea. Six of these people were designated for helping to provide support to Bank Rossiya, which was sanctioned in 2014 for providing material support to a senior Russian official. The seventh is Yevgeny Prigozhin, who is accused of having links to a company building a military base near the Russia-Ukraine border. An official close to the Russian Defense Ministry said that Prigozhin was involved in one of Russia's few attempts to create a private military company, which operated in Ukraine and later in Syria. The companies that are sanctioned include Institut Stroiproekt, a Russian highway construction company, Russian government-sponsored Crimean Railway and the Crimean Ports company. (AP, 12.20.16, Wall Street Journal, 12.21.16)
• Russian President Vladimir Putin’s spokesman Dmitry Peskov has criticized the United States for targeting additional individuals and organizations with sanctions over Moscow’s aggression in Ukraine and suggested the Kremlin would respond in kind. "We reserve the right to choose a time, place and format of response in the form that suits us," Russian Deputy Foreign Minister Sergei Ryabkov said, appearing to mimic what U.S. President Barack Obama said last week about a pending U.S. response to alleged Russian hacking during the 2016 presidential election. (RFE/RL, 12.21.16, Wall Street Journal, 12.21.16)
• The U.S. State Department has unexpectedly softened sanctions against Russia’s state arms exporter in order to buy new military reconnaissance equipment. Washington apparently wants to know if the Russians have created a digital reconnaissance camera that is better than its U.S. equivalents and has made amendments to the sanctions list in order to purchase the Russian technology. (Vzglyad/RBTH, 12.16.16)
• During the next 12 months, the U.S. will start easing the sanctions imposed over the showdown in Ukraine in 2014, according to 55% of respondents in a Bloomberg survey, up from 10% in an October poll. Without the restrictions, Russia’s economic growth would get a boost equivalent to 0.2 percentage point of gross domestic product (GDP) next year and 0.5 percentage point in 2018, according to the median estimates in the poll. (Bloomberg, 12.20.16)
• U.S. President-elect Donald Trump’s pick for secretary of commerce, Wilbur Ross, has been a business partner with Russian oligarch Viktor Vekselberg in a major financial project involving the Bank of Cyprus. (Mother Jones, 12.19.16)
• U.S. President-elect Donald Trump’s national security adviser, Michael Flynn, partnered this year with a controversial technology company co-run by a man once convicted of trying to sell stolen biotech material to Russia’s KGB. Subu Kota, who pleaded guilty in 1996 to selling the material to an FBI agent posing as a Russian spy, is one of two board directors at the Boston-based company Brainwave Science. (Bloomberg, 12.23.16)
• Rep. Dana Rohrabacher (R-Calif.) is finding himself newly relevant, after nearly three decades in Washington, as Donald Trump's presidential win provides his out-of-the-mainstream views on Russia a new foothold. Rohrabacher, 69, declined to comment specifically on speculation that he might be appointed Trump's ambassador to Russia, saying only that Trump’s transition team has discussed several possibilities with him. (The Washington Post, 12.18.16)
• Brent Scowcroft, national security advisor to former U.S. President George H. W. Bush, said: "Gorbachev was doing our work for us,” with his reforms “undermining what kept it [the USSR] together." (RFE/RL, 12.22.16)
• Russia's popularity among Americans has again dropped to Cold War-era depths, according to a poll from the Chicago Council on Global Affairs released Dec. 21. The poll found Americans giving Russia an average rating of 32 when asked to rate their feelings toward Russia from 0 to 100. That score is down from an average of 40 in the organization’s June survey and marks the lowest score on this measure since 1986, when Russia’s rating stood at 31. (The Washington Post, 12.21.16)
• Teva Pharmaceutical Industries Ltd. agreed to pay $519 million to U.S. authorities after admitting to paying bribes in Russia, Ukraine and Mexico to boost sales. (Bloomberg, 12.22.16)
• After a long courtship between the California separatist movement’s Yes California Independence Campaign and the Kremlin-funded Anti-Globalization Movement of Russia, the world is getting its first-ever “Californian embassy.” (The Moscow Times, 12.16.16)
• A dedicated center for popularizing the Russian language has been opened in Washington D.C., according to an agreement signed on Dec. 15 between Russia's Pushkin State Russian Language Institute and Metaphor, a U.S.-based academic center for Russian language and culture. (RIA Novosti, 12.16.16)
• Patriot News—whose postings were viewed and shared tens of thousands of times in the United States—is among a constellation of websites run out of the United Kingdom that are linked to James Dowson, a far-right political activist who advocated Britain’s exit from the European Union and is a fan of Russian President Vladimir Putin. (New York Times, 12.17.16)

II. Russia’s domestic news

Politics, economy and energy:

• Russian President Vladimir Putin says he will decide later whether to seek another six-year term in 2018. Putin, speaking at the end-of-year news conference on Dec. 23 that lasted for several hours, said he will “look at what will be going on in the country and in the world” to make a decision. Putin also suggested he would not move the next presidential election, due to be held in March 2018, up to 2017. Kremlin spokesman Dmitry Peskov says that he does not know whether President Vladimir Putin plans to seek reelection in 2018. (RFE/RL, 12.23.16, AP, 12.23.16, RFE/RL, 12.21.16)
• The influential speaker of Russia's lower house of parliament has suggested opposition politician Aleksei Navalny is not eligible to run for president in 2018. (RFE/RL, 12.22.16)
• President Vladimir Putin said Russia’s economy is returning to growth and there are signs that real wages are improving as the country emerges from its longest recession this century. Gross domestic product (GDP) will likely shrink by 0.5% to 0.6% in 2016, rather than a previously forecast 1%, while the budget deficit will be 3.7% this year and is “absolutely acceptable,” Putin said.  (Bloomberg, 12.23.16)
• Russians' real disposable income has fallen by 12.3% since the beginning of the economic crisis in 2014.  In May 2016 the average monthly salary in Russia fell to $500, which is below the average monthly salary in China, according to Russia's largest bank, Sberbank. (RBTH, 12.23.16)
• Last week saw the biggest inflows into Russian equity funds since 2011. Ten-year government bond yields are down to 8.5% from 14% at the start of 2016; the stock market is up almost 30% in local currency terms and nearly 50% in dollar terms as the rouble has strengthened significantly. (Financial Times, 12.20.16)
• Russia’s largest bank, Sberbank, plans to close up to half of its branches over the next five years, the company’s CEO has announced.  (The Moscow Times, 12.21.16)
• En+ Group Ltd., the commodity business controlled by Russian billionaire Oleg Deripaska, is considering going public next year amid a recovery in the industry, according to people familiar with the matter. (Bloomberg, 12.22.16)
• Russia will start supplying natural gas to Crimea in the coming days, Russian President Vladimir Putin said Dec. 23. (Reuters, 12.23.16)
• Physicists from the Moscow Institute of Physics and Technology (MIPT) and the Joint Institute for High Temperatures (JIHT) of the Russian Academy of Sciences have described the mobility of line defects, or dislocations, in uranium dioxide. This, they announced this week, will enable future predictions of nuclear fuel behavior under operating conditions. (World Nuclear News, 12.23.16)
• Russians will soon need a prescription to buy medicines which contain alcohol in a bid to stop them from being used as cheap alternatives to vodka. The crackdown follows the death of more than 70 people in a mass poisoning in the Siberian city of Irkutsk. (The Moscow Times, 12.22.16)
• The percentage of Russians who regretted the Soviet collapse has dropped below 50% only once since 1992: in 2012, when it hit 49%, according to the Levada Center. In the most recent polling, about 56% of Russians say they regret its fall. (The Washington Post, 12.21.16)
• The number of Russians who think media reports are false or impartial has increased from 24% in 2015 to 48% in 2016, a report by Russian journalism charity Mediastandart has revealed. (The Moscow Times, 12.19.16)

Defense and Aerospace:

• In 2007, Russia spent 2.7% of its gross domestic product (GDP) on defense, but the figure grew to 4.7% in 2016, according to Russian President Vladimir Putin. In 2015, Russia spent about $52 billion on its military. Putin said that the proportion would gradually decline to 2.8% again by 2019. (New York Times, 12.23.16)
• Russia successfully flight tested a new missile capable of knocking out strategic U.S. communications and navigation satellites, according to U.S. Pentagon officials. (Washington Free Beacon, 12.21.16)
• On Dec. 23, 2016 the Sevmash ship-building plant began construction on the eighth Project 955 Borei ballistic missile submarine (or, rather, started from the fourth submarine, Project 955A Borei A). As was reported earlier, the submarine was named Knyaz Pozharsky. (Russianforces.org, 12.23.16)
• Russia’s State Duma has passed a measure that will allow the Russian military to hire people for short-term contracts to fight abroad. In the past, such people had to serve two or more years; now, they will only have to commit to six to 12 months. (Eurasia Review, 12.16.16)
• Russian state space agency Roscosmos will continue to operate a section of the International Space Station until at least 2028. (The Moscow Times, 12.22.16)
• The Russian Defense Ministry says one of its planes has crash-landed in northern Siberia. Everyone survived, but 32 people were hospitalized, including 16 in grave condition. (RFE/RL, 12.19.16)

Security, law-enforcement and justice:

• A Moscow court has sentenced a retired military officer to 12 years in prison after convicting him of treason, a charge that is usually linked to alleged espionage. Retired Colonel Aleksei Sinyakov was found guilty of high treason on Dec. 15 and sentenced the same day. (RFE/RL, 12.16.16)
• The Russian Foreign Ministry says one of its diplomats has been found shot dead in Moscow. In a Dec. 20 statement, the ministry said that a senior adviser at its Latin America Department, Pyotr Polshikov, died in Moscow on Dec. 19. (RFE/RL, 12.20.16)
• Moscow's Basmanny District Court has seized property belonging to former Russian Economic Development Minister Alexei Ulyukayev. (The Moscow Times, 12.16.16)
• Russian blogger Aleksei Kungurov has been convicted and imprisoned for a post harshly criticizing the government’s military operation in Syria that prosecutors say was sympathetic to terrorism. (RFE/RL, 12.20.16)

III. Foreign affairs, trade and investment

General developments and relations with “far abroad” countries:

• Japan and Russia concluded a two-day summit on a territorial dispute by announcing bilateral economic deals worth 300 billion yen ($2.5 billion), but the countries failed to achieve the breakthrough Tokyo had sought. Among other things, Japan and Russia will create a $1 billion fund to invest in joint energy and infrastructure projects over the next five years. Also Russian state nuclear corporation Rosatom has signed a memorandum of cooperation in peaceful uses of atomic energy with two Japanese ministries. One key area of cooperation under the agreement will be post-accident recovery at the damaged Fukushima Daiichi plant. The date of a meeting between the Russian and Japanese foreign affairs and defense ministers is not set yet, Japan’s Foreign Minister Fumio Kishida said on Dec. 18. (Wall Street Journal, 12.16.16, The Washington Post, 12.16.16, World Nuclear News, 12.19.16, TASS, 12.18.16)
• China has requested the Russian government to allow Chinese Special Forces to be trained in anti-terror measures at a private institute in Chechnya, as they want to be trained in tackling suicide bombers. (RBTH/Gazeta.ru, 12.19.16)
• The Russian Embassy in Islamabad, Pakistan has refuted reports in the Pakistani and Indian media that said Russia planned to merge the Moscow-led Eurasian Economic Union (EAEU) with the China Pakistan Economic Corridor (CPEC). (RBTH, 12.22.16)
• The European Union (EU) condemned Russia's controversial "foreign agent" law after a Moscow court upheld the Russian Justice Ministry's decision to designate prominent human rights organization, Memorial International Society, as a foreign agent. (RFE/RL, 12.16.16)
• Russia has criticized the Netherlands for allowing the United States to begin stocking tanks there, and for a court ruling that ordered Crimean treasures on loan to a Dutch museum to be returned to Ukraine rather than Russia. (RFE/RL, 12.22.16)
• Russia’s ruling United Russia Party has signed an agreement on cooperation with Austria’s right-wing Freedom Party. (The Moscow Times, 12.20.16)
• French nationalist party Le Front National is struggling to find fresh funding for their 2017 presidential campaign after the closure of their Moscow-based backers, the Bloomberg news agency reported Dec. 22. (The Moscow Times, 12.22.16)
• Espionage experts at Britain’s Cambridge University have announced an independent review into their funding and “institutional affairs” after allegations of potential links to Russian intelligence. (Financial Times, 12.21.16)
• Deutsche Bank AG, which is being probed over whether it helped investors illegally transfer billions of dollars out of Russia, said an internal review provided no indications that it breached sanctions in the country. (Bloomberg, 12.23.16)
• Russian President Vladimir Putin’s government is befriending a powerful military leader, Khalifa Haftar, who now controls more territory than any other faction in the tumultuous, oil-rich North African state of Libya. Russia’s defense sales company, Rosoboronexport, lost at least $4 billion of contracts, and Gazprom lost several billion more in energy exploration and extraction deals signed with Libya’s Gen. Muammar el-Qaddafi before his 2011 overthrow. (Bloomberg, 12.20.16, Bloomberg, 12.21.16)
• Between 2006 and 2015, Russia sold $12.7 billion worth of arms to the Middle East and North Africa, compared with $6 billion in the previous decade, according to figures from Stockholm International Peace Research Institute (SIPRI), the arms trade watchdog. (Bloomberg, 12.20.16)
• Serbian Prime Minister Aleksandar Vucic said on Dec. 19 that he would travel to Moscow later this week to sign a deal that will include six MiG-29 fighters, which he says are needed "to protect our freedom and sovereignty." (RFE/RL, 12.19.16)

Ukraine:

• Ukrainian officials said on Dec. 19 that five soldiers have been killed in the latest outburst of fighting with pro-Russia rebels near the town of Svitlodarsk in the Donetsk region. The rebels said two people were killed and two others were missing on their side, and claimed that 10 Ukrainian soldiers died in the Dec. 18 battle, according to Russian news agencies. Ukrainian officials then said on Dec. 21 that at least two more Ukrainian troops have been killed in the past 24 hours. On Dec. 22 Kiev said two more Ukrainian soldiers had been killed in the past 24 hours. Separatists claim military actions started on Dec. 18 when Ukrainian forces in the Donetsk region, backed by artillery, attempted to break through from the settlement of Luganskoye to the village of Kalinovka near the town of Debaltsevo. Kiev blames resumption of hostilities on separatists. U.S. State Department spokesman John Kirby told reporters in Washington that the United States is deeply concerned about the recent spike in violence in eastern Ukraine.  (AP, 12.19.16, Washington Post, 12.20.16, AP, 12.21.16. TASS, 12.22.16, Belfer Center, 12.23.16, CBS News, 12.23.16)
• Russian President Vladimir Putin says that peace talks sponsored by France and Germany should remain the basis for efforts to settle the conflict in eastern Ukraine. Putin said at a news conference Dec. 23 that the “Normandy format hasn’t been highly effective but there is nothing else, and work in that format should continue or the situation will deteriorate.” (AP, 12.23.16)
• Millions of dollars' worth of U.S.-supplied Raven drones that Kiev had hoped would help in its war against Russian-backed separatists have proven ineffective against jamming and hacking, Ukrainian officials say. (Reuters, 12.22.16)
• Russian howitzers and rocket launchers regularly pounded Ukrainian positions across the border in the early stages of the war in eastern Ukraine, according to an analysis of hundreds of attack sites published Dec. 21 by the open source investigative group, Bellingcat. (AP, 12.21.16)
• Responding to demands to release Ukrainian filmmaker Oleh Sentsov and other Ukrainians jailed in Russia, Russian President Vladimir Putin has called for a comprehensive deal to free all prisoners, including those held in Ukrainian prisons. (AP, 12.23.16)
• The Ukrainian Orthodox Church’s Moscow Patriarchate (UOC-MP) helped arrange a prisoner exchange of two Russian citizens for a Ukrainian serviceman who had spent nearly two years in captivity. (The Moscow Times, 12.22.16)
• The European Union has extended sanctions against Russia for its actions in Ukraine for another six months. The European Council formally approved the extension on Dec. 19 after EU leaders agreed to the move at a summit last week. (RFE/RL, 12.19.16)
• European Union leaders reached a compromise with the Netherlands on Dec. 15 that should allow the bloc to enact an agreement on closer ties with Ukraine, regarded as a landmark deal to counter the influence of Russia. (AP, 12.16.16)
• The U.N. General Assembly has passed a resolution that recognizes Crimea as "temporarily occupied" by Russia and condemns the "abuses" and "discrimination" against Crimean Tatars, ethnic Ukrainians and other groups on the peninsula. (RFE/RL, 12.20.16)
• The Ukrainian parliament has removed Ukrainian lawmaker Nadia Savchenko from the country’s delegation to the Parliamentary Assembly of the Council of Europe on Dec. 22. Savchenko confirmed media reports that she had met in Belorussian capital of Minsk with the leaders of two Russia-backed separatist groups in eastern Ukraine. (RFE/RL, 12.22.16)
• Russian opposition leader Alexey Navalny, who has declared his intent to run in Russia’s next presidential election, says one of his top priorities if elected would be to implement the Minsk II accords aimed at ending the conflict in Ukraine. (RFE/RL, 12.16.16)
• Igor “Strelkov” Girkin, former defense minister of the self-proclaimed Donetsk People’s Republic in eastern Ukraine, has asked his followers on social media to help him find a job. (The Moscow Times, 12.19.16)
• Ukrainian prosecutors opened a probe Dec. 21 into an attack on an important Jewish pilgrimage site in the Ukrainian town of Uman, the second attack in as many years. (AP, 12.21.16)
• Fugitive Ukrainian lawmaker Oleksandr Onyshchenko, whose accusations of top-level corruption have sparked a political furor, has charged that Ukrainian President Petro Poroshenko's allies are profiting from supplying troops fighting Russia-backed separatists. The U.S. Justice Department has cut ties with Onyshchenko, who said he had turned over damning evidence proving the corruption of Ukraine’s president, a spokesman told RFE/RL on Dec. 16. (RFE/RL, 12.17.16, RFE/RL, 12.20.16)
• Ukraine returned 17 masterpieces valued at 17 million euros to Italy on Dec. 21 after they were stolen by masked, armed robbers from a Verona art museum last year. (RFE/RL, 12.21.16)
• Ukraine's parliament has approved a budget for 2017, raising its chances of securing more aid from the International Monetary Fund (IMF) under a $17.5 billion loan package. The document, approved by 274 to 226 on Dec. 21, keeps the budget deficit at 3% of gross domestic product (GDP), in line with the IMF's guidelines. (RFE/RL, 12.21.16)
• Nationalized Ukrainian lender Privatbank has a 148 billion hryvnia ($5.6 billion) hole in its balance sheet, the country's central bank governor said Dec. 19. Ukraine's largest private lender is controlled by tycoon Ihor Kolomoisky, who bankrolled armed formations supporting the Ukrainian military. (Wall Street Journal, 12.19.16)

Russia’s other post-Soviet neighbors:

• Authorities in Kazakhstan say they have detained 16 suspected members of banned Islamic group Takfir wal-Hijra during a major security operation in three parts of the predominantly Muslim Central Asian country. (RFE/RL, 12.21.16)
• Kazakhstan says Turkmenistan has suspended visa-free travel for Kazakhs living close to the Turkmen border. (RFE/RL, 12.21.16)
• Kyrgyzstan's President Almazbek Atambaev has met with India's Prime Minister Narendra Modi in the Indian capital of New Delhi. (RFE/RL, 12.21.16)
• Kyrgyz President Almazbek Atambaev says his country supports Iran's full membership in the Shanghai Cooperation Organization (SCO). Atambaev made the statement on Dec. 23 in the Kyrgyz capital of Bishkek after holding talks with visiting Iranian President Hassan Rohani. (RFE/RL,12.23.16)
• Iranian President Hassan Rohani visited Armenia on Dec. 21 as part of a swing through three former Soviet republics. Rohani then held talks with Kazakh President Nursultan Nazarbaev in Kazakhstan's capital, Astana, on Dec. 22. (RFE/RL, 12.22.16, RFE/RL, 12.21.16)
• An Armenian appeals court on Dec. 19 upheld a life sentence handed down to Valery Permyakov, a Russian soldier convicted of killing an Armenian family of seven in 2015. (The Moscow Times, 12.19.16)
• Belarusian Foreign Minister Uladzimer Makey has met with top Georgian officials in the Georgian capital of Tbilisi on a trip during which he will open an embassy for Belarus. (RFE/RL, 12.20.16)

News items for this digest curated by Simon Saradzhyan, director of the Russia Matters Project.

Please note that Russia Matters will resume distribution of news and analytical digests on January 3, 2017.