News round-up, July 27, 2023
Editorial…
Extraordinary but Dangerous "Phenomenon": "It's So Hot, They're Growing Mangoes in Italy"
The challenges faced by farmers in the Mediterranean offer a glimpse into the difficulties of feeding a planet that is getting warmer. Rising sea levels, dry spells, and heatwaves are causing disruptions to food production in this region, which is known for its unique diet. The recent heatwave has affected food production in many ways, such as causing cows to produce less milk and reducing honey production in Italy. The Ebro Delta, which has around 20,000 hectares of paddy fields, is particularly vulnerable to the warming climate due to rising sea levels and drought. Some farmers are already considering switching to hardier crops, while others are considering seaweed and clams due to the excess salt in the soil. Short-term solutions include processing more wastewater and limiting water evaporation. However, scientists warn that adaptation has limits; at some point, farmers will have to change their crops altogether.
Source: WSJ, todayMost read…
TOP NEWS/Focus: In Mexico, private cash races to plug nearshoring energy crunch
The Energy Dilemma: Mexico's Nearshoring Industry Struggles Amidst Infrastructure Roadblocks
While companies in Mexico appreciate the advantages of operating in the country, they face significant challenges due to the inadequate energy infrastructure. The absence of sufficient investment in constructing new transmission lines and substations has impeded their progress, forcing them to rely on outdated and underdeveloped systems. The primary concern stems from the limited scope of investment by the Mexican government in this critical sector.
REUTERS by Isabel Woodford/Editing by Germán & Co July 26, 2023Gulf Stream could collapse as early as 2025, study suggests
A collapse would bring catastrophic climate impacts but scientists disagree over the new analysis
Damian Carrington Environment editor, Jul 26, 2023China adds flexibility to power grids, builds storage capacity to avoid outages
REUTERS by Andrew Hayley, July 26, 20232Fed poised to hike rates as markets anticipate inflation endgame
REUTERS by Howard Schneider, July 26, 2023One dead in cargo ship fire, electric car suspected source, Dutch coastguard says
Reuters, July 26, 2023
At the COA Spring Gala 2023, Andrés Gluski, the CEO & President of AES and Chairman of the Americas Society/Council of the Americas, presented President Lacalle Pou with the prestigious Gold Insigne. This award was given in recognition of President Lacalle Pou's outstanding leadership in successfully transforming Uruguay into a prominent technology and innovation hub, all while upholding a thriving democracy and robust economy.
Image by Germán & Co via Shutterstock
Focus: In Mexico, private cash races to plug nearshoring energy crunch
The Energy Dilemma: Mexico's Nearshoring Industry Struggles Amidst Infrastructure Roadblocks
While companies in Mexico appreciate the advantages of operating in the country, they face significant challenges due to the inadequate energy infrastructure. The absence of sufficient investment in constructing new transmission lines and substations has impeded their progress, forcing them to rely on outdated and underdeveloped systems. The primary concern stems from the limited scope of investment by the Mexican government in this critical sector.
REUTERS by Isabel Woodford/Editing by Germán & Co July 26, 2023/3]A general view shows high voltage power lines owned by Mexico's state-run electric utility known as the Federal Electricity Commission (CFE), in Santa Catarina, on the outskirts of Monterrey, Mexico February 9, 2021. REUTERS/Daniel Becerril/File Photo
MEXICO CITY, July 26 (Reuters) - For Mexican industrial park owners like Sergio Bermudez, business is booming amid a wave of U.S businesses setting up over the border.
So-called nearshoring has pulled over $9 billion into Mexico since last October by manufacturers like Unilever (ULVR.L) , Barbie maker Mattel (MAT.O) , and Tesla (TSLA.O) , lured by its proximity to the giant U.S market, cheap labor, and geopolitical stability.
Yet Bermudez and many of his 400-strong cohort have a serious cost issue on their hands: energy.
Industrial parks are under pressure to spend millions of dollars to build federal power transmission lines and substations amid government underinvestment, growing energy demand, and aging infrastructure which is at capacity.
While these parks have long contributed to state infrastructure, the lines and specifications now required are getting much longer and costlier in Mexico's manufacturing north, according to nearly a dozen sources.
"Federal funds can't keep up with the growth we're seeing… so the developers or companies have to absorb the cost," said Eduardo Martinez, an official for the state of Nuevo Leon, pointing to austerity and the unpredicted nearshoring boom.
Sergio Arguelles, president of the Mexican Association of Private Industrial Parks (AMPIP), said parks' investment in state energy assets today is unprecedented. The group is yet to calculate exact amounts, but said it is "very significant."
The lure of new clients for parks is strong, but it is still a bitter pill: with regulation restricting private ownership, park owners essentially donate the infrastructure to the state.
"It's the biggest challenge...We are thinking about how are we going to reach an agreement with the government to manage this for the good of the country," said Aaron Gallo, the real estate director at American Industries, whose multiple Mexican industrial parks cater to foreign clients like Danish toymaker Lego.
American Industries is currently building a $12 million 12-kilometer (7.5-mile) line. Gallo said such investments mean they have as much as tripled energy costs for clients in recent years, complicated by lengthy permit processes.
"It's very bureaucratic, it does slow us down," said Gallo. "But there’s no other option."
The issue underscores the holes in President Andres Manuel Lopez Obrador's attempt to concentrate power in the state energy utility company, CFE, which critics say is unfit to support Mexico's major growth opportunity.
Though private sector assistance may help bolster Mexico's energy security in the short term, much more is needed accommodate the wave of new demand, said David Gantz, a fellow on U.S -Mexico trade at the Baker Institute.
"Mexico would be very well positioned to take advantage of nearshoring if it didn't have such an energy problem," he said.
CFE did not respond to a request for comment.
THE SHRINKING STATE
Mexico's approach to its groaning electricity grid is in contrast to its fast-growing peers, which tend to either incentivize private energy contractors or have state utility companies with deep pockets.
Last year, CFE investment slid to 35.3 billion pesos ($2 billion), or 0.15% of GDP, a fraction of manufacturing rival China's planned investment in the grid of 0.9% of GDP, per Reuters analysis.
Meanwhile, CFE built just under 150 km of transmission lines last year, more than 10 times less per 100,000 square km than in Brazil, where Electrobras said it added 8,679 km to the network.
"We needed a lot more," said AMPIP's Arguelles, noting the bulk of CFE's budget has gone to power generation rather than distribution and transmission infrastructure.
Lopez Obrador has pressed hard to tighten state control of the energy sector, arguing that past governments rigged the market in the favor of private companies.
Yet with billions dedicated to the heavily indebted state-oil company Pemex, industry observers say Mexico lacks the funds to support upgrades to the electricity network.
"The CFE had a very different vision and budget before," said Bermudez, whose family has been in the "maquiladora" or remote manufacturing business for decades. "It used to be much easier."
Indeed, 91% of parks report issues related to energy supply, according to a recent AMPIP survey, including line congestion and being forced to turn away new clients.
Meanwhile, Ramses Pech, CEO of energy consultancy firm Group Caraiva estimated 80% of infrastructure built in industrial areas is now privately funded.
Still, there is some hope for the new wave of 47 planned industrial parks. The energy ministry said it plans to build around 3,000 km of transmission lines next year, as well as new substations, particularly in the north.
FOOTING THE BILL
Some argue that it is only right that the private sector pay its own way, especially given Mexico's relatively low corporation tax, and parks' healthy return on investment.
Hans Joachim Kohlsdorf, an electricity wholesale executive in Mexico, argues that park owners often do not think strategically when setting up remote manufacturing hubs, and understands why the government is reticent to pay.
"There needs to be better planning," he said. "We're in a Catch 22: (the parks) want everything free, and the other party doesn't want to pay."
Zonia Torres, a commercial director of an industrial park in the state of Guanajuato, which has paid for federal infrastructure, agrees.
"The CFE doesn't want to bet on future (energy) demand," she said, adding that Mexico is still "an emerging market" with limited resources.
Yet critics say Mexico's push for state control over energy distribution while also neglecting it is self-sabotage.
"The network provider should be capable of building the infrastructure...The public policy does not take into account the reality, and the level of (foreign) demand." said Alfredo Nolasco, founding partner of nearshoring consultancy Spyral.
"The lack of foresight is likely to be disastrous.
Image by Germán & Co via ShutterstockGulf Stream could collapse as early as 2025, study suggests
A collapse would bring catastrophic climate impacts but scientists disagree over the new analysis
Damian Carrington Environment editor, Jul 26, 2023The Gulf Stream system could collapse as soon as 2025, a new study suggests. The shutting down of the vital ocean currents, called the Atlantic Meridional Overturning Circulation (Amoc) by scientists, would bring catastrophic climate impacts.
Amoc was already known to be at its weakest in 1,600 years owing to global heating and researchers spotted warning signs of a tipping point in 2021.
The new analysis estimates a timescale for the collapse of between 2025 and 2095, with a central estimate of 2050, if global carbon emissions are not reduced. Evidence from past collapses indicates changes of temperature of 10C in a few decades, although these occurred during ice ages.
Other scientists said the assumptions about how a tipping point would play out and uncertainties in the underlying data are too large for a reliable estimate of the timing of the tipping point. But all said the prospect of an Amoc collapse was extremely concerning and should spur rapid cuts in carbon emissions.
Amoc carries warm ocean water northwards towards the pole where it cools and sinks, driving the Atlantic’s currents. But an influx of fresh water from the accelerating melting of Greenland’s ice cap and other sources is increasingly smothering the currents.
A collapse of Amoc would have disastrous consequences around the world, severely disrupting the rains that billions of people depend on for food in India, South America and west Africa. It would increase storms and drop temperatures in Europe, and lead to a rising sea level on the eastern coast of North America. It would also further endanger the Amazon rainforest and Antarctic ice sheets.
“I think we should be very worried,” said Prof Peter Ditlevsen, at the University of Copenhagen in Denmark, and who led the new study. “This would be a very, very large change. The Amoc has not been shut off for 12,000 years.”
The Amoc collapsed and restarted repeatedly in the cycle of ice ages that occurred from 115,000 to 12,000 years ago. It is one of the climate tipping points scientists are most concerned about as global temperatures continue to rise.
Research in 2022 showed five dangerous tipping points may already have been passed due to the 1.1C of global heating to date, including the shutdown of Amoc, the collapse of Greenland’s ice cap and an abrupt melting of carbon-rich permafrost.
The new study, published in the journal Nature Communications, used sea surface temperature data stretching back to 1870 as a proxy for the change in strength of Amoc currents over time.
The researchers then mapped this data on to the path seen in systems that are approaching a particular type of tipping point called a “saddle-node bifurcation”. The data fitted “surprisingly well”, Ditlevsen said. The researchers were then able to extrapolate the data to estimate when the tipping point was likely to occur. Further statistical analysis provided a measure of the uncertainty in the estimate.
The analysis is based on greenhouse gas emissions rising as they have done to date. If emissions do start to fall, as intended by current climate policies, then the world would have more time to try to keep global temperature below the Amoc tipping point.
The most recent assessment by the Intergovernmental Panel on Climate Change concluded that Amoc would not collapse this century. But Ditlevsen said the models used have coarse resolution and are not adept at analysing the non-linear processes involved, which may make them overly conservative.
The potential collapse of Amoc is intensely debated by scientists, who have previously said it must be avoided “at all costs”.
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Prof Niklas Boers, from the Potsdam Institute for Climate Impact Research in Germany, revealed the early warning signs of Amoc collapse in 2021.
“The results of the new study sound alarming but if the uncertainties in the heavily oversimplified model [of the tipping point] and in the underlying [sea temperature] data are included, then it becomes clear that these uncertainties are too large to make any reliable estimate of the time of tipping.”
Prof David Thornalley, at University College London, UK, agreed the study had large caveats and unknowns and said further research was essential: “But if the statistics are robust and a relevant way to describe how the actual Amoc behaves, then this is a very concerning result.”
Dr Levke Caesar, at the University of Bremen, Germany, said using sea surface temperatures as proxy data for the strength of the Amoc currents was a key source of uncertainty: “We only have direct observational data of the Amoc since 2004.”
The extrapolation in the new analysis was reasonable, according to Prof Tim Lenton, at the University of Exeter, UK. He said the tipping point could lead to a partial Amoc collapse, for example only in the Labrador Sea, but that this would still cause major impacts. Ditlevsen said he hoped the debate would drive new research: “It’s always fruitful when you do not exactly agree.”
Prof Stefan Rahmstorf, at the University of Potsdam, Germany, said: “There is still large uncertainty where the Amoc tipping point is, but the new study adds to the evidence that it is much closer than we thought. A single study provides limited evidence, but when multiple approaches have led to similar conclusions this must be taken very seriously, especially when we’re talking about a risk that we really want to rule out with 99.9% certainty. Now we can’t even rule out crossing the tipping point in the next decade or two.”
At the Energy Summit 2923 in Santo Domingo, Dominican Republic, Edwin De los Santos, President of AES DOMINICANA, emphasized the company's strong commitment to global environmental preservation.
“The relationship between energy and development is symbiotic and interdependent. “
Electrical pylons and power lines are seen in Yanqing district of Beijing, China December 17, 2021. REUTERS/Tingshu Wang/File PhotoChina adds flexibility to power grids, builds storage capacity to avoid outages
REUTERS by Andrew Hayley, July 26, 20232BEIJING, July 26 (Reuters) - China is introducing more flexible power transmission arrangements into its national grid system, helping to avoid a repeat of the outages that plagued parts of the country last year, according to central government officials.
In response to decreased output from hydropower plants, authorities have "rationally optimised" power transmission between provinces to send more power to the country's drought-stricken southwest, Guan Peng of the National Development and Reform Commission told a press conference on Wednesday.
This has included sending more power from China's sparsely populated northwest, Guan added.
China's grid system predominantly distributes power between provinces through fixed medium-to-long term contracts, which do not accommodate changes in regional demand and supply conditions.
More than 90% of market-based power trading in China is conducted through these mid-to-long term contracts, according to S&P Global Commodity Insights.
After a drought last August, fixed, unidirectional power trading agreements led hydro-dependent southwestern Sichuan province to export power out of the province to fulfil these contracts, even as consumers in the province endured power cuts.
In addition to adding flexibility to grid transmission, authorities have increased water storage at hydro facilities in advance in order to guarantee their operation during periods when temperatures were high, Guan said.
The region has not seen widespread power outages this year, despite similarly hot and dry weather conditions.
Weather-dependent hydropower is expected to remain the primary power source in Sichuan and neighbouring Yunnan, with the Sichuan provincial government forecasting it to account for more than 77% of province's installed generation capacity in 2025.
China has also extensively developed its 'new type' energy storage capabilities this year, officials said. 'New type' energy storage in China is overwhelmingly comprised of lithium-ion battery storage, and contrasts with older pumped-hydro storage technologies.
The installed capacity of this 'new type' energy storage reached 12 gigawatts (GW) as of the end of May, said National Energy Administration official Liu Mingyang. This represents a roughly 37% increase on the 8.7GW in installed capacity reported at the end of last year.
Image: Germán & CoCooperate with objective and ethical thinking…
The U.S. Federal Reserve building is pictured in Washington, March 18, 2008. REUTERS/Jason Reed/File PhotoFed poised to hike rates as markets anticipate inflation endgame
REUTERS by Howard Schneider, July 26, 2023WASHINGTON, July 26 (Reuters) - The Federal Reserve is expected to raise interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the U.S. central bank's past 12 policy meetings and possibly a last move in its aggressive battle to tame inflation.
The increase, anticipated by investors with nearly a 100% probability, would raise the benchmark overnight interest rate to the 5.25%-5.50% range. That would bring it to roughly the highest level since the approach to the 2007-2009 financial crisis and recession.
Reuters Graphics Reuters GraphicsThere's little sense a similar collapse is on the horizon. Far from it, the economy is proving more resilient to rising interest rates than expected, with ongoing growth and an unemployment rate that is currently pinned at a low 3.6%.
In assessing where policy may move next, in fact, the Fed will be balancing whether the economy remains too strong to return a still-elevated rate of inflation to the central bank's 2% target against evidence that a process of "disinflation" may be underway that is likely to continue even without any further rate increases.
After a rapid series of rate hikes over the last year, with the central bank moving in unusually large three-quarters-of-a-percentage-point steps at one point, policymakers say they are now making meeting-by-meeting judgments based on incoming data, an approach meant to keep their options open and one likely to be emphasized by Fed Chair Jerome Powell in a press conference shortly after the 2 p.m. EDT (1800 GMT) release of the policy statement.
A key question, said Steve Englander, head of G10 FX research and North America macro strategy at Standard Chartered, is whether the Fed "puts more emphasis on weaker-than-expected inflation or stronger-than-expected activity in determining policy" moving forward.
NEARING THE END
The Fed will not update quarterly economic and interest rate projections at this week's meeting, though policymakers will have a chance to discuss quarterly bank survey data that has taken on heightened importance since a string of regional bank collapses earlier this year.
Policymakers' projections in June showed the Fed likely nearing the end of its hiking cycle, with a majority of them seeing the need for only one further quarter-percentage-point increase beyond the expected hike on Wednesday.
Data since June, if anything, has lowered expectations that further rises in borrowing costs will be needed, with headline inflation data coming in weaker than expected, and information about producer prices and other aspects of the economy suggesting further moderation is developing. Indeed, as policymakers began their two-day meeting on Tuesday, the Conference Board reported U.S. consumers' 12-month inflation expectations sank to the lowest level since November 2020.
New data on the Fed's preferred measure of inflation, the personal consumption expenditures price index, will be released on Friday. A Reuters poll showed economists expect the measure, stripped of volatile food and energy prices, to have increased at a 4.2% annual rate in June, which would be the lowest since September 2021.
That is a significant decline in a data point that has been stuck at around 4.6% since December. But it is still more than double the Fed's target, and officials including Powell have said they will not shift gears on policy until progress on inflation is sustained over several months and they are convinced the pace of price increases will return to 2%.
The Fed will have a larger-than-usual amount of data to assess before its next meeting on Sept. 19-20, some eight weeks away. The typical gap between meetings is six weeks. The longer span allows a full two months of information on jobs and inflation to accumulate, and in this case will also provide the first two of three reports on economic growth in the second quarter.
Seaboard: pioneers in power generation in the country…
…“More than 32 years ago, back in January 1990, Seaboard began operations as the first independent power producer (IPP) in the Dominican Republic. They became pioneers in the electricity market by way of the commercial operations of Estrella del Norte, a 40MW floating power generation plant and the first of three built for Seaboard by Wärtsilä.
After a rally this year, the S&P 500 has climbed about 27% from its recent bottom. PHOTO: BRENDAN MCDERMID/REUTERSOne dead in cargo ship fire, electric car suspected source, Dutch coastguard says
Reuters, July 26, 2023AMSTERDAM, July 26 (Reuters) - One person died and several others were hurt when a fire broke out on a cargo ship carrying cars off the northern tip of Netherlands, forcing several crew members to jump overboard, the Dutch coastguard said on Wednesday.
The Panama-registered Fremantle Highway was transporting 2,857 cars from Germany to Egypt, 25 of them electric.
An electric car was the suspected source of the blaze, a coastguard spokesperson said, adding that the ship was still burning.
The 199-metre ship, which had departed from the German port of Bermenhaven, was successfully towed out of shipping lanes early on Wednesday, Dutch broadcaster NOS reported.
The ship was sailing 27 km (17 miles) north of the Dutch island of Ameland, with 23 crew onboard, when the fire started on Tuesday night, a statement said.
The crew had tried, but failed, to extinguish the fire, the coastguard statement said.
The injured crew were taken by helicopter to medical facilities on the mainland. They suffered smoke inhalation, or were hurt during the evacuation, a spokesperson said.
A spokesperson for Shoei Kisen Kaisha, a Japanese ship leasing company that manages the Fremantle Highway, was not immediately available for comment.
It is the latest fire to hit a car carrier.
Earlier this month, two New Jersey firefighters were killed and five injured while battling an intense blaze on a cargo ship carrying hundreds of vehicles. A fire destroyed thousands of luxury cars on a ship off the coast of Portugal's Azores islands in February last year.
Image by Germán & CoPutin appeared paralyzed and unable to act in first hours of rebellion
TWP By Catherine Belton, Shane Harris and Greg Miller, July 25, 2023 LONDON — When Yevgeniy Prigozhin, the head of the Wagner mercenary group, launched his attempted mutiny on the morning of June 24, Vladimir Putin was paralyzed and unable to act decisively, according to Ukrainian and other security officials in Europe. No orders were issued for most of the day, the officials said.
The Russian president had been warned by the Russian security services at least two or three days ahead of time that Prigozhin was preparing a possible rebellion, according to intelligence assessments shared with The Washington Post. Steps were taken to boost security at several strategic facilities, including the Kremlin, where staffing in the presidential guard was increased and more weapons were handed out, but otherwise no actions were taken, these officials said.
“Putin had time to take the decision to liquidate [the rebellion] and arrest the organizers” said one of the European security officials, who, like others, spoke on the condition of anonymity to discuss sensitive intelligence. “Then when it began to happen, there was paralysis on all levels … There was absolute dismay and confusion. For a long time, they did not know how to react.”
This account of the standoff, corroborated by officials in Western governments, provides the most detailed look at the paralysis and disarray inside the Kremlin during the first hours of the severest challenge to Putin’s 23-year presidency. It is consistent with public comments by CIA Director William J. Burns last week that for much of the 36 hours of the mutiny Russian security services, the military and decision-makers “appeared to be adrift.”
It also appears to expose Putin’s fear of directly countering a renegade warlord who’d developed support within Russia’s security establishment over a decade. Prigozhin had become an integral part of the Kremlin global operations by running troll farms disseminating disinformation in the United States and paramilitary operations in the Middle East and Africa, before officially taking a vanguard position in Russia’s war against Ukraine.
Kremlin spokesman Dmitry Peskov told The Post that the intelligence assessments were “nonsense” and shared “by people who have zero information.”
The longtime symbiosis of the two men, who first met in St. Petersburg in the early 1990s, has exposed the weaknesses of Putin’s crony system of management, where rival clans are pitted against each other, and which has been stretched to breaking point by the war.
Who is Yevgeniy Prigozhin, Wagner chief who stirred a crisis in Russia?
The lack of orders from the Kremlin’s top command left local officials to decide for themselves how to act, according to the European security officials, when Prigozhin’s Wagner troops stunned the world by entering the southern Russian city of Rostov in the early hours of June 24, seizing control of the Russian military’s main command center there, and then moved into the city of Voronezh, before heading further north toward Moscow.
Without any clear orders, local military and security chiefs took the decision not to try to stop the heavily armed Wagner troops, the security officials said.
Wagner mercenary chief Yevgeniy Prigozhin leaves the headquarters of the Southern Military District amid the group's pullout from the city of Rostov, Russia, on June 24. (Alexander Ermochenko/Reuters)
Many on the local level could not believe the Wagner rebellion could be happening without some degree of agreement with the Kremlin, the security officials said — despite Putin’s emergency televised address to the nation on the morning of the mutiny in which he vowed tough action to stop the rebels, and despite a warrant issued for Prigozhin’s arrest for “incitement to insurrection” on the eve of his march to Moscow.
“The local authorities did not receive any commands from the leadership,” said a senior Ukrainian security official. “From our point of view this is the biggest sign of the unhealthy situation inside Russia. The authoritarian system is formed in such a way that without a very clear command from the leadership, people don’t do anything. When the leadership is in turmoil and disarray, it the same situation at the local level and even worse.”
The intelligence information helps explain what’s been seen as the biggest debacle of Putin’s rule — how Prigozhin’s armed band of fighters, demanding the ouster of Russian Defense Minister Sergei Shoigu and armed forces chief of staff Valery Gerasimov, were able to proceed to within 120 miles of Moscow without facing resistance, before eventually agreeing to turn around after a deal was brokered with the help of Alexander Lukashenko, the Belarusian president.
The disarray in the Kremlin also reflects a deepening divide inside Russia’s security and military establishment over the conduct of the war in Ukraine, with many including in the upper reaches of the security services and military supporting Prigozhin’s drive to oust Russia’s top military leadership, the European security officials said.
“Some supported Prigozhin and the idea that the leadership needs to be cleaned up, that the fish is rotting from the head,” one of these officials said.
One senior NATO official said some senior figures in Moscow appeared ready to rally behind Prigozhin had he succeeded in achieving his demands. “There seem to have been important people in the power structures … who seem to have even been sort of waiting for this, as if his attempt had been more successful, they would also” have joined the plot, this official said.
Prigozhin’s increasingly vitriolic tirades blaming corruption and mismanagement by the Russian military command for battlefield setbacks and high casualties in the war against Ukraine had resonated with many sectors of Russian society. Many in the rank and file of the Russian army also wanted Prigozhin to succeed in forcing change at the top of the Russian military, believing that then “it would become easier for them to fight,” this official said.
But others in the security establishment were horrified at the mutiny attempt, and at the Kremlin’s toothless reaction, convinced it was leading Russia toward a period of deep turmoil, officials said.
“There was disarray. You could argue about the depth of it, but there really was lack of agreement,” said a senior member of Russian diplomatic circles. “We heard all these statements. They were not always consistent … For some time, they did not know how to react,” he said. Putin had vowed to crush the rebellion on the morning the rebellion began but by the time he finally emerged in public more than 48 hours later, he said all steps had been taken on his “direct order” to avoid major bloodshed.
Members of the Russian elite said the division over the conduct of the war and its handling by the Russian military leadership, will continue, despite a public relations drive by the Kremlin to demonstrate Putin is in control and the start of a campaign to purge the ranks of the Russian military of critics and Prigozhin’s supporters among Russian ultranationalists.
On Friday Igor Girkin, a controversial former Russian commander in Ukraine who has been vocal in denouncing the Russian military leadership, was arrested. Several high-ranking generals perceived to be close to Prigozhin, including Gen. Sergei Surovikin, who was often praised by the Wagner leader, have disappeared from public view.
The lack of direction from the Kremlin during the crisis has left Putin significantly weakened, according to his critics. “Putin showed himself to be a person who is not able to make serious, important and quick decisions in critical situations. He just hid,” said Gennady Gudkov, a former colonel in the Russian security services who is now an opposition politician in exile. “This was not understood by most of the Russian population. But it was very well understood by Putin’s elite. He is no longer the guarantor of their security and the preservation of the system.”
“Russia is a country of mafia rules. And Putin made an unforgivable mistake,” said a senior Moscow financier with ties to the Russian intelligence services. “He lost his reputation as the toughest man in town.”
Ukraine is now the most mined country. It will take decades to make safe.
The conflict between Prigozhin and the Russian military leadership had been building up for months, and the possibility of conflict increased sharply when the Russian Defense Ministry decreed June 10 that Wagner fighters had to sign contracts with the ministry from July 1, essentially ending Prigozhin’s control of the mercenary group — and the billions of dollars in government contracts attached to it.
When the security service warnings appeared that Prigozhin could be mounting some kind of rebellion, some in the security establishment believed the preparations could be no more than a bluff to increase pressure and gain more leverage to secure his control of Wagner, one of the European security officials said.
To some degree, if Prigozhin’s mutiny was an attempt to gain leverage, it worked. Putin was apparently forced into compromise with the renegade leader, allowing him to travel around Russia for days after the mutiny, because Prigozhin’s work for the Kremlin was too deeply intertwined with the interests of Putin’s state, according to several of the security officials, and Vladimir Osechkin, an exiled human rights activist who has interviewed several former Wagner fighters. Instead of prosecuting Prigozhin for leading the armed insurrection, Putin agreed to drop the charges. In exchange, Prigozhin halted the march on Moscow, withdrew his men from key military installations and agreed to decamp to Belarus, keeping at least part of Wagner intact.
Russia has deployed private mercenary groups as a shadow arm of the state to protect Kremlin interests, “where the state is without strength or cannot officially act,” according to a report drawn up for a Russian parliamentary roundtable on legalizing the private paramilitary organizations in 2015. The report was obtained by the Dossier Center, an investigative group founded by Mikhail Khodorkovsky, the exiled Putin opponent, and shared with The Post.
“Private paramilitary groups can become effective instruments of state foreign policy,” the report states. “The presence of private military groups in the planet’s ‘hot spots’ will increase Russia’s sphere of influence, win new allies for the country and allow the obtaining of additional interesting intelligence and diplomatic information which ultimately will increase Russia’s weight globally.”
The intertwining of Wagner with the interests of Russian intelligence, with its upper ranks staffed with former members of Russian military intelligence, and its leading role in operations in Syria, Libya and across Africa, where it gained access to extensive mining rights, has meant it was impossible for Putin to swiftly bring the curtain down on Prigozhin’s operations, Osechkin said. Prigozhin “worked for more than 20 years for Putin’s team. He did a lot for their interests in a whole series of countries. He has a huge amount of information” about them, Osechkin said.
“They created a monster for themselves,” one of the European security officials said.