Describe US sanctions on Oleg Deripaska

In rare rebuke of Trump administration, some GOP lawmakers advance measure to oppose lifting Russian sanctions

The Senate on Tuesday advanced a resolution to oppose a Treasury Department plan to lift sanctions against Russian companies controlled by a Vladimir Putin ally, with 11 Republicans voting to advance the Democratic measure in a rare example of bipartisanship.
The resolution, introduced by Senate Minority Leader Charles E. Schumer (D-N.Y.), seeks to block the Treasury Department from removing sanctions the Trump administration imposed last year on companies controlled by Russian oligarch Oleg Deripaska, including the aluminum producer Rusal. The Senate voted 57 to 42 to approve a motion to proceed to debate on the resolution.
“Why would we vote to relax sanctions on three essential Russian companies when Putin has not stopped or even curtailed his malign activities? This is sort of a kiss-up to Putin,” Schumer told reporters shortly before the vote.
Treasury notified Congress on Dec. 19 that it intended to lift the sanctions because Deripaska has agreed to reduce his stake in En+ Group, the holding company that controls Rusal, from about 70 percent to 44.95 percent. This would protect the companies “from the controlling influence of a Kremlin insider,” which had been the goal of punishing the firms, Treasury said.
Deripaska will remain under personal sanctions, along with a half-dozen other oligarchs and more than a dozen government officials the Trump administration targeted in April, for furthering “the Kremlin’s global malign activities, including its attempts to subvert Western democracy, its support for the Assad regime, its malicious cyber activities, its occupation of Crimea, and its instigation of violence in Ukraine,” Treasury said.
“This shouldn’t be a political issue,” Treasury Secretary Steven Mnuchin told reporters after meeting with Republicans shortly before the vote. “We have been tougher on Russia, with more sanctions than any other administration.”
Under the Treasury plan, Russia’s state-owned VTB Bank or another Treasury-approved entity will take ownership of a block of Deripaska’s shares in En+ that had been pledged against a loan.
The Obama administration added VTB Bank to a sanctions list in 2014, as punishment for Russia’s invasion of Ukraine. The Trump administration issued sanctions against VTB’s chairman, Andrey Kostin, last year, as part of the actions against Deripaska and others.
According to Treasury, Glencore, the Swiss mining and trading company, will swap its shares in Rusal for shares in En+, which will dilute the holdings of all shareholders, including Deripaska. Finally, the Russian businessman will donate about 3 percent of his En+ shares to a Russian charity he founded, Volnoe Delo, according to people familiar with the plan.
Schumer said he thought Deripaska would still have too much sway over the company. “When you have 45 percent of a company you basically control it,” he told reporters.
The resolution must pass both houses of Congress and survive a presidential veto to block Treasury action. On Tuesday, House Majority Leader Steny H. Hoyer (D-Md.) introduced a resolution similar to Schumer’s. A number of House Democrats have voiced skepticism about lifting the sanctions.
“Amid one disclosure after another about President Trump’s peculiar relationship with Russian interests, now is hardly the time to lift sanctions on the companies of one of Putin’s closest buddies, Oleg Deripaska,” Rep. Lloyd Doggett (D-Tex.) said Tuesday.
Washington’s sanctions on Rusal and En+ Group clobbered the oligarch financially, sinking the market value of his publicly traded companies. They caused havoc far beyond Russia. Global aluminum prices spiked, battering U.S. and European companies and prompting complaints from European allies. Soon after announcing the sanctions, Treasury softened its stance, giving Western companies more time to end dealings with the aluminum producer.
En+ Group lobbied the Trump administration heavily to lift the sanctions. The British chairman of the company, Gregory Barker, hired Mercury Public Affairs and former U.S. senator David Vitter to try to gain the support of the State Department and other agencies.
In a phone interview last week, Barker, a former U.K. energy minister and a member of Britain’s House of Lords, called Treasury’s plan to lift the sanctions “a very strong and robust response, which is unprecedented in the way it removes Deripaska of control of his own business.”
“If allowed to proceed, [the deal] will chart a new course for an open, global En+ and Rusal led by an independent international board,” Barker said.


Describe US sanctions on Oleg Deripaska

US sanctions against companies owned by Russian oligarch Oleg Deripaska have been lifted.  What prompted imposition of the sanctions?  Why were sanctions lifted?  What Deripaska-owned companies were involved?  What impact did the sanctions have on Deripaska?  European sanctions on Deripaska are not relevant nor are European reactions to US sanctions.  Deripaska's relationship with Paul Manfort and Konstantin Kilimnik are not pertinent.

US sanctions against companies owned by Russian oligarch Oleg Deripaska have been lifted.  What prompted imposition of the sanctions?  Why were sanctions lifted?  What Deripaska-owned companies were involved?  What impact did the sanctions have on Deripaska?  European sanctions on Deripaska are not relevant nor are European reactions to US sanctions.  Deripaska's relationship with Paul Manfort and Konstantin Kilimnik are not pertinent and should not be mentioned in any relevant document.

Find information online that answers this multifaceted question.

A new link between the Trump campaign and Russian intelligence that’s more evocative than definitive

Imagine that you had a document that included sensitive information. So, before handing the document to someone, you very carefully cut out pieces of black paper and Scotch-tape them on top of the parts of the document you want to keep private. Foolproof.
You probably see the problem here. And yet someone, perhaps attorneys working for Paul Manafort, appears not to have done so. A document filed with the court on Manafort’s behalf tried to obscure important information by overlaying black boxes on the text, giving the appearance of a redacted document but offering all of the security of those little bits of black paper.
So what did we learn? Several things, as The Washington Post has reported — but one particularly evocative connection between Manafort and a man believed to have links to Russian intelligence.
The document attempts to defend Manafort from charges of having lied to investigators by arguing that he simply didn’t remember various interactions with a colleague of his named Konstantin Kilimnik — who, a filing by investigators working for Robert S. Mueller III alleged in March, “has ties to Russian intelligence service and had such ties in 2016.” Manafort, for much of 2016, was working for President Trump’s campaign as its chairman.
Manafort and Kilimnik had worked together on issues related to Ukrainian politics for years before Manafort joined the campaign. Part of the document meant to be redacted asserts that “[i]ssues and communications related to Ukrainian political events simply were not at the forefront of Mr. Manafort’s mind during the period at issue” and, therefore, it’s not surprising that he didn’t recall raising the subject with Kilimnik.
"The same is true,” the section continues, “with regard to the Government’s allegation that Mr. Manafort lied about sharing polling data with Mr. Kilimnik related to the 2016 presidential campaign".
This is evocative.
There have been questions from the outset of the investigation into Russian interference about how Russian actors might have directly tried to coordinate campaign activity with the Trump team. We know, for example, that Russian entities targeted Americans on social media in an attempt to influence their political thinking. There were reports, including from McClatchy in July 2016, that investigators were trying to determine if there was direct campaign coordination between the Trump campaign and Russia that might have allowed Russia to better tailor its influence program.
“One source familiar with Justice’s criminal probe said investigators doubt Russian operatives controlling the so-called robotic cyber commands that fetched and distributed fake news stories could have independently ‘known where to specifically target … to which high-impact states and districts in those states,’” McClatchy reported at the time. But there wasn’t any real evidence that information was moving from Trump’s campaign to Russia.
Until this failed redaction emerged.
So what does it tell us? The language is vague: Manafort shared “polling data with Mr. Kilimnik related to the 2016 presidential campaign.” That doesn’t necessarily mean polling data from the Trump campaign. There was certainly a lot of polling done in 2016 but, interestingly, not much by the Trump campaign — which spent more on promotional hats than on opinion surveys. Manafort might have shared publicly available polling information with Kilimnik, which nonetheless raised questions for Mueller’s team. (It probably goes without saying, but that investigators asked Manafort about the sharing of polling and flagged his response as false indicates that they were interested in this particular exchange.)
Let’s assume, for the sake of argument, that it was internal Trump campaign polling. The timing on this is iffy; the first polling expense logged by the campaign in 2016 came at the end of August. Earlier that month, Manafort was fired, after allegations of illicit payments from Ukraine became public. But, again, let’s assume that’s what it was.
What might Russia have learned? It's hard to say without knowing what the polling said or was focused on. Perhaps it revealed particular messages that were effective with apathetic or persuadable voters. Perhaps it revealed particular places where the campaign hoped to get a boost.
We know something now that we didn’t know in July 2017, when McClatchy first reported on Russia’s interference efforts: They don’t seem to have done much. There were a number of targeted ads and a broad range of campaign pitches, but the ad targeting was fairly scattershot, heavily focused on areas where the presidential contest wasn’t particularly close, and the messages deployed by the Russians were not particularly sophisticated.
There was a late-campaign focus on trying to suppress the black vote to some extent, a focus that Bloomberg News reported in October 2016 was also a focus of the Trump campaign itself. But, as we noted last month, the Russian effort was not particularly robust. There was nothing in the product of the Russian effort that we know of that would suggest any particular inside knowledge.
That is beside the point, of course. It’s worth asking why Manafort might have passed polling to Kilimnik. If he wanted Kilimnik to share that information with Russia to influence the campaign, it’s hard to see that as anything less than an effort to collude with Russia.
We know, thanks to reporting from the Atlantic, that Manafort in April 2016 emailed Kilimnik to ensure that his colleague had been sharing information about his new position with the Trump campaign to an oligarch named Oleg Deripaska. Manafort and Deripaska, an ally of Russian President Vladimir Putin, worked together for years until they had a falling out.
In July 2016, Manafort asked Kilimnik to offer Deripaska private briefings on the campaign, according to Post reporting. Manafort seemed to believe that his position with the campaign offered an opportunity to provide something of value to Deripaska and, further, seemed to believe that offering insight into the inner workings of the campaign might be of interest to the oligarch.
It's not hard to extend this train of thought to an obvious place: Perhaps that effort included Manafort passing Kilimnik polling information with the intent that he give it to Deripaska.
Update: The Times
Why would Deripaska care? Perhaps because he hoped that Trump’s election would result in a relaxation of the sanctions that he faced from the U.S. government. This was an effort that spanned multiple administrations and that involved Manafort for years. Perhaps Manafort hoped to rebuild their business partnership by showing that the candidate for whom he was working might soon be president.
If that was the plan, it worked out to a limited degree. Trump is president and sanctions on Deripaska will be eased. How much of that if any is due to Manafort, first fired and then indicted, is not clear.
Perhaps there was a conduit for collusion that went from Trump to Manafort to Kilimnik to Russian intelligence. Or perhaps Manafort, ever the hustler, was working a hustle.


Describe US sanctions on Oleg Deripaska

Trump confused everyone by canceling North Korea sanctions. The explanation may have been a coverup.

Last week, President Trump announced in a cryptic tweet that he was canceling major sanctions against North Korea. This led to several hours of confusion, because the Treasury Department had just announced sanctions against two Chinese shipping companies that were accused of facilitating trade with North Korea. Canceling sanctions the day after they were announced seemed like an unprecedented step. After several hours of confusion, the administration announced that Trump had not been referring to those sanctions — but instead had canceled new, as-yet unannounced North Korea sanctions that were in the pipeline.
Today, Bloomberg News reports that this explanation may have been false. Bloomberg reporters say they have been told by five unnamed sources familiar with the matter that there were no new North Korea sanctions planned and that Trump was indeed referring to the sanctions against the two Chinese shipping companies doing business with North Korea. He was eventually persuaded to change his mind, however. According to Bloomberg, the purported explanation was no more than a “cover story” intended to conceal the erratic policy process in the White House and Trump’s eventual change of mind.
In a forthcoming article in the journal International Security, Abraham Newman and I discuss how the United States has used its sanctioning power to build an extensive system of international financial control that has greatly extended the reach of U.S. power. However, recent policy steps by the Trump administration, including overreach in some areas (the threat of sanctions against close allies) and unpredictable decision-making in others (the willingness of the administration to turn sanctions into a bargaining chip in trade diplomacy) is contributing to the undermining of U.S. power. Bloomberg’s reporting is likely to add to a general impression of disarray in White House geopolitical decision-making.
U.S. power to impose sanctions has limits
As Newman and I discuss in our research, the United States has expanded its use of sanctions in the recent past. It has been able to apply new kinds of power, leveraging the central role that the dollar and financial messaging systems such as SWIFT play in the global financial architecture. The United States has been able to rely on a sophisticated administrative apparatus, centered in the Treasury Department’s Office of Foreign Assets Control (OFAC), to administer sanctions policy. However, this power has its limits. It works best when other countries — especially U.S. allies — respect it and go along with it. It also relies on the great deference that the U.S. legal system pays to the administration’s decisions about sanctions. When the administration says sanctions are in the security interests of the United States, American courts are likely to heed it.
These limits are becoming increasingly clear as the Trump administration tests them. On the one hand, the administration is increasingly unwilling to listen to its allies about sanctions policy. It effectively forced SWIFT — a Belgium-based consortium — to adhere to the U.S. position on Iran, despite the strong opposition of European states. It is also changing its approach to Cuba sanctions in ways that may — if it continues on the current path — have massive repercussions for European firms. This is leading to increasingly organized opposition from America’s European allies, as well as traditional rivals and adversaries such as China and Russia.
The Trump administration is also seeing increasing challenges to its sanctions decisions in U.S. courts. The energy giant ExxonMobil is suing the Treasury Department over a sanctions decision punishing it for its dealings with the Russian oil company Rosneft, while the Russian oligarch Oleg Deripaska announced a lawsuit over sanctions this month. Finally, the OFAC is also seeing significant staff losses as personnel defect to the private sector.
Administration inconsistency is undermining its approach to sanctions
Trump’s apparent turnabout is only the most recent example of U.S. inconsistency on sanctions. Last year, the president watered down sanctions against Chinese tech company ZTE, apparently as a bargaining chip in trade negotiations. Adam Segal of the Council on Foreign Relations described this as a “flabbergasting” decision. Trump’s ambassador to Russia was willing to share a platform with a sanctioned Russian oligarch. White House press secretary Sarah Sanders’s reasoned defense of last week’s U-turn was that “President Trump likes Chairman Kim and he doesn’t think these sanctions will be necessary.”
This inconsistency is damaging Washington’s ability to get U.S. allies to respect its sanctions and related policies overseas. European diplomats say in private that one of the reasons European states have not signed onto the effective U.S. embargo against telecommunications equipment made by China’s Huawei Technologies is that they do not know whether the administration will maintain it. They fear that if they change their policies and laws in response to U.S. pressure, Trump may just decide on the spur of the moment to change U.S. policy on Huawei, leaving Europe out on a limb.
It is also probably damaging morale among the administration employees charged with making sanctions determinations. The OFAC relies on a esprit de corps to maintain skilled lawyers, who could be making several times as much money in the private sector. It is improbable that OFAC officials are enthused by Bloomberg’s reporting of a reversal, re-reversal and coverup.
Finally, it is likely that some officials and administration lawyers are worried that the apparent lack of consistency could damage U.S. credibility in court. In general, courts defer to the administration when it cites the U.S. national interest. However, as in other areas of the law, it is possible that news coverage of apparently inconsistent and erratic decision processes, as well as possible coverups, may lead judges to be more skeptical of administration claims than in the past. It is still very unlikely that judges will overturn the very long established practices of deference, or even modify them significantly, but it is less unlikely than it used to be.


Describe US sanctions on Oleg Deripaska

The Finance 202: Trump can probably stop worrying about Fed hikes for now

THE TICKER
President Trump — dug in and drumming on his demand — is prevailing on the most consequential economic front in Washington.
It isn’t over the government shutdown, which remains stalemated over Trump’s insistence on money for a border wall. Rather, the Federal Reserve looks likely to hold off on further interest rate hikes, as Trump has been insisting since he started inveighing against the central bank last summer.
“The final pieces of the puzzle fell into place on Wednesday that essentially ensure it will be months before the Fed contemplates another rate rise,”
The Fed’s pause, to the extent it materializes, won’t owe to Trump’s jawboning (which he renewed in a Tuesday tweet). Instead, some central bank policymakers are shifting on the need to continue hiking because inflation appears tame — and a cloudy economic outlook warrants a go-slow approach.
Two of the regional Fed bank presidents who on Wednesday indicated a new willingness to wait — Eric Rosengren of Boston and Charles Evans of Chicago — have been relatively hawkish. But given recent uncertainty, including the stock market’s choppiness, “current monetary policy seems appropriate for now,” Rosengren said.
The comments came as minutes from the Fed’s December meeting revealing central bank policymakers are feeling increasingly cautious about how to proceed.
And Fed Chair Jay Powell confirmed the approach on Friday, when he struck what investors heard as a note more sensitive to financial markets during a question-and-answer session in Atlanta.
Taken together, the commentary supports the conclusion “now firmly embedded in markets that the next rate hike will come no sooner than June, if it comes at all,”
In his note, Shepherdson predicted that if the United States and China strike a trade deal, stocks will rally sharply, smoothing the path for the Fed to resume hiking. “Fed officials, we think, will come to regret their knee-jerk reactions to the drop in stocks in the fourth quarter, because the bigger picture hasn’t changed much,” he writes. “In short, if you believe that the U.S. and China will soon reach a trade agreement, then the risk of further Fed rates hikes later this year is much greater than is currently implied by markets.”
Nevertheless, for the first few months of this year at least, the Fed looks primed to back off the monetary tightening that has been enraging Trump.
And, as CNBC’s Jeff Cox notes, that should reduce one risk emanating from the White House: That the president would try to fire Powell in a fit of pique, a move that is “universally regarded as difficult to achieve and likely disruptive if not disastrous for the market.”
— Trump walks out of shutdown negotiations. The Post's Erica Werner and co.: “Talks between [Trump] and congressional Democrats aimed at ending the partial government shutdown collapsed in acrimony and disarray Wednesday, with the president walking out of the White House meeting and calling it ‘a total waste of time’ after Democrats rejected his demand for border-wall funding. Furious Democrats accused Trump of slamming his hand on the table before he exited, and they said he ignored their pleas to reopen the federal government as they continue to negotiate over his border wall demands. With the shutdown nearing the three-week mark, some 800,000 workers are about to miss their first paycheck. ‘He thinks maybe they could just ask their father for more money. But they can’t,’ said House Speaker Nancy Pelosi (D-Calif.), an implicit dig at Trump’s wealthy upbringing.”
Some House GOP defect on bill to reopen Treasury
Meanwhile, small business owners can't get loans, as the Small Business Administration has stopped processing applications, The Post reports.  And the Treasury Department can't cover it’s water bill.
— House Dems seek answers from Mnuchin. NYT's Alan Rappeport and Ken Vogel: “House Democrats have summoned Steven Mnuchin, the Treasury secretary, to Congress on Thursday to deliver a classified briefing about the Trump administration’s plans to end sanctions on companies linked to the billionaire Russian oligarch Oleg V. Deripaska. The briefing is an early instance of Democratic lawmakers flexing their new oversight muscles after taking control of the House last week... Congress is reviewing the administration’s decision — announced in December by the Treasury Department — to lift sanctions against three companies that Mr. Deripaska controls, EN+, Rusal and JSC EuroSibEnergo.”
— Stocks cautiously climbing.
“The S&P 500 Index was up for a fourth consecutive day led by energy producers, reaching the highest level in almost a month. The Nasdaq benchmarks were the strongest performers on strength in semiconductors and technology hardware manufacturers.”
Why stocks tanked in December
“On the first day of trading in 2019 last week, Apple warned that its fiscal first-quarter sales wouldn’t be as high as previously projected and said its profit margin would be ever so slightly narrower than forecast. The Nikkei Asian Review reported this week that Apple is cutting its iPhone production by 10 percent for the next three months. It is more of the same for other companies. Beverage giant Constellation Brands said Wednesday that its fiscal 2019 earnings per share would be $9.20 to $9.30, down from the range of $9.60 to $9.75 it forecast earlier. The company said it expects weak sales in its wine and spirits business next quarter.”
Computers still bearish.
“Funds that use such strategies likely went from holding net long positions, or betting that prices would rise, in four major asset classes—stocks, bonds, currencies and commodities—in the third quarter of 2017, to being short, or wagering against, everything but bonds by 2019. And even their embrace of bonds is bearish, signaling a flight to haven assets.”
New tech stocks on the block.
— May tries again to sell her Brexit deal.
“May postponed the vote in mid-December when it became clear lawmakers would resoundingly reject the agreement, a compromise deal that has left both pro-European and pro-Brexit politicians unhappy. Rather than warming to May’s deal since then, lawmakers have tried to wrest control of Brexit from the government and put it in the hands of Parliament. An alliance of governing Conservative and opposition legislators has dealt May two defeats in as many days — symbolic setbacks that suggest a power shift from the executive to the legislature.”
TRADE FLY-AROUND:
— Beijing talks yield progress. Bloomberg's Andrew Mayeda and Miao Han: “The Trump administration is pushing for a way to make sure China delivers on its commitments in any deal the two nations reach to defuse a trade war that has roiled financial markets and dimmed the outlook for global growth. The U.S. wrapped up three days of mid-level talks with China in Beijing on Wednesday, noting a commitment by President Xi Jinping’s government to buy more U.S. agricultural goods, energy and manufactured products. For its part, China said the meetings were “extensive, in-depth and detailed,” and laid the foundation for a resolution of the conflict.”
High-level talks may be next.
But Trump could skip Davos
— Trump, GOP to battle on trade powers. Bloomberg's Jenny Leonard: “Trump is setting himself up for a fight with congressional Republicans if he seeks to expand his unilateral tariff powers or proceed with threatened duties on imports of cars and auto parts. Trump is expected to urge Congress in his State of the Union address this month to pass new legislation that would boost his powers to break down tariff and non-tariff barriers to American exports...
“Sen. Chuck Grassley of Iowa, who now chairs the Finance Committee with jurisdiction over trade, told reporters Wednesday that Trump will not be allowed more power because Congress has already delegated too much authority to the executive branch. ‘Oh, we aren’t going to give him any greater authority, we’ve already delegated too much,; Grassley said in response to a question on the Bloomberg News report.”
Grassley is also looking into his authority to see Trump's tax returns
MELTDOWN WATCH:
— Bezos's divorce and his stake in Amazon.
“Mr. Bezos is the world’s wealthiest man, with a net worth of about $137 billion, according to the Bloomberg Billionaires Index. Ms. Bezos, who was instrumental in helping to launch Amazon, could be entitled to half the couple’s wealth depending on where they divorce, attorneys said. If Ms. Bezos ends up with a chunk of Mr. Bezos’s stake, she could influence shareholder votes on resolutions and press for changes at the company. No matter what, Mr. Bezos is expected to remain one of the company’s largest holders. The next biggest holders are Vanguard Group and BlackRock Group Inc., each with a little more than 5% of the company. In a message Wednesday on Mr. Bezos’s Twitter account, the couple said that after a trial separation, they had chosen to proceed with the divorce.” (Bezos owns The Post.)
— Sweden is way ahead of AOC on tax rates.
“Critics of high taxes claim the policy stifles economic growth by reducing the incentive for people to work. But Sweden’s employment rate is 77.5 percent, beating the U.S.’s 71 percent. The Nordic country has also surpassed the U.S. in terms of economic growth this decade, expanding 2.7 percent a year, on average, compared with 2.2 percent for the U.S.”
Larry Summers: AOC right in spirit.
— Ginne Mae chief quits. Bloomberg's Elizabeth Dexheimer: “Michael Bright has stepped down from running Ginnie Mae to join a trade group, according to a person with knowledge of the matter. Bright, who has been chief operating officer of the government-owned mortgage guarantor since July 2017, will be joining the Structured Finance Industry Group as its president, the person said, asking not to be named because the move hasn’t been announced. Bright was nominated by [Trump] last year to become Ginnie Mae’s president and had bipartisan support on the Senate Banking Committee. He didn’t get a confirmation vote from the full Senate.”
COMING SOON:
— From The New Yorker’s Ivan Ehlers
Just a few weird tech products we saw at CES 2019
One mother’s struggle as the shutdown grinds on
Meteorologist fired for using racist slur on air says it was an accident


Describe US sanctions on Oleg Deripaska

Too big to sanction? U.S. struggles with punishing large Russian businesses.

When the Treasury Department imposed tough sanctions on Russian oligarch Oleg Deripaska and his companies in April, the fallout for the Putin ally was fast and fierce.
Western customers stopped buying from the aluminum company he controls, sinking its share price and shaving Deripaska’s fortune from $6.7 billion to $3.4 billion, according to Forbes estimates.
The sanctions also caused havoc far beyond Russia. Global aluminum prices spiked, battering U.S. and European companies that use the metal. After an outcry from manufacturers and foreign governments, Treasury softened its stance, giving companies more time to end dealings with the aluminum producer, Rusal, and suggesting it could lift sanctions on the company if Deripaska cedes control.
The episode is a cautionary tale as the United States readies more sanctions against Russia, including some beginning Monday that will affect U.S. technology exports, and some under consideration in Congress that could prove painful for European oil and gas companies.
Compared with other countries that have been under U.S. sanctions, including Iran, Cuba, Myanmar and North Korea, Russia plays a bigger role in global commerce, giving the sanctions more potential to sting — both their intended targets and unintended bystanders in the United States and Europe, economists and trade experts say.
Russia “is part of the world economy,” said Richard Sawaya, a sanctions expert at the National Foreign Trade Council, an industry-financed organization that advocates free trade. “It’s a member of the World Trade Organization,” he said. “Its banks are connected throughout Europe and the U.S.”
The sanctions
After an initial ban on some U.S. technology exports to Russia, a second stage of the sanctions could follow later this year with penalties including a ban on Russian airlines landing in the United States.
Russian lawmakers say
Congress, meanwhile, is considering additional sanctions to punish Russian “aggression,” including its interference in U.S. elections. The bipartisan legislation would ban U.S. investors from buying new shares of Russian government debt. It would also cut some Russian banks’ access to U.S. dollars, a step that would “very, very seriously hit the Russian financial system,” said Vladimir Milov, economic adviser to Russian opposition politician Alexei Navalny, a foe of President Vladimir Putin.
The bill’s energy-related sanctions could prove particularly harmful to European companies, said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington. Those measures would ban companies from investing in crude-oil infrastructure inside Russia, or in large energy projects outside Russia if they involve a Russian state-controlled company. Kirkegaard said that would probably complicate investments by German companies and Royal Dutch Shell in Nord Stream 2, a planned pipeline that would ship Russian natural gas to Germany.
Deripaska’s camp is dangling the threat of even worse outcomes for the United States if Washington doesn’t lift the Rusal sanctions. Failure to reach a deal could lead the holding company through which Deripaska controls the aluminum producer to seek “other avenues to resolve the current impasse, including a potential acquisition by Chinese interests or the potential nationalization of the company by Russia,” according to Justice Department filings made by a U.S. lobbying firm representing the holding company’s chairman.
One former Treasury official said the tumultuous rollout of the Rusal sanctions showed a lack of coordination with U.S. allies and ignorance about the global metals market.
“One lesson we should draw from this is that while folks at Treasury have a pretty good sense of how their sanctions on financial products will play out, they don’t have the same expertise and knowledge of nonfinancial commercial sectors,” said Liz Rosenberg, who handled sanctions policy during the Obama administration and is now a senior fellow at the Center for a New American Security.
The Treasury Department says its strike was well thought out.
“We understand this was a very significant action targeted against Deripaska and the companies he has ownership of,” Sigal Mandelker, undersecretary of the Treasury for terrorism and financial intelligence, said in an interview. “We were well aware this was going to be impactful, and are focused on sanctions that have impact.”
Deripaska isn’t likely to make a clean escape even if Rusal sanctions are lifted because sanctions on him personally will remain intact. And he is having to make serious concessions as he seeks relief for his aluminum company.
To placate Treasury, Deripaska has “agreed in principle” to reduce his shareholding in En+ Group, the holding company that controls Rusal, from 70 percent to below 50 percent, according to En+, which says it is working “with Mr. Deripaska and his family to transfer their assets to approved organizations or trustees.” Deripaska and his allies have also resigned from the boards of Rusal and En+.
Deripaska, Rusal and En+ did not respond to requests for comment.
The Deripaska-controlled holding company is leaning on several Western establishment figures to plead its case in Washington. Leading that effort is En+ Chairman Gregory Barker, a former U.K. energy minister and a member of Britain’s House of Lords. To help press his agenda, Barker hired Mercury Public Affairs, which assigned an influential lobbyist to the case: former U.S. senator David Vitter (R-La.).
In Mercury lobbying documents filed with the Justice Department, Vitter and Mercury warned that failure to lift Rusal sanctions would “open the Trump administration up to criticism for harming U.S. manufacturers and consumers” and “cause significant disruptions to global aluminum and metals markets.”
In a May 1 email to State Department officials, Vitter thanked them for a “productive meeting” and attached media reports about the London Stock Exchange’s plans to halt trading of En+ shares unless the company won a sanctions reprieve. The reports underscored a “deadline upon us,” Vitter wrote, according to a copy of the email filed with the Justice Department.
Asked about the email, a State Department spokesperson said: “We regularly meet with business and other representatives as part of our outreach efforts.” Vitter and Mercury declined to comment. Barker didn’t respond to a request for comment.
Deripaska started amassing his fortune in the 1990s, when Boris Yeltsin was Russia’s president and rival groups vied for control of previously state-owned industries. In lawsuits, former allies and rivals accused Deripaska and his associates of using fraud and violence to take over aluminum assets, allegations Deripaska denied. Between 1998 and 2000, the United States denied Deripaska visas under a statute deeming foreigners ineligible “based on security, unlawful activity and related reasons,” Rusal has disclosed in securities filings. Deripaska called those concerns “unwarranted” in the filings.
By the early 2000s, his company’s output of aluminum was second only to that of U.S. giant Alcoa Corp. After the 2008 financial crash, Rusal was forced to take a $4.5 billion bailout loan from a Russian state-owned bank, which political analysts say made Deripaska more reliant on Putin.
The oligarch’s business came crashing to a halt when Treasury issued its April 6 sanctions, barring global banks and companies from dealing with him personally or with the companies he controls.
The London Metal Exchange, a global clearinghouse for aluminum, announced it would no longer allow Rusal ingots in its warehouses. Share prices for Rusal and En+ collapsed on the Hong Kong and London stock exchanges, and many of their Western board members resigned.
Rusal is a major supplier of alumina, a raw material used to produce aluminum, so global prices for alumina also shot up. Roy Harvey, chief executive of Pittsburgh-based Alcoa, said that the price spikes were “throwing a lot of the market into an uproar.”
U.S. allies, including Germany, Ireland, France and Britain, warned the State Department that the move was disrupting global markets and hurting European factories that relied on Rusal, diplomats said, speaking on the condition of anonymity to discuss sensitive conversations. Ireland expressed concerns about a Rusal-owned alumina plant in rural Ireland that employs 470 people in a region “where there isn’t alternative sources of employment,” Daniel Mulhall, the Irish ambassador to the United States, said in an interview.
In an apparent nod to those concerns, Treasury softened its stance 17 days later, giving banks and companies more time to wind down dealings with Rusal and saying it might consider lifting the Rusal sanctions under certain conditions.
“The company has petitioned us for delisting. And I’m not going to comment on the specifics of what that would entail, but one of the issues will be selling down the majority interest,” Treasury Secretary Steven Mnuchin said in an April 30 interview with Bloomberg TV. “We’re having conversations with the company.”
Treasury’s Office of Foreign Assets Control, or OFAC, has extended the grace period for companies to wind down dealings with Rusal until Oct. 23, giving both sides until then to reach a deal. “The company has been in continuous communication with OFAC trying to find a solution aimed at its delisting,” Rusal said on Aug. 6.
jeanne.whalen@washpost.com
john.hudson@washpost.com


Describe US sanctions on Oleg Deripaska

‘Whatever he wants’: Inside the region Russian oligarch Oleg Deripaska runs like a personal fiefdom

KHUTOR SOKOLSKY, Russia —
The livestock stalls hold around 150 head of cattle. The reservoir contains at least 200 tons of fish. Two geese that managed to survive New Year’s Eve stand sentry over the ducks.
But this is no ordinary farm.
The food grown on these acres in southern Russia is produced with one main customer in mind: the metals magnate Oleg Deripaska, whose power in his home district resonates like that of a modern-day feudal lord.
His riches paid for the district’s schools, kindergartens, churches, rural gas pipelines and sports facilities, and trips to Paris for his former teachers. He has negotiated agreements specifying how his tax money is spent. The district court consistently rules in his favor.
His home — and the adjoining hotel, offices, employee residences and farm — occupy an entire village in southern Russia.
“He likes domestic, traditional kinds of sausage. They’re fatty, of course,” said Deripaska’s farm manager, Ralf Dreeris. The recipe for a Ukrainian-style sausage that Dreeris makes was given to Deripaska by Ukraine’s ousted pro-Moscow president, Viktor Yanukovych.
The immense wealth and influence of the men known as oligarchs, who won control of assets after the fall of the Soviet Union, is one of the hallmarks of modern Russia.
Here in the district of Ust-Labinsk — a swath of plain where Deripaska grew up, and which he still calls home — the union of riches and privilege in President Vladimir Putin’s Russia may have reached its apogee.
“They call this district his property,” said Alexander Savelyev, who also hails from this mostly rural area and works as a journalist and at the regional office of the opposition activist Alexei Navalny. “He can do whatever he wants here.”
The U.S. Senate last month upheld a Trump administration move to lift sanctions on Deripaska’s companies after he reduced his stake and stepped down from their boards, sending share prices back up.
The many critics of the deal in Washington claimed that Deripaska, 51, still retained control of the companies, and questioned the propriety of easing the penalty on a figure on the fringes of the investigation into Russian interference in the 2016 U.S. presidential election.
Deripaska’s ties to Paul Manafort, President Trump’s now-jailed former campaign chairman and a former consultant to Yanukovych, stoked speculation that Deripaska may have played a role in linking the Kremlin and the Trump campaign.
In a statement to The Washington Post, Deripaska called the allegations “beyond absurd” and said he had no contact with Manafort for more than seven years.
“While I realize I’ve involuntarily become a lightning rod for the anger some Americans have about the elections result, they need to look elsewhere for a scapegoat,” Deripaska said. “I am nobody’s man, in Russia, the U.S., or anywhere else, for that matter.”
In April 2018, the United States imposed sanctions on him in response to Russia’s “worldwide malign activity,” costing Deripaska billions as his companies’ stock price cratered.
Weeks earlier, social media posts emerged showing a self-proclaimed sex expert known as Nastya Rybka and Deripaska relaxing on his yacht with a Russian deputy prime minister. Deripaska then sued Rybka — whose real name is Anastasia Vashukevich — in the Ust-Labinsk district court. A favorable verdict arrived within 29 minutes, along with a rare order forcing Instagram to take down the posts that irked Deripaska.
In Ust-Labinsk, few people seemed willing to criticize Deripaska. Not even the priest who leads Deripaska’s congregation.
“If he did something somewhere that was morally or ethically wrong, then that is his personal problem,” said the Rev. Grigory Gureyev. “The man takes care of his home region.”
Gureyev preaches at the Deripaska-built Church of St. Vladimir. Deripaska’s father, Vladimir, is buried in the adjacent graveyard. An architect on Deripaska’s staff who specializes in churches designed it as a replica of the Church of the Intercession on the Nerl, one of Russia’s most famous medieval buildings. Another staff member procured a rare relic of Saint Demetrios of Thessaloniki.
In the district’s main town, Ust-Labinsk, population 40,000, Deripaska is building a boarding school. The central quad’s columned arcade is already complete, set against the town’s vegetable-oil-extraction plant and the grain elevator.
“He believes that classical architecture, in particular, allows schoolchildren, in particular, to study academic subjects more deeply,” said Yury Ryabchenyuk, who heads Deripaska’s economic development fund focused on the region. “This isn’t a campus. This is an Italian palazzo.”
The surrounding small-town roads don’t radiate Roman grace. So Deripaska will also help pay to renovate the streets in the boarding school’s vicinity.
Public officials in Ust-Labinsk at times described themselves as stewards and executors of Deripaska’s wishes rather than as decision-makers in their own right. They spoke in interviews set up by Deripaska’s foundation after The Washington Post reached out to the foundation regarding a story about Ust-Labinsk.
“I’m like the manager, dealing with things like infrastructure,” said Ust-Labinsk’s mayor, Sergey Vyskubov. Referring to Deripaska in the respectful patronymic form, he added: “Oleg Vladimirovich thinks much more long-term, in terms of strategic projects.”
Deripaska has negotiated agreements with regional authorities specifying how his tax money is to be spent. One of his long-term interests is kaizen — a Japanese business-management approach emphasizing continuous improvement. A kaizen suggestion box greets visitors to City Hall, and even the kindergartens are designed according to the philosophy’s teachings.
Other projects appear to come together on a whim.
Last spring, after a meeting with the governor, Deripaska ordered his staff to come up with a comprehensive plan to get children in the Krasnodar region, which includes Ust-Labinsk, to play rugby. He had played the sport growing up.
Over the summer, Deripaska’s staff brought in professional rugby players to teach the rules to Ust-Labinsk gym teachers. They bought uniforms and equipment. They hired a former member of Russia’s national team to help run the program. By the start of the school year in September, eight Ust-Labinsk schools were offering rugby classes.
He also persuaded his old karate teacher, Pavel Pisarenko, who years ago emigrated to the United States, to come back to Ust-Labinsk from Colorado Springs to head a new martial arts center.
In the village of Oktyabrsky, Deripaska had his grandmother’s one-story wooden house preserved to look just like it did when she was alive — down to the napkins.
Deripaska moved to Moscow for university and became a metals trader after the collapse of the Soviet Union. Starting out with a stake in a Siberian smelter, he built one of the world’s largest aluminum conglomerates. Along the way, according to the Treasury notice announcing sanctions against him last year, Deripaska “has been accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering.”
Deripaska has denied those allegations, but he’s been open about his support for Putin — and the Kremlin has supported him. As recently as 2016, Russian Foreign Minister Sergei Lavrov asked then-Secretary of State John F. Kerry for assistance in getting Deripaska a U.S. visa, The Post reported.
In a written statement, Deripaska said that he considered Ust-Labinsk home and that he spent more time there than in Moscow.
“Our efforts are a drop in the ocean,” he said. “Until the residents of the district start to get involved themselves, fundamentally, nothing will change.”
The area has come to rely on Deripaska’s money. He paid for the seed and fertilizer for the children’s sugar-beet cultivation contest and for the sand for a village beach volleyball court. When the director of the district history museum heard about a site where the invading Germans may have massacred local Jews in World War II, he asked Deripaska’s foundation for funding to examine it.
The museum director, Furkat Baychibayev, said it was a no-brainer to seek money from the foundation rather than the local government.
“It’s a more flexible system,” he said.
Although the U.S. Treasury lifted sanctions on his companies, Deripaska himself remains banned from doing business with any Americans. Sanctions helped cut Deripaska’s wealth to $3.6 billion from $6.7 billion in the past year, according to Forbes.
The sanctions have been felt in Ust-Labinsk, too.
Deripaska’s effort to bring foreign companies into an industrial park he built in the district broke down after the U.S. sanctions were announced, Ryabchenyuk said. So did a deal to buy a combine harvester from John Deere, according to Dreeris, the farm manager.
Dreeris said Deripaska has been spending more time on the property lately and has shown interest in expanding his farming operation. It already boasts plums, apricots, 56 varieties of apples, dairy and beef cows, quail, rabbits, a food-safety laboratory and an animal-feed processing plant. Much of what Deripaska doesn’t consume is sold in local markets.
“It’s said that the locals eat what the oligarch eats,” Dreeris said. “It’s very prestigious for them.”
anton.troianovski@washpost.com


Describe US sanctions on Oleg Deripaska

Happy Hour Roundup

* Julie Hirschfeld Davis and Lisa Friedman report that the finely-tuned machine that is the Trump White House continues to operate perfectly:
I figure it’ll take one or two more cycles of such embarrassing revelations to make Trump decide that Pruitt isn’t up to his administration’s high standards. On the other hand, he’s so petulant that he probably doesn’t want to give Kelly the satisfaction, so who knows.
* Peter Nicholas reports that Trump’s aides gave him a Powerpoint presentation to try to convince him that the things he’s been saying about Amazon are false, to no avail.
* John Hudson and Seung Min Kim report that the administration imposed a new set of sanctions on Russian companies and business leaders, including Oleg Deripaska, the mob-connected billionaire whom Paul Manafort owes millions of dollars, and who for some reason has not had Manafort murdered.
* Ariel Edwards-Levy reports on polling that shows voters are saying their top issue is health care, which bodes well for Democrats in November.
* Arit John reports that Democrats are planning on using the Affordable Care Act as an issue against their Republican opponents in the fall.
* Stocks slid again today, and the New York Times reports that investors are now beginning to take the prospect of a major trade war “seriously.”
* A good catch by Steve Benen: Trump let slip that he realizes managing this trade war is not going to be “easy,” which is an important revelation, given his constant claims that solving problems as president will be a simple matter.
* Ari Berman reports that Maryland just became the 12th state to enact automatic voter registration, a big step forward for voting rights.
* Allegra Kirkland reports that Democrats in blue states are being unusually aggressive in passing legislation this year.
* Yardena Schwartz reports that women who spoke out about sexual harassment at Fox News found themselves blacklisted from the news business.
* Randall Eliason explains why the latest development in the Paul Manafort case is such a big deal.
* ProPublica is running an interesting experiment in pairing with local news organizations to do local investigative reporting, at a time when such journalism has been badly downsized.
* Kirsten Powers explains that there’s nothing pro-life about wanting to execute women who have abortions.
* Tara Golshan wonders if Republicans are going to increasingly turn to race-based appeals this fall as it becomes clearer that their tax cut won’t deliver victory at the polls.
* Michael Tomasky explains what we can learn about November from a Wisconsin Supreme Court race.
* At The Week, I contemplated whether we’re stuck in an eternal political doom loop.
* And Michelle Goldberg examines a bizarre right-wing conspiracy theory in which Trump is a genius who only pretended to collude with the Russians in order to trap his enemies.


Describe US sanctions on Oleg Deripaska

Russians sanctioned over election hacking and assassination attempt

The Trump administration slapped new sanctions on 18 Russian intelligence agents Wednesday for a variety of activities, including interfering in the U.S. presidential election, the attempted assassination of a former spy in Britain and hacking international agencies that combat chemical weapons and doping.
The latest round of sanctions bring the total of Russian individuals and entities the Trump administration has sanctioned to 272, even as President Trump has continued to deny any collusion between his campaign and Russia during the 2016 election.
Nine officers for Russia’s Main Intelligence Director (GRU) were sanctioned for playing a role in undermining the election.
The Treasury Department’s Office of Foreign Assets Control said they were engaged in cyberactivities that targeted election systems and political parties. It said they released stolen documents related to the election, using online personas, and promoted their spread on social media accounts operated by the GRU.
Treasury also sanctioned the chief accountant for a Russian company that took part in the information war by producing English language news sites such as USA Really, which played up divisive political issues and attempted to stage a political rally in the United States.
In addition, Treasury imposed sanctions on Alexander Petrov and Rusian Boshirov, two GRU officers who have been accusing of attempting to assassinate Sergei Skripal and his daughter in Salisbury, England, last year.
Skripal, a former Russian spy, and his daughter fell gravely ill after being exposed to a military grade nerve agent called Novichok. Britain, the United States, Germany, France and Canada have all concluded that the Russian government was responsible for the attack. The Kremlin has denied involvement.
British police have charged Petrov and Boshirov with conspiracy to murder the Skripals and a British detective who also fell ill after being exposed to the nerve agent.
Also among the individuals who were sanctioned is a former GRU officer who gave money to a political party in Montenegro before its 2016 elections. The Treasury Department said Victor Boyarkin was acting on behalf of Oleg Deripaska, a Kremlin-connected oligarch who despite being sanctioned has been invited to the World Economic Forum in Davos, Switzerland.
At the same time, the Treasury Department lifted sanctions on three companies after the companies agreed to diminish Deripaska’s holdings or sever his control over the companies.
Two GRU agents were sanctioned for playing a role in hacking into the databases of the World Anti-Doping Agency (WADA) and the Organization for the Prohibition of Chemical Weapons (OPCW).
WADA exposed Russia’s state-sponsored doping program for athletes, and the Russian hacking exposed confidential medical data of professional athletes, Treasury said.
The OPCW assisted in investigating the Skripal attack and the use of chemical weapons in Syria, where Moscow has provided military backing for the government.
carol.morello@washpost.com


Describe US sanctions on Oleg Deripaska

As Sochi Winter Olympics near, rich Russians bankrolling Games spar with Vladimir Putin

Russia's President Vladimir Putin (front) visits the "RusSki Gorki" Jumping Center at the Krasnaya Polyana resort near the Black Sea city of Sochi November 27, 2013.  (Novosti / Reuters/Novosti / Reuters)
In August, Russian President Vladimir Putin flew to the Black Sea resort of Sochi, where his country is spending a record $48 billion on the 2014 Winter Olympics. A regular visitor, with an official residence in town, Putin watched mixed-martial-arts contests at the Oblaka nightclub with Russian Prime Minister Dmitry Medvedev and Kazakh President Nursultan Nazarbayev.
After the first fight, the leaders suddenly were plunged into darkness for almost three minutes, giving them a taste of the blackouts that have plagued Sochi for years. Putin, poker-faced when the power returned, strode into the ring to congratulate the fighters as the tournament concluded.
“Here in Russia, we have always valued and respected men who know how to stand firm to the last,” he said.
Putin is bracing for a fight of his own in the mad rush to the Feb. 7 opening ceremony. With concerns about terrorist attacks, lack of snow and anti-gay laws dominating headlines, Sochi has endured its share of pre-Olympics tension.
Yet another, potentially longer-lasting battle is playing out behind the scenes — involving Putin’s government, some of Russia’s wealthiest industrialists and a state-owned bank. The government is demanding that the country’s biggest companies stand firm on commitments to bankroll the Games.
To finance venues and apartments in the Caucasus Mountains and along Sochi’s coast, state-owned Vnesheconombank, known as VEB, lent $7.4 billion to a who’s who of Russia’s elite. Among the biggest loan recipients are companies controlled by Vladimir Potanin, chief executive of OAO GMK Norilsk Nickel, the world’s largest nickel producer. Joining him are Oleg Deripaska, chief executive of United Co. Rusal, the No. 1 aluminum company; Alexey Miller, chief of state-controlled gas provider OAO Gazprom; and German Gref, chief of state-controlled OAO Sberbank, Russia’s largest bank.
The moguls say skyrocketing costs and restrictions on commercial activities mean they risk losses on their investments unless the government helps. They want extended tax breaks and subsidies on the interest payments they owe VEB for Sochi assets.
Putin is staking Russia’s image — and his legacy — on his pet Olympics project.
Sochi 2014 might as well be renamed Putin 2014, says Scott Antel, a partner at DLA Piper in Moscow who has worked on hotel projects in the region. Antel says Putin twisted billionaires’ arms to get the Olympics off the ground in return for letting their companies run their quasi-monopolies.
‘You will do your civic duty’
“This was a deal with the devil,” Antel says. “You will do your civic duty and build facilities in Sochi so we can have this coming-out party for the new Russian state. This is your indirect taxation to be allowed to continue with your main business activity.”
Deputy Prime Minister Dmitry Kozak, the country’s top Olympics official, dismisses suggestions of coercion. Kozak, who has worked alongside Putin for two decades dating to the St. Petersburg city administration, says investors got good deals — from favorable rates to government-built roads.
“All investors were invited to the project voluntarily,” Kozak says on a gray day in late October, sitting in Moscow’s White House, the mazelike government headquarters. He says investors will have to forfeit Sochi projects if they can’t repay their loans.
“If they default, then they will lose their equity and lose their business,” Kozak says. “The shares will be sold at auction.”
The Winter Games have proved a gamble for Putin. Russia’s economic growth was set to slow to 1.5 percent in 2013 just as Sochi soaks up the single biggest infrastructure investment since the Soviet Union collapsed in 1991.
“It’s the single most important event for Putin’s presidency,” says Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory. “If it is deemed to be a failure, there will be a focus on the cost.”
The reason Sochi’s price tag has quadrupled from Putin’s original $12 billion estimate depends on whom you ask. Boris Nemtsov, who ran unsuccessfully for mayor of Sochi in 2009, says as much as $30 billion has disappeared through corruption, a charge Kozak denies. Locals blame inflated prices for labor and materials. Others say the $48 billion figure is misleading because it covers infrastructure that will remain after the Games.
Putin is brooking no failures in his Olympics obsession. In February, he fired Akhmed Bilalov, vice president of the Russian Olympic Committee. Putin publicly criticized him for cost overruns and delays in the $245 million ski jump complex, which was seven times over budget. The Russian prosecutor general’s office opened a criminal case in April, accusing Bilalov of misspending funds as head of state-owned OAO Northern Caucasus Resorts.
Bilalov denies wrongdoing, says an associate who doesn’t want to be named, because the case hasn’t been settled. The associate says Bilalov had been feeling ill for months. In April, after fleeing to Germany, he discovered high levels of mercury in his bloodstream and later traced it to carpets in his Moscow office. Bilalov, who declined to comment, doesn’t know who’s responsible for the contamination, his associate says.
Kozak says investigators can’t find billions of rubles Bilalov allegedly spent on the Olympics project.
“It’s an extremely unpleasant story,” Kozak says.
Putin has unleashed the unparalleled spending to try to transform Sochi, a fading resort city 1,000 miles south of Moscow with pebble beaches and mountain views, into a year-round destination.
The spa region favored by Soviet leaders now has about 12,000 new hotel rooms. Near the Olympic stadium, whitewashed apartment blocks dot the seaside. In the mountains, white-knuckle chairlifts have been replaced with modern equipment to lure Russian skiers from their beloved French resort of Courchevel.
Backers are betting nightclubs and malls will turn sleepy Caucasus villages into hot spots. The priciest project: Government-owned OAO Russian Railways built an $8.7 billion rail line and highway to provide a 30-minute link between ski sites around Krasnaya Polyana and Adler on the coast, both of which are part of Sochi’s sprawling Adler district.
Russian Railways chief executive Vladimir Yakunin, a close associate of Putin, says the government ordered him to construct the road even after the Transport Ministry concluded that the project was too difficult.
“I was very reluctant,” Yakunin says. “They decided we were a sacrificial goat.”
If the hoped-for influx of post-Olympics tourists doesn’t materialize, Putin’s government may end up with heavily indebted ghost towns around Adler and Krasnaya Polyana.
“There’s massive infrastructure, and there’s no plan to attract business,” Macro Advisory’s Weafer says.
Basic Element, the holding company of United Co. Rusal’s Deripaska, has made one of the biggest private investments. It oversees Sochi projects worth $2.4 billion, using about $1 billion in loans from VEB. Among them: a $778 million Olympic athletes village on the coast; a $186 million cargo port that the 45-year-old billionaire wants to turn into a yacht marina; and a $440 million overhaul of Sochi International Airport, with two VIP terminals, one built just for Putin and the government.
Deripaska’s Olympics headaches mounted in October 2012, when his Port Sochi Imeretensky defaulted on a VEB loan of about $118 million. In one of a flurry of Olympics-related lawsuits, the port company sued Olympstroy, the state firm building most venues, in April and VEB in May.
Deripaska’s company claimed that just 2  percent of the planned 14 million tons of Olympic cargo was shipped via sea from 2010 to 2013. Without sufficient cargo, the port has been unable to keep up with loan payments. In October, VEB countersued the port company and Olympstroy for about $150 million.
Relaxing on a brown leather chair in Sochi airport’s main VIP terminal, Andrey Elinson, deputy chief executive of Basic Element, says the government invited the company to build a port to get Olympics-related goods into Sochi. Basic Element would never have pursued it without Olympstroy outlining minimum expectations.
No promises
“We’re in a bit of a disagreement with the government,” he says. “They have pushed more cargo through railways and invested in extending railway cargo capacity while the port was underloaded.”
The government made no promises, Kozak says.
“No one guaranteed a flow of goods,” he says. “Neither Olympstroy nor anyone else forced Oleg Deripaska to build the port.”
For his part, Russian Railways’ Yakunin says the port wasn’t up to the Olympics task, so the cargo loads shipped via rail doubled.
Other projects are burdened with debt and scant cash flow after delays in turning them into commercial businesses. Basic Element in 2011 counted on preselling some of the 1,500 apartments it built in the coastal Olympic Village, where palm trees from Italy adorn courtyards with pools. The company plans to turn the complex into a resort called Sochnoe, marketing it as a Russian Côte d’Azur.
VEB wouldn’t allow apartments to be sold early, Elinson says. Deripaska’s companies must start repaying the principal of a $687 million loan in 2014 and are trying to renegotiate, he says.
“The government has to forgive the interest payments for a certain amount of the loan lifetime,” Elinson says. “We’re also discussing the cancellation of property taxes.”
VEB is caught in the middle. After Putin’s government tapped the bank to lend billions to finance the Olympics and rescue companies amid the financial crisis, VEB’s capital adequacy ratio approached 10 percent in July, nearing the minimum allowed under the bank’s internal requirements. If investors default and VEB can’t quickly sell the assets to cover the loan, its capital could take a further hit.
“In the case of default, the Olympic projects will form a big hole in VEB’s balance sheet,” VEB Deputy Chairman Sergey Vasiliev says.
Potanin, the Norilsk Nickel chief — and Russia’s ninth-richest man as of late November — is bleeding money in Rosa Khutor, which will host Alpine skiing, snowboarding and freestyle skiing competitions. Potanin, 52, and Putin hatched the idea for Rosa Khutor in 2002, when they were skiing in Austria.
They thought, “Why don’t we have such a resort?” Potanin recalls.
Potanin planned to spend about $300 million. After Russia’s successful Games bid in 2007, his costs soared to $2.6 billion, including interest, as he made the resort Olympic-class. He financed the upgrades with a $1.7 billion loan from VEB that has grown to $2.2 billion with interest. Repayments on the principal must begin in June.
The resort is more Austrian than Russian. Doppelmayr lifts zip skiers to 7,550 feet. Pink and yellow hotels at the base nestle along the roaring Mzymta River.
Rosa Khutor assumed about $500 million of noncommercial expenses for facilities and equipment that Potanin says he wouldn’t have added without the Games. He built apartments for 2,600 athletes in the mountains and stockpiled snow.
He says the government indicated last year it would be willing to reimburse about $245 million, or half of the costs required by the Games, but he hasn’t received anything yet. He’s negotiating for tax breaks and restructured debt payments to make the resort commercially viable. VEB rates, about 9 percent in November, have dented cash flow.
“Nowhere in the world are green field projects like this one financed at such high interest rates,” Potanin says.
Deripaska and Potanin are just two investors seeking government relief. Gazprom, the world’s largest gas producer, is spending about $3 billion on projects including a power station in Adler, a gas pipeline and a cross-country and biathlon complex, according to Olympstroy. Sberbank took over construction of the $2.4 billion Gornaya Karusel mountain resort in Krasnaya Polyana.
Gazprom’s Miller and Sberbank’s Gref joined Potanin and Deripaska in a March letter to Kozak, the deputy prime minister. They demanded subsidies for interest payments on loans and asked that Sochi become a special economic zone with lower property tax rates.
“Our companies agreed to participate in investing in Olympic venues taking into consideration the social nature of the project,” they wrote. “At the same time, Sberbank, Gazprom, Rusal and Norilsk Nickel are public commercial companies, the aim of which is to increase returns for their shareholders.”
The standoff continued in November.
“The ball is in their court,” Potanin said through a spokesman. Sberbank says it wants property tax incentives in place until 2024, when it expects to repay its VEB loan. Gazprom declined to comment.
In an indication of how pinched they’re feeling, Potanin and Deripaska transferred some Sochi debts to Norilsk in April. Norilsk loaned $140 million to a company controlled by Deripaska, chief of Rusal, which owns a stake in the nickel producer. The loan can be repaid with stakes in Olympic Village assets. The company also took an undisclosed share of Rosa Khutor in exchange for about $140 million of debt.
Kozak says investors must be prepared to repay. VEB charged just 0.4 percentage points above the Russian central bank rate, 8.25 percent in November, on most loans. Meanwhile, the government built electricity networks, roads and the train line. Kozak dismisses the notion of tax breaks.
“We cannot give tax preferences to those we already supported and leave others on their own to face their debts,” he says.
Basic Element’s Elinson says Russian companies delivered venues on an accelerated time scale — and need to recoup their investments.
“It’s not fair to treat us in a way that we just should leave the sites because we’re not able to repay the loans,” he says. “It was never intended to be a sponsorship idea.”
The full version of this Bloomberg Markets article appears in the magazine’s January issue.


Provide information regarding the possibility of sabotage being responsible for the SpaceX Falcon 9 explosion.

I am interested in information concerning the possibility that sabotage might have been responsible for the September 2016 explosion of a SpaceX Falcon 9 rocket.  Details of the explosion itself and any observations are relevant. Details of the investigation into the explosion, including evidence pointing toward or away from sabotage, and any conclusions are all relevant. Omit documents referring commercial purposes.

Investigate the cause of an event to answer this question.

Flying astronauts has always been risky. No wonder NASA and SpaceX are on edge.

CAPE CANAVERAL, Fla. — Spaceflight is a dangerous enterprise. That unrelenting reality underlies every decision as NASA and SpaceX near the hour when they’ll strap two veteran astronauts into a spacecraft that will mark not only the first human launch to orbit from United States soil in nearly a decade but also the first time a private company has performed the feat.
That mission, scheduled for 4:33 p.m. Eastern Time Wednesday, is being celebrated as a historic moment for NASA and the nation. It’s also an enormously risky endeavor whose failure could be a major setback for a growing commercial space industry and a devastating blow to SpaceX, which has upended the traditional aerospace pecking order.
That’s among the reasons that weather now looms as the most likely obstacle to an on-time launch. It has been rainy and overcast here the last few days with low thick clouds that unveiled a stunning rainbow Tuesday morning.
But forecasters at Patrick Air Force Base still predicted a 40 percent chance that weather would force a postponement of Wednesday’s launch, an improvement from Monday’s 60 percent, but still casting doubt on the schedule. And conditions at Cape Canaveral may not be the only reason for cancellation: forecasters are watching developments all along the East Coast, where the Dragon capsule might have to ditch in the case of an emergency abort.
Fear of lightning also could force a postponement under complex NASA rules that prohibit a launch if the spacecraft is going to fly within 10 nautical miles of storm clouds that might generate an electrical discharge. Rockets tearing through such clouds can cause a lightning strike, as happened during Apollo 12 when the Saturn V rocket was hit twice, causing damage to some non-essential components. The crew was still able to complete its mission to the moon.

NASA administrator Jim Bridenstine emphasized at a news conference Tuesday his concerns for the safety of the two astronauts, Bob Behnken and Doug Hurley, and said the expected presence of President Trump and Vice President Pence would not increase pressure to launch if conditions are not right.
“We want people to be able to feel free to say, ‘No,’ and not feel any pressure to launch,” he said, adding that he had texted Hurley and Behnken on Monday and told them, “If you want me to stop this for any reason, say so.”
There is no way to exaggerate the inherent risk involved any time people are placed atop a rocket filled with thousands of gallons of highly volatile propellants. The danger is compounded by the fact that SpaceX’s Dragon spacecraft has never flown humans before.
In an interview, Elon Musk, SpaceX’s founder and CEO, called the launch a “crucial step. Can’t mess it up.”
He said he was optimistic. “The probability of success, you know, knock on wood, I think is high," he said. "But it it is not 100 percent. And so we’re just doing everything we can to think of, any possible way, to improve the probability of success, because this would be a big setback if something were to go wrong.”
Paul Hill, a member NASA’s safety advisory panel and the former director of mission operations at NASA’s Johnson Space Center in Houston, warned that human factors can lead to mistakes.
“Now is the time to be on alert for ‘go’ fever,” he said after the panel’s recent quarterly meeting. “So much work has gone into being this close to launch, it can be difficult to resist the pressure to accept some risk or trivialize some concern with less rigor.”

For all of NASA’s accomplishments, human spaceflight remains a relatively rare and exceedingly dangerous enterprise. Since John Glenn became the first American to orbit the Earth in 1962, NASA has launched a total of 164 spacecraft with astronauts to orbit, an average of fewer than three a year.
Two ended in disaster — the Columbia and Challenger shuttle flights that killed 14. And many others narrowly escaped harrowing calamities, like the Apollo 12 lightning strike or the oxygen tank rupture that threw the Apollo 13 mission into chaos.
Maiden flights of spacecraft with humans on board are the scariest. When the space shuttle flew for the first time in 1981, for example, officials estimated the chance of losing the crew was somewhere between 1 in 500 to 1 in 5,000. Later, after NASA had flown the shuttle many times, it found that first flight was far riskier than originally thought — the chance of death was actually 1 in 12.
There are many key differences between the shuttle’s first flight and the upcoming launch of what’s known as NASA’s Commercial Crew Program. The spacecraft and rocket are owned and operated by a private firm, SpaceX, not NASA. The technology has advanced a great deal since the shuttle days; SpaceX’s Dragon capsule is outfitted with modern touch screens and safety measures, such as an abort system, not available on the shuttle.
And while the space shuttle’s first flight had crews on board, Dragon last year completed what NASA said was a flawless test mission without crews to the International Space Station that returned to Earth safely. Flying astronauts to the station may be a new feat, but SpaceX has flown 21 cargo and supply missions to the station since 2012 in the uncrewed version of the Dragon spacecraft. That’s given the company plenty of practice sending spacecraft to orbit, and then chasing down the station and attaching to it as it orbits the Earth at 17,500 mph.
SpaceX’s Falcon 9 rocket has also proved to be a reliable work horse that is closing on 100 launches.
But spaceflight is governed by unforgiving physics, requiring extraordinary amounts of energy to escape gravity. Launching a rocket is like detonating a bomb, but with the blast controlled so it flows in a single direction.
“We’ve done everything we can to make sure that the rocket is safe and the spacecraft is safe," Musk said in the interview. "But the risk is never zero when you’re going 25 times the speed of sound, and you’re circling the Earth every 90 minutes. It’s a speed that’s difficult for people to even comprehend.”
The mission would also be the first time since the 1975 Apollo-Soyuz flight, when Russian and American spacecraft docked in orbit, that NASA astronauts would return to Earth by landing in the ocean, rather than on land. Water landings have their own risk, such as when Gus Grissom nearly drowned in 1961, after his capsule filled with water and eventually sank.
The space shuttle landed on a runway, and since its retirement in 2011, NASA astronauts have been flying in Russian Soyuz spacecraft that land on the steppe in Kazakhstan. But there have been hair-raising moments with the Soyuz as well. In 2018, one of the side boosters failed to separate properly and slammed into the rocket, triggering the emergency abort system, which sent NASA astronaut Nick Hague and his Russian counterpart, Alexey Ovchinin, on a harrowing ride to the edge of space.
“If you do this business, you’re going to get your nose bloodied some,” said Gerry Griffin, who served as a NASA flight director during the Apollo era. “Hopefully, you don’t kill anybody. But if you do it long enough and fly enough vehicles, you’re going to have a failure.”
No one knows the risks inherent in human spaceflight better than Behnken and Hurley. Since they were assigned to the Commercial Crew mission in 2015, they’ve spent thousands of hours training for the flight and are confident, especially since Dragon has a robust abort system.
“Now, I will add that it is the first flight with crew,” Hurley said during a recent news conference. “It’s the second flight of the vehicle. So the statistics will tell you that’s riskier than, say, the 15th flight or the 20th flight of the vehicle.”
Still, he said he was “confident in both the SpaceX and NASA teams. We’ve looked at all the stuff that we need to look at. And when we’re ready to launch, we’ll go do it.”
The whole point of this test flight is to put the spacecraft through its paces and wring out any problems before NASA certifies it for the operational missions the agency hopes will ferry crews to the space station and back for years to come.
Boeing, the other company NASA is paying to develop a new vehicle to fly its astronauts, suffered troubling setbacks late last year during the test flight of its Starliner spacecraft. No astronauts were on board, but the spacecraft encountered trouble almost immediately upon reaching orbit. The onboard computer was 11 hours off, making the spacecraft think it was at a different part of the mission than it actually was.
Crews on the ground scrambled, and then discovered a second software problem that would have caused the wrong thrusters to fire during the spacecraft’s return to Earth, when what’s known as the service module was to separate from the crew module.
Controllers on the ground discovered the problem while the spacecraft was in orbit and were able to correct it. Had they not, however, it could have damaged the spacecraft’s heat shield or sent the crew module tumbling off course.
Since then, NASA officials have said they should have been better at holding Boeing accountable to the agency’s rigorous safety standards. And they are confident that after years of working closely together to deliver cargo and supplies to the station and now crew, NASA and SpaceX won’t encounter any such problems on the upcoming mission.
But there are always concerns about the unexpected and the overlooked.
The space shuttle Challenger exploded on chilly January day in 1986 after an “O-ring” joint failed amid unheeded warnings about launching in cold weather. In 2003, Columbia disintegrated as it was reentering Earth’s atmosphere after a piece of foam became dislodged during the launch and damaged heat resistant tiles on the wing. A subsequent investigation found a “broken safety culture” at the space agency.
In the past several years, NASA and SpaceX have led investigations into a trio of failures. In 2015, a Falcon 9 rocket carrying supplies to the station exploded during flight after the failure of a strut designed to withstand 10,000 pounds of force buckled at 2,000. A year later, another rocket blew up on the launchpad after the failure of a pressure vessel in the second stage liquid-oxygen tank. And last year, during a test of the abort system, the Dragon spacecraft exploded because of a leaky valve. SpaceX also has struggled with the parachute system that would guide the spacecraft to a soft landing as it returns to Earth.
No one was injured in any of those failures. NASA and SpaceX said they have investigated all the problems, fixed them and are now ready to launch humans.
“This endeavor is the culmination of not only years and years of experience, or time and work, but hundreds of thousands of hours of tireless effort to bring us here,” said Benji Reed, SpaceX’s Commercial Crew Program manager. “And it’s all focused on the safety and reliability of the system.”
He said that the mission was a “sacred honor” and that the company would do everything possible to fly the astronauts “to the space station and safely bring them back home to their families. Fundamentally, this is what SpaceX was founded for.”
Outside experts agree the teams have prepared as best they could.
“I would say the risk is acceptable. But it’s not zero. Spaceflight is inherently dangerous, so there is always risk,” said Wayne Hale, the former manager of NASA’s shuttle program. “But I think that all the appropriate checks appear to have been done. I think appropriate measures have been taken and having an uncrewed test flight was a big step.”
That said, everyone will be holding their breath the moment the countdown ticks to liftoff.
“I think we’re all very appropriately nervous,” Reed said.


What the SpaceX rocket explosion means for NASA and human spaceflight

A fire burns on a launchpad after reports indicated that a SpaceX Falcon 9 rocket exploded during a test firing in Cape Canaveral, Fla. (Tia Grant/European Pressphoto Agency) A SpaceX Falcon 9 rocket exploded while being fueled Thursday morning on a launchpad at Cape Canaveral, Fla. No injuries resulted, but the rocket and its payload, an Israeli satellite named Amos-6, were destroyed. The explosion is a serious setback for SpaceX, the company founded by Elon Musk in 2002, and by extension for NASA, which has been investing in SpaceX for many years as part of the "commercial crew" program. SpaceX has said it hopes to launch U.S. astronauts into orbit to the International Space Station by the end of next year. Boeing also has a NASA commercial contract to launch astronauts in a capsule on top of an Atlas V rocket. The United States has been unable to launch astronauts on American rockets since the retirement of the space shuttle program in 2011. But an audit coincidentally issued Thursday by the NASA Inspector General's office said delays in the commercial crew program could push the first launch to late 2018, and have already forced NASA to buy additional seats on Russian rockets, at a cost to taxpayers of $490 million. On Facebook Live, Washington Post reporters Chris Davenport and Joel Achenbach discussed the SpaceX explosion and its ramifications — including how it might have an effect on Musk's desire to put humans on Mars in the 2020s. Read more: Why NASA still believes we might find life on Mars SpaceX nails booster landing at sea Which way to space? SpaceX says it will fly a spacecraft to Mars as soon as 2018 That SpaceX explosion blew up one of Facebook’s most ambitious projects

A fire burns on a launchpad after reports indicated that a SpaceX Falcon 9 rocket exploded during a test firing in Cape Canaveral, Fla. (Tia Grant/European Pressphoto Agency) On Facebook Live, Washington Post reporters Chris Davenport and Joel Achenbach discussed the SpaceX explosion and its ramifications — including how it might have an effect on Musk's desire to put humans on Mars in the 2020s. Read more: Why NASA still believes we might find life on Mars SpaceX nails booster landing at sea Which way to space? SpaceX says it will fly a spacecraft to Mars as soon as 2018 That SpaceX explosion blew up one of Facebook’s most ambitious projects


Elon Musk’s SpaceX is using a powerful rocket technology. NASA advisers say it could put lives at risk.

When Elon Musk and his team at SpaceX were looking to make their Falcon 9 rocket even more powerful, they came up with a creative idea — keep the propellant at super-cold temperatures to shrink its size, allowing them to pack more of it into the tanks.
But the approach comes with a major risk, according to some safety experts. At those extreme temperatures, the propellant would need to be loaded just before takeoff — while astronauts are aboard. An accident, or a spark, during this maneuver, known as “load-and-go,” could set off an explosion.
The proposal has raised alarms for members of Congress and NASA safety advisers as the agency and SpaceX prepare to launch humans into orbit as early as this year. One watchdog group labeled load-and-go a “potential safety risk.” A NASA advisory group warned in a letter that the method was “contrary to booster safety criteria that has been in place for over 50 years.”
Concerns at NASA over the astronauts’ safety hit a high point when, in September 2016, a SpaceX Falcon 9 rocket blew up while it was being fueled ahead of an engine test. No one was hurt, but the payload, a multimillion-dollar satellite, was lost. The question on many people’s minds at NASA instantly became: What if astronauts were on board?
The fueling issue is emerging as a point of tension between the safety-obsessed space agency and the maverick company run by Musk, a tech entrepreneur who is well known for his flair for the dramatic and for pushing boundaries of rocket science.
In this culture clash, SpaceX is the daring, Silicon Valley-style outfit led by a man who literally sells flamethrowers on the Internet and wholeheartedly embraces risk. Musk is reigniting interest in space with acrobatic rocket-booster landings and eye-popping stunts, such as launching a Tesla convertible toward Mars.
His sensibilities have collided with a bureaucratic system at NASA that has been accused of being overly conservative in the wake of two shuttle disasters that killed 14 astronauts.
The concerns from some at NASA are shared by others. John Mulholland, who oversees Boeing’s contract to fly astronauts to the International Space Station and once worked on the space shuttle, said load-and-go fueling was rejected by NASA in the past because “we never could get comfortable with the safety risks that you would take with that approach. When you’re loading densified propellants, it is not an inherently stable situation.”
SpaceX supporters say tradition and old ways of thinking can be the enemy of innovation and thwart efforts to open the frontier of space.
Greg Autry, a business professor at the University of Southern California, said the load-and-go procedures were a heated issue when he served on Trump’s NASA transition team.
“NASA is supposed to be a risk-taking organization,” he said. “But every time we would mention accepting risk in human spaceflight, the NASA people would say, ‘But, oh, you have to remember the scar tissue’— and they were talking about the two shuttle disasters. They seemed to have become victims of the past and unwilling to try anything new, because of that scar tissue.”
In a recent speech, Robert Lightfoot, the former acting NASA administrator, lamented in candid terms how the agency, with society as a whole, has become too risk-averse. He charged the agency with recapturing some of the youthful swagger that sent men to the moon during the Apollo era.
“I worry, to be perfectly honest, if we would have ever launched Apollo in our environment here today,” he said during a speech at the Space Symposium last month, “if Buzz [Aldrin] and Neil [Armstrong] would have ever been able to go to the moon in the risk environment we have today.”
NASA is requiring SpaceX and Boeing to meet a requirement that involves some complicated calculations: The chance of death can be no greater than 1 in every 270 flights.
One way to ensure that, as Lightfoot said during his speech, is to never fly: “The safest place to be is on the ground.”
Shuttles shelved
Still, the scar tissue runs deep.
NASA lost 14 astronauts in two space-shuttle disasters, the result of deep systematic problems of a once young and swashbuckling agency that many said had grown sclerotic.
In the investigation into the 2003 disaster, the Columbia Accident Investigation Board blasted NASA for failing to learn “the bitter lessons” from the Challenger explosion in 1986. Columbia was lost as much by a “broken safety culture” as much as the chunk of foam that broke off and damaged the shuttle’s heat shield. That second disaster helped lead to the retirement of the shuttle in 2011, leaving NASA in the position of being unable to fly astronauts from U.S. soil.
Instead, NASA pays Russia to ferry its astronauts to the International Space Station, an arrangement that costs the agency millions. In 2006, Russia charged $21.3 million a seat. That jumped to $81.9 million by 2015.
To end the dependence on Russia, NASA has turned to the private sector, outsourcing the responsibility of flying astronauts to the space station to two companies — SpaceX and Boeing — that have been awarded $6.8 billion in contracts combined. Other private companies eventually could compete for other government launch contracts — including Blue Origin, which was founded by Washington Post owner Jeffrey P. Bezos — but none are expected to send people to the space station anytime soon.
The pivot to private companies is enabling NASA to focus on deep space. But SpaceX and Boeing have both faced challenges and delays. Now, as the drought in human spaceflight extends into its seventh year, NASA is facing the prospect of even more delays — and questions about whether the contractors it plans to rely on will have a better track record than the agency that put men on the moon.
“It really is a very, very difficult problem to do human spaceflight,” said Phil McAlister, the director of NASA’s commercial spaceflight development division. “You’ve got thousands of pounds of really highly energetic propellants on board. You’ve got mini controlled explosions going off. You’ve got to survive the rigors of space, which is not very friendly for the human body. And then you’ve got to reenter the atmosphere, and the spacecraft gets heated up to thousands of degrees.”
SpaceX pulled off 18 successful launches last year, a record, and is aiming for more this year. But it has also lost two of its Falcon 9 rockets in explosions, and amid all its triumphs, it has never attempted flying humans.
The first failure happened in 2015, when a rocket blew up a couple of minutes after liftoff as it was flying cargo and supplies to the space station. No one was on board, and no one was injured. Then, just over a year later, another rocket exploded, this time on the launchpad while being fueled ahead of an engine test.
At the time, Musk declared that if crews had been aboard they would have been safely ferried away by the rocket’s abort system. Still, that mishap is forcing the company to redesign bottles of pressurized helium that sit inside the rocket’s fuel tanks.
Now SpaceX is getting ready to fly astronauts on an upgraded version of the same rocket. And its decision to add propellant to the rocket with astronauts on board is attracting scrutiny.
To get more power out of its rocket, SpaceX brings its propellants — liquid oxygen and refined kerosene — to unusually low temperatures. That causes them to become dense, meaning SpaceX can pack more fuel into its rockets.
To SpaceX, the approach is another example of how it is breaking the mold. The densified propellant “provides greater propellant margin for increased reliability,” the company said in a statement. In other words, should something go wrong on the mission, the rocket would have more propellant to adjust to emergencies. SpaceX’s dramatic booster landings also require additional propellant.
But to others it is an unnecessary risk. At a Capitol Hill hearing earlier this year, members of Congress pressed Hans Koenigsmann, SpaceX’s vice president for build and flight reliability, about the safety of the load-and-go procedure.
Koenigsmann said that the fueling takes only about a half-hour, a “relatively quick procedure, and we believe that this exposure time is the shortest and therefore the safest approach.”
And the company points out that if anything goes wrong during fueling, the rocket’s launch abort system would allow the astronauts to escape safely. It also conducts a “static fire,” a quick test firing of the engines in the days leading up to the launch to make sure the rocket is operating properly.
And since its rockets and its Dragon spacecraft are reusable, the company gets to inspect them after each flight, giving it an in-depth understanding of how the vehicles perform.
“As with all hazard analyses across the entire system and operations, controls against those hazards have been identified, and will be implemented and carefully verified prior to certification,” the company said in a statement.
But in a 2015 letter to NASA, Thomas Stafford, a retired Air Force lieutenant general and then chairman of the agency’s space-station advisory committee, wrote that “there is a unanimous, and strong, feeling by the committee that scheduling the crew to be on board the Dragon spacecraft prior to loading oxidizer into the rocket is contrary to booster safety criteria that has been in place for over 50 years, both in this country and internationally.”
At the hearing this year, William Gerstenmaier, NASA’s associate administrator for human exploration and operations, said the agency had not decided whether it would allow SpaceX to load crews before loading the fuel, but he did not rule it out.
He vowed that the agency would “make sure that we’re really, really safe to go fly, and the system is ready for crew before we put them on board.”
In an interview, Lightfoot, the former acting NASA administrator, said the agency is in deep discussions with SpaceX about the safest way to go. The agency has a long history with SpaceX, first hiring it to fly cargo to the station and now looking for it to send humans into space.
“It’s a matter of having a good risk discussion so that we understand that,” he said. “I would just say that instead of working it in the press, we work in the engineering review boards.”
'You have to humanize it'
For all its push-the-envelope swagger, SpaceX says it is serious about flying people safely and is going to great lengths to study every aspect of the vehicle, down to individual valves, so that it will meet and surpass the 1-in-270 chance-of-death metric, said Benji Reed, the director of SpaceX’s commercial crew program.
When Reed was down at Cape Canaveral, Fla., on a recent trip, he came across a room on a special tour where the astronauts’ families from the shuttle program used to wait ahead of the rocket launch.
They were stunned to see that a whiteboard with drawings made by the children of the crew lost in the 2003 Columbia disaster was still there, preserved.
“That really drives it home,” Reed said. “This isn’t just the people that we’re flying — these are all of their families. So we take this extremely seriously, and we understand that our job is to fly people safely and bring them back safely. To do that you have to humanize it. You have to see them as your friends and as your colleagues.”
But even with some of the best engineering minds at NASA, calculating risk is an imperfect science. There are too many unknowns in systems that are inherently dangerous and complex.
“Even identifying all of the risks is impossible,” Gerstenmaier said during a speech last year. “Also, risk cannot be boiled down to a single statistic.”
Before the very first shuttle flight, NASA estimated that the chance of death was between 1 in 500 and 1 in 5,000. Later, after the agency had compiled data from shuttle flights, it went back and came up with a very different number.
The chance of death was actually 1 in 12.
christian.davenport@washpost.com