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Risks of a conflict on the Moldovan-Ukrainian border are mounting, since Chisinau’s military and their Ukrainian counterparts intend to control the Transnistrian part of the border, which is on the verge of turning into a contact line, Nezavisimaya Gazeta writes. Joint Control Commission (JCC) Transnistrian co-chairman Oleg Belyakov confirmed to the newspaper that the risk of a military conflict exists, saying that Ukraine may become one of the sides in the conflict. "Moldova is corking up Transnistria from all sides," he said.
According to Belyakov, the recent move means that "Transnistria will wholly be lying within the legal terrain of Moldova." "This is really becoming a direct confrontation between the sides. The crisis (military conflict on the Dniester since 1992) has not been settled, but the 1992 peace agreement that we still follow today, says that the sides cannot impose sanctions, blockades and the like against each other. However, what Moldova is doing contradicts the accord signed by presidents of Russia and Moldova at the time," he said.
Belyakov also expects the flow of goods and people between the countries to stop, which will adversely impact business. "Those actions are aimed at destabilizing the situation," he added. "The politicians in Moldova and Ukraine deeply underestimate the potential consequences of the situation, which is being created now. There is a threat of military clashes, and Ukraine may become one of the sides in the conflict," the co-chairman explained.
Experts warn that the restrictions imposed by Ukrainian President Pyotr Poroshenko against five banks with Russian state capital operating in the Ukrainian market - Sberbank, VS Bank, Prominvestbank, VTB Bank and BM Bank - may threaten the stability of the Ukrainian banking sector, since Russian banks have an around 10% share of the market, Kommersant writes on Friday. Sanctions include a ban on withdrawal of funds outside of Ukraine, as well as payment of dividends, interest, return of interbank deposits and loans, funds from correspondent accounts of subordinated debt. The ban also concerns distribution of profits and capital of these five lenders.
Lev Dorf, an analyst at the Russian branch of Moody's Investors Service, says that "the sanctions may produce a lot of flak stemming from bad press, which may undermine clients’ confidence and cause an outflow of funds." According to Senior Director of Russia’s Analytical Credit Rating Agency (ACRA) Kirill Lukashuk, "the dynamics of business development is not obvious to all subsidiaries of Russian banks without exceptions, not only those partially government-owned." A source in the Pyotr Poroshenko Bloc told Kommersant that "President assumes that since sanctions do not require closing or kicking banks out of Ukraine this poses no threat to the country’s banking sector." Another source close to one of the banks slapped with restrictions, said: "We have to swallow the decision of the Ukrainian authorities." "On the one hand, it is worse than it used to be, but better than it could have been," he stressed.
Speaking about the move’s potential effect on the Russian banking sector, Lev Dorf said that it is not going to be huge, considering the share of Ukrainian assets in Russia’s banking. "Ukrainian structures take a small share in the assets of Russian parent institutions - less than half a percent with Sberbank, 2% of all assets with VEB, around 0.4% with VTB, which means that even in the worst case scenario a total loss of Ukrainian business would hardly be felt by parent banks," he said. Nevertheless, a source close to VEB told Kommersant that the new sanctions will definitely weaken the position of those Russian players that are currently negotiating the sale of their local subsidiaries. "We are forced to sell the bank at lower prices and much quicker," he noted.
Deputy Foreign Minister Vasily Nebenzya is the prime candidate for the post of Permanent Representative to the United Nations, Kommersant says citing four sources in Russia’s government institutions. Following the unexpected death of Vitaly Churkin on February 20, who had held the position since April 8, 2006, Pyotr Ilyichev, Russia’s First Deputy Permanent Representative to the United Nations, was appointed as Acting Permanent Representative to the organization.
Sources told the newspaper that before becoming deputy minister, Nebenzya, 55, had previously held top positions in Russia’s representative offices for the United Nations in New York and Geneva. Given his far-reaching experience since joining Russia’s diplomatic corps back in 1983, this would play a significant role in the selection process for this top post. If appointed, Nebenzya will be facing a challenging task to stand up against Russia’s opponents in the organization, namely the United States, Britain and France, which have taken hard-line stances against Russia at the UN Security Council recently, Kommersant writes.
The state privatization program for 2017-2019 may be amended, two federal officials told Izvestia daily, adding that the changes on the horizon are related to small-scale assets set to be sold within the next three years. The projected amount of funds to be raised from privatization of small assets - around 1,040 sites, which currently stands at 16.8 bln rubles for three years, or 5.6 bln rubles per year, is not going to change, though the sources do not expect the target to be met. A source in the Ministry’s press service confirmed to the newspaper that a number of amendments to ‘small-scale’ privatization are under consideration now.
Experts remain divided on whether the goal to raise 16.8 bln rubles from ‘small-scale’ privatization is achievable. Director of RANEPA Institute of Public and Private Sector Management (IPPSM), Professor Elena Ivankina believes that reaching it is a challenge, and practical only if big factories, ships and agricultural complexes are sold. "If the target is to sell 1,040 sites in three years to rake in 16.8 bln rubles, then this means that the average cost of one site will be 16.8 mln rubles. This sum will only be raised if ships, factories and agricultural facilities from the privatization are definitely sold. In the case that only plots of land and buildings are sold, I can hardly imagine the government raising this sum of money amid the current decline in property prices," Ivankina told Izvestia.
According to Sergey Sivayev, Director of the Municipal Economy Department at Russia’s Institute for Urban Economics, the announced prices are extremely low. "Those are small sums for federal property. Obviously, the scale of privatization is very modest," he told the newspaper. Russia’s ex-Minister of Economic Development Alexey Ulyukayev estimates the ‘small-scale’ privatization proceeds for 2014-2016 at 15 bln rubles (as of July 2016).
At least 470 bln rubles have been invested in the Crimean peninsula over the three-year period by the central federal authorities, which is 1.6 times more than its gross regional product in 2015, RBC business daily writes. This sum includes federal transfers to the budgets of Crimea and Sevastopol in 2014-2016 and funds allocated through the federal target program for the peninsula’s social and economic development over the past two years. In November 2016, there was another (the fifth) hike in the total amount of funds spent on the federal target program, RBC says. Crimea is also one of Russia’s most heavily subsidized regions.
This year, a number of major infrastructure projects aimed at improving the connection between Russia and the Crimean peninsula will be completed. A new airport terminal in Simferopol is planned to be opened in mid-2018. The launch of four lines of the energy bridge to Crimea in May 2016, which ensures that the peninsula has its own generation capacity, is another achievement.
The main difficulty that businesses are facing in the region is the shift from one jurisdiction to the other. Companies have to spend time and efforts to adjust to the new Russian legislation and taxation system, RBC writes. Also, local companies are facing tougher competition as experienced firms have come from mainland Russia. The employment process is difficult for Ukrainian nationals after Crimea’s reunification with Russia, the newspaper writes with reference to unnamed sources, while credit rates are another pressing issue.
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