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Press review: More US sanctions against Russia and Moscow ready for deeper oil output cuts

Top stories in the Russian press on Monday, March 27
White House in Washington AP Photo/Carolyn Kaster
White House in Washington
© AP Photo/Carolyn Kaster

Kommersant: US slaps new sanctions on Russia’s military industrial complex

Washington has imposed new sanctions on eight enterprises of Russia’s military-industrial complex. The move stems from accusations that these corporations had violated American legislation on the non-proliferation of weapons of mass destruction with regards to Iran, North Korea and Syria. For two years, US departments and ministries will be prohibited from purchasing products and services from those companies that fall under the ban, Kommersant wrote.

A number of enterprises claim that the new measures will not affect their business in any way due to the lack of cooperation with the United States.

Two top managers of the defense industry enterprises that were hit by the sanctions told Kommersant that the news was "unexpected", but "will not be reflected in business operations". The new American sanctions, which affect several enterprises of the high-tech civil and defense conglomerate Rostec, will not affect the work of the companies, the state corporation told Kommersant, noting "We have been living under a sanctions regime for a while now. They have, for a long time, acted as an additional impetus for us in developing a whole range of new technologies, reaching new markets."

According to a Kommersant diplomatic source, by introducing the next "obviously far-fetched sanctions," an "unpleasant shadow" has been cast on the preparations to the first meeting between the presidents of Russia and the United States, Vladimir Putin and Donald Trump. Thus, the political consequences might prove to be more unpleasant, according to the newspaper, since Moscow hoped that Washington would not tighten sanctions until the first meeting of the Russian and US presidents.

 

Izvestia: Turkey outlines duties on Russian produce

The Russian Agriculture Ministry has obtained official information on Turkey’s introduction of duties on imports of Russian produce, Izvestia wrote. According to the newspaper, the duty on wheat and corn is set at 130%, and 36% for sunflower oil.

Citing the Agriculture Ministry, the newspaper specified that from March 15 this year, duties on imports of rice total 45%, while sunflower meal comes to 13.5%, and beans to 9.7%. Imports of sunflower oil, in addition to a 36% duty, will face other restrictions. A minimum customs value floor on delivered products will be set at $1,500 per tonne. The ministry noted that this is "impossible at the current price of $800 per tonne."

Turkey’s Ministry of Food, Agriculture and Livestock held back from disclosing all the details, the newspaper wrote. "There are no intentions to make any further claims on the ministry’s plans," the ministry told Izvestia.

On March 15, Turkey excluded Russia from the list of countries importing agricultural products without duties. Previously, duty-free treatment for Russian products had been in effect if goods were imported for processing or further export to third countries. However, in order to bring in Russian agricultural products to the Turkish market, it was still necessary to pay a fee of 130%. Now this duty applies to any imports of agricultural products from Russia to Turkey, which intensifies the burden on Russian exporters.

 

Nezavisimaya Gazeta: Russia ready to talk about deeper oil cuts

The Monitoring Committee for compliance with the global agreement to reduce oil production by OPEC and non-OPEC countries has started talks on the possibility of extending the deal. According to Nezavisimaya Gazeta, Russia, however, will decide on possibly prolonging the oil output reduction deal on the basis of four factors: the market climate, the commercial reserves situation, the balance of supply and demand and the effectiveness of the existing arrangement.

According to the Russian Energy Minister Alexander Novak, as of February producer countries reduced oil production by 93% of the planned targets.

Experts at RBC Capital Markets told Nezavisimaya Gazeta that Russia is likely to join the extension of the deal with OPEC only if the cartel makes the decision, noting "We believe that another drop in prices is not in the interests of the Russian Federation."

The current outcome of the deal on freezing oil production are polarizing - some experts believe that the obligations on reducing oil production are working, just not as fast as OPEC would have liked - market participants are mistaken if they believe that the implementation of the agreement would lead to an immediate reduction in oil reserves to an average level in five years.

Some industry insiders disagree - Rustam Tankayev, General Director of InfoTEK-Terminal and a leading expert with the Russian Union of Oil and Gas Producers, told the newspaper that he positively assesses fulfillment of both goals set by Russia. "Thanks to the agreements, Russia’s role as the main hydrocarbon power of the world is strengthening. This is indicated by its production and export volumes, newly discovered and developed deposits. We produce about 550 mln tonnes of oil per year, and could have 700 mln tonnes with the appropriate investments. Most importantly, we have incredible areas of the country where exploration has not even been carried out yet," the expert added.

As for extending the agreement on oil production cuts, Tankayev believes it is unprofitable for the majority of Russian oil producers. "Not everyone understands that the main question now is the geopolitical position of our country, forming its leadership positions, and the lifting of sanctions," the expert concluded.

 

Nezavisimaya Gazeta: Central Bank foresees 2% growth in Russian economy at best

The Bank of Russia has mapped out three scenarios for the development of the country’s economy. The optimistic one, based on a forecast of $55 per barrel for Urals oil in 2017 and $60 per barrel in 2018, implies that long-term economic growth will not exceed 2% per year. The base case scenario, which the regulator currently uses as a base for its monetary policy, puts the Urals oil price at around $50 per barrel this year. The worst case scenario would see the oil price plunge to $25 per barrel in 2017 and stay at this level until 2019.

Experts polled by Nezavisimaya Gazeta said they consider even the base case scenario too optimistic from the viewpoint of GDP dynamics. "Given the latest trends of raising taxes and falling real household income, the Russian economy may easily continue going down," Director of the Institute of Contemporary Economics, Nikita Isayev, told the newspaper, adding that "a 2% growth is the ceiling at best unless an urgent modernization of the economy is carried out, with a true anti-crisis plan and a strategy of further development with a thorough control of its implementation."

Dmitry Lukashov, a senior analyst at IFC Markets, shares this view, saying that one "will be at pains" in order to achieve 2% growth. According to Lukashov, amid a projected drop in commodity prices economic improvements are only possible in case the volume of supplies are boosted (though this may be hindered both by oil export agreements and the problems Russia may face on the gas market), or if budget revenues are diversified. "Over the last two years, there have been serious changes in the structure of Russia’s export," he told Nezavisimaya Gazeta.

 

Izvestia: Russia’s Transport Ministry to use UAVs to foster Arctic transport development

The Russian Transport Ministry plans to introduce the use of unmanned systems in the country's Arctic transport complex, transporation chief Maxim Sokolov told Izvestia.

"The integrated deployment of unmanned systems in the Arctic transport complex is a large-scale task. On the basis of a Unified Protected IT System, we plan to deploy a promising control system for the movement of unmanned vehicles in the Arctic that can significantly expand the range of tasks for the Arctic transport complex," Sokolov said.

The minister told the newspaper, that the Unified Protected Information and Telecommunication System of the Arctic Zone transport complex will cover the entire territory of the Russian North, including the Arctic water area, inland waterways and land routes, cross-polar airways, and regional transport routes and networks. "Information resources of this system will be used to coordinate transport and logistics work at transport hubs, as well as operational monitoring of the Arctic’s transport situation. The introduction of this system will help foster the socio-economic development of the vast and resource-rich Arctic territories," Sokolov stated.

Sokolov noted that the development of the Arctic zone is currently one of the priority state tasks. Sea, air and land transport routes pass through the territory of the Arctic – building them up and providing navigation and information support provides additional impulses to the development of resources in the northern territories. According to the transport minister, there are currently “73 airfields in the Arctic zone, 12 of them are located on the coast of the Northeast Passage.”

 

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