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Kiev plans to fully halt railroad passenger service with Russia in what is going to become yet another step to fence off Ukraine from its neighbor, Thursday’s Kommersant writes with reference to informed sources in the Ukrainian capital. "Kiev is preparing to halt railway passenger service with Russia starting roughly from July 1," a source close to the Ukrainian government told the publication, adding that the reluctance of Russian Railways to "cease passenger service to Russia from the ATO (anti-terror operations-conflict zone - TASS), particularly from Donetsk, which violates Ukraine’s sovereignty and territorial integrity," is used as a pretext. According to Ukraine’s former deputy infrastructure minister Alexander Kava, the rumors about a potential stoppage of passenger service followed a new round of anti-Russia sanctions last week and the halt of freight service.
Though the Ukrainian central government’s plans have not yet been officially confirmed either in Kiev or in Moscow, Kommersant’s Ukrainian sources claim that the initiative has been hugely pressed by secretary of Ukraine’s National Security and Defense Council Alexander Turchinov and Verkhovna Rada (parliament) Speaker Andrei Parubiy. A source in the National Front parliamentary faction, part of the leading collation, told the newspaper that "the decisions related to sanctions and other restrictions against Moscow are usually initiated by our party and our representatives in the authorities, particularly Alexander Turchinov and Andrei Parubiy." According to a source in the Pyotr Poroshenko Bloc, the biggest faction in the Ukrainian parliament, "any flare-up with Russia, whether that be the blocking of social networks, or the halt of railway service and the prospects of introducing a visa regime, boosts the president’s public opinion rating with national patriots, which is why such issues have been surfacing recently, regardless of their economic efficiency."
Ukrainian expert and political scientist Ruslan Bortnik assumes that "the Ukrainian authorities are ready to fully break economic, cultural and cultural ties with Russia and its people as this trend is in great demand with that part of society." "In a situation like that financial calculations take a back seat," he added. Sources in the Russian Railways’ structures in the Voronezh and Belgorod regions, the areas neighboring Ukraine, told Kommersant they are mostly concerned about the outside possibility of transit traffic with Russia’s southern regions via Ukrainian territory being halted, and say that direct railroad service between Russia and Ukraine "de facto ceased to exist in 2014."
Crimea is part and parcel of the Russian Federation, head of Montenegro’s opposition and leader of the Democratic Front Milan Knezevic said in an interview with Izvestia daily. “The peninsula was placed under Ukrainian jurisdiction by a lone decree in 1953. Taking into account the events in Ukraine in 2014, it sounds logical that the Crimeans supported the reintegration into Russia at the referendum,” the politician said. “There is a similar problem in the Balkans with Kosovo, the only difference is that Kosovo was ripped away as a result of NATO bombings in 1999 and consequent pressure by the West. Sooner or later, Kosovo will return to its historical roots, like Crimea,” he added.
When asked why Montenegro joined anti-Russia sanctions in 2014 despite its being a non-EU member, Milan Knezevic said that the country’s government chose to toe the EU line instead of putting efforts into boosting cooperation with Moscow. “The sanctions against Russia hit Montenegro first and foremost. Even now we don’t know exactly which areas those sanctions cover. Meanwhile, Russia does not even feel them. That’s why we call them invisible sanctions,” he told the newspaper. According to the politician, Montenegro’s economy “hugely depends on Russian investment and the flow of Russian tourists.” “Just last year, 330,000 tourists from Russia visited Montenegro. Between 2006 and 2017, every third tourist and every third investor was from Russia. Also, around 15,000-20,000 Russian nationals live in Montenegro,” he noted.
The opposition leader believes that Montenegro is “quite literally on the verge of a social and economic collapse” at the moment. “Its indebtedness totaling 2 bln euro is the result of a flawed economic and social policy and catastrophic privatization. Montenegro has also gone beyond all Maastricht criteria on its external debt, and it is virtually on the same level with Greece, as the current indebtedness exceeds the total budget,” Knezevic explained. He added that any “extra sanctions in the form of charter flight restrictions or transfer of investments from the country would ruin the nation’s economy.” “I think Russia could impose personal sanctions, for example, against the MPs who voted to join NATO and are responsible for impairing ties between Russia and Montenegro,” the politician said.
Russia’s food exporters are facing new obstacles on the Turkish market despite the deal to lift trade restrictions struck by Moscow and Ankara earlier this week, as dilemmas in extending contracts were reported by sunflower oil exporters, for whom Turkey is a major overseas market, Thursday’s Kommersant writes. A source in a large company told the newspaper that importers either cannot obtain licenses on tax-free supplies or cannot receive them in the volumes required. “They say that now Russian produce should account for no more than 15-30% of all licenses issued,” the head of Russia's Oil and Fats Union Mikhail Maltsev said.
Reports of obstacles popping up with sunflower oil exports followed news about similar problems faced by grain dealers after it was defined that Russia should account for 20-25% of all import licenses. A source in Russia’s Economic Development Ministry told Kommersant that relevant talks between ministries are underway. The quagmire around supplies of grain and sunflower oil started in March when Turkey cancelled duty-free imports for Russian agricultural producers, and import duties on wheat and corn from Russia of 130% came into force. That said, the sunflower oil duty comes to 36%. Traditionally Turkey accounts for more than 10% of Russian wheat supplies and more than half of all oil exported to the country, the publication says.
Russian grain exporters are now under the gun as they are denied access to Baltic ports, Vedomosti business daily writes. Russia’s Grain Union has asked President of Russian Railways Oleg Belozerov to facilitate railway service for grain exports to foreign ports on the Baltic Sea, particularly Latvia, according to a letter obtained by the publication. Head of the Union Arkady Zlochevsky confirmed to Vedomosti he had filed a request with the company. Earlier Reuters reported that Russian Railways rejects the bulk of freight transportation requests regarding oil products, fertilizers, coal, metals from Russia to Latvian ports, allegedly in a move to pressure the country over its criticism of Russia’s Nord Stream 2 natural gas pipeline project. According to Zlochevsky and a top manager, the company denies 100% of grain transportation requests. The Grain Union head says since the whole plan of Russia’s grain complex development is now under threat, the sector is hugely interested in finding new importers able to substitute for traditional buyers of Russian grain, including Turkey.
The OPEC summit is about to kick off in Vienna later today, with more opinions and expectations being voiced as to what its outcome will be. The proposal to prolong the agreement between OPEC and non-OPEC nations for another oil production cut for nine more months has been widely supported recently. Russia’s Energy Ministry also welcomes the initiative, which has been repeated by Energy Minister Alexander Novak who heads the Russian delegation to Vienna. However, experts from Finance Ministry are bucking the trend, saying the threat to oil price stability may come from the United States, Vedomosti newspaper says.
“The producers’ pact is unreasonable,” the ministry’s department for budget policy and strategic planning said in a presentation obtained by the publication. The extension of the deal until the end of this year will reduce the glut of oil in OECD (Organization for Economic Cooperation and Development) countries by 250 mln barrels, the ministry said, and as a result its demand will exceed supply by 1.9 mln barrels per day, which will support the ‘shale revolution 2.0’. According to the ministry’s experts, “the payback will lie in a substantial surplus (around 0.7 mln barrels per day) in the first half of next year, stockpiling and a plunge of oil price… up to $30” per barrel. The US drilling rate and its current efficiency imply a rise in production rates to 1.5 mln barrels per day, which is above global consumption growth rates (1.3 mln barrels per day), the Ministry says, adding that the oil price of around $40-plus per barrel is ideal for securing a balance of supply and demand.
The share of foreign capital in Russia’s state debt has surpassed 30%, compared to 22.3% of non-residents in federal loan (OFZ) bonds last year, Izvestia daily writes with reference to the Central Bank’s data. The Finance Ministry also demonstrated a surge in demand for OFZ from foreign investors. “According to our estimates, in Q1 foreign lenders’ Russian subsidiaries acquired around 32% of OFZ bonds placed during that period,” a source in the ministry told Izvestia, adding that “whether the trend will persist depends both on the future situation on global capital markets and on the country’s continuing economic recovery.”
The demand for Russian OFZ bonds from international investors has been very diverse over the past three years, the newspaper says. Right after the anti-Russia sanctions were introduced, the share held by non-residents plummeted from the 2014 peak of 25% to 18% in early 2015. Later on, the situation levelled off at 23%. Since the beginning of this year, there has been a new wave of demand for emerging markets’ assets worldwide, which resulted in a serious inflow of foreign capital into the country, both strategic and speculative. Izvestia’s source in the government’s finance and economy bloc said the difficult situation in China and Brazil may spark a huge shift in demand to Russian securities. “Theoretically, portfolio managers may close their positions on all emerging markets if a shock hit some of them,” he said.
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