The Finance Ministry’s draft budget for the next three years approved by the government on Monday stipulates more expenditures on police and national security, but cutbacks in defense spending, though outlays on military needs still account for almost one-third of all federal spending, Nezavisimaya Gazeta notes. Experts interviewed by the newspaper do not see any dramatic changes in the new budget proposed for the upcoming three-year period. Head of the FBK Strategic Analysis Department Igor Nikolaev said that the move to cut Russia’s defense spending looks relatively unexpected, though "previously those expenses had been growing for several consecutive years."
According to Vladimir Klimanov, who chairs the department of state economic regulation at the Presidential Academy of National Economy and Public Administration (RANEPA), Russia’s spending policy is not undergoing any drastic changes as the budget is still being put together amid tough restrictions, particularly related to the Reserve Fund’s depletion. “The policy of curtailing budget expenditures amid adherence to assumed obligations on social expenditures, the implementation of various large-scale projects, high spending on national defense and the security structures on the whole still exists. In this respect, you cannot say that the policy is undergoing any fundamental changes,” he noted.
Meanwhile, Associate Professor at the Plekhanov Russian University of Economics Irina Komarova sees at least three priorities for the new budget. "The first is focusing on encouraging investment in the economy by broadening the options of subsidized lending to small and mid-sized business and the development of a public-private partnership mechanism. The second is the development of digital technology. The third is maintaining the social orientation of the budget by stimulating the construction of social infrastructure, widening the social net and support for certain groups of population," the expert said.
Russian Foreign Minister Sergey Lavrov won’t be attending the meeting of the Council of Foreign Ministers of the Black Sea Economic Cooperation (BSEC) set for November in Kiev, Izvestia writes with reference to well-placed sources in Russia’s diplomatic circles. "Another representative will be sent there in order to avoid an anti-Russia consensus," a source said. Ukraine took over the organization’s chairmanship in place of Turkey on June 29.
Head of the Russian Federation Council’s Foreign Affairs Committee Konstantin Kosachev told the newspaper that Kiev might play the anti-Russia card to zoom in on its relations with Moscow. "The delegation from the Federation Council is actively participating in the Black Sea Economic Cooperation’s parliamentary assembly. And we have a clear understanding that Ukraine is striving to politicize the BSEC’s activities and bring up all issues it has with Russia in it," he said, adding that certain members of the organization belonging to the European Union and NATO welcome those efforts. "On the other hand, there is an understanding that the efficiency of the BSEC will quickly cease once it gets politicized since it was not created for settling disputes, but for working on common interests. And it will only make things worse if the Ukrainian representatives get its activities politicized," the Russian legislator warned.
Ukraine’s chairmanship in the BSEC expires in December 2017. The country’s foreign minister Pavel Klimkin also skipped the meeting of top diplomats in Sochi on July 1, 2016 when Russia chaired the organization. The Black Sea Economic Cooperation, which comprises Russia, Ukraine, Azerbaijan, Armenia, Albania, Bulgaria, Greece, Georgia, Moldova, Romania, Serbia and Turkey, was established in 1999 for implementation of joint projects in various fields, including the economy, energy, infrastructure and social areas, as well as partnerships in emergency relief operations.
Tiraspol has its sights set on hammering out a new strategy as it moves toward Ukraine. Its Supreme Council Chairman noted that Kiev is a Transnistrian settlement provider that is as viable as Moscow, Nezavisimaya Gazeta says. After meeting Ukraine’s special envoy to the breakaway republic, Transnistria’s President Vadim Krasnoselsky instructed the head of the breakaway republic’s foreign ministry to keep in mind both Russia and Ukraine. Though Russia is a strategic ally, which listens to the Transnistrian side, it is also necessary to establish ties with Kiev, which must realize that Tiraspol is constructive and ready to accept certain terms, Krasnoselsky said.
According to Bogdan Tsyrdya, member of the Moldavian parliament, the European Union’s efforts in Transnistria to use "soft power via tax-free trade with the EU, various grants and other measures" have been quite successful. The MP also does not rule out that "one day Moscow may find out that Transnistria is beyond Russia’s influence." "Tiraspol will turn to those places where the interests of its business elites are, and they lie both in Ukraine and in the European Union, which accounts for 38% of Transnistria’s exports," Tsyrdya told Nezavisimaya Gazeta. Since the EU is not interested in having a conflict zone on its borders, and does not welcome either Russian, NATO, or the US military forces there, (though Washington is against Russia having a military base in Transnistria) one can expect Tiraspol to step up relations with Kiev, he said. "Transnistria has to survive," which requires changes in its geopolitical vector, the politician stressed.
The Transnistrian conflict erupted in March 1992 when initial clashes occurred between the Moldovan police and the Transnistrian militia near the city of Dubossary, which spiraled into an outbreak of armed hostilities. By the summer, it had morphed into a large-scale conflict in Bendery, where about 1,000 people were killed and tens of thousands were wounded and ended up as refugees. The civil war was brought to an end following a peace agreement signed in Moscow in July 1992 and Russian peacekeepers were brought into the conflict zone. Since then, they have been maintaining peace and calm in the region, together with their Moldovan and Transnistrian colleagues, thus allowing Chisinau and Tiraspol to conduct negotiations on settling the conflict over the breakaway republic.
As Russia’s top oil producer has announced plans to participate in funding the construction of the Iraqi Kurdistan’s natural gas pipeline infrastructure, most experts warn this may turn out to be a risky economic undertaking. "Russia has no notable influence with the political elite in Iraqi Kurdistan and the investment in an economically risky project is only possible if long-term political dividends are expected," an expert at the Russian International Affairs Council Timur Akhmetov told Kommersant business daily. He believes the project has a political element to it as Moscow is striving to take control over the infrastructure of energy supplies to Europe amid drastic changes in the Middle East. Alexey Grivach, Deputy Director General of the National Energy Security Fund, agrees that the project contains “a lot of politics.”
Meanwhile, Stanislav Ivanov, a leading research fellow from the Russian Academy of Sciences’ Institute of World Economy and International Relations (IMEMO) does not believe that the risks are really high. "Rosneft has a promising outlook regardless of whether Kurdistan will withdraw from Iraq or not," he told the newspaper, adding that "it will be even easier if it becomes an independent state, and neither Baghdad nor Iran will have the guts to fight a war."
The level of terrorist activity in Iraq is currently as high as in Syria, Leonid Isayev, an orientalist scholar and senior lecturer at the Higher School of Economics told Vedomosti. Major explosions were reported in the region not long ago, and what’s more an independence referendum is planned next week in Iraqi Kurdistan. Meanwhile, Iraq says it is gearing up to send in government troops to the territory of the potential breakaway state, the expert said, adding that he also considers the restless situation in the region as a threat for such projects.
Another issue implies local risks for Rosneft, experts say, as the project is likely to trigger enormous controversy from Gazprom. Russia’s biggest oil and gas producers have long been wrangling over gas supplies both domestically and internationally as Rosneft is seeking to dethrone Gazprom’s monopoly on exports of pipeline gas. Valery Nesterov, an analyst at Sberbank Investment Research, admits that the talks with the Kurds may be an instrument of pressure on Gazprom. Turkey as a transit country is crucial for the gas monopoly, which is currently implementing the ambitious Turkish Stream, and at least half of that gas will be delivered to Europe.
Nordea is mulling over leaving the Russian market, a source from a large industrial holding and two banking sector sources told Vedomosti. Shareholders of the Stockholm-based lender have been in talks with potential investors since early 2017, one of the sources said. However, taking into account the fact that the current market environment is not very favorable for the sale of such a huge asset given the owners’ expectations regarding value, the group admits to eyeing the sale of its credit portfolio instead of a full-fledged sale of the whole bank, he added.
Nordea has been operating on the Russian market since 2006, and has been among a few that did not announce intentions of quitting the country after the financial meltdown. However, it started wrapping up its local retail business in 2015 when it analyzed the dynamics of people’s incomes, the impact of the currency devaluation, inflation and unemployment levels. In January 2017, the bank sold its retail portfolio to Sovcombank for 16 bln rubles ($275 mln). One of the bankers told Vedomosti that Nordea has been trying to sell off its Russian division for three years now, though it still has not managed to find a buyer.
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