Russia’s Federation Council (upper house) intends to support legislation that slaps new sanctions on the United States. A bill with additional restrictive measures is currently in the works in the State Duma. The document will likely limit cooperation between Moscow and Washington in the aerospace industry as well as exports of Russian titanium (used by Boeing and Airbus). Deputy Chairman of the Council of the Federation Committee on Foreign Affairs Andrey Klimov confirmed to Izvestia that the document is under consideration.
"In general, of course we support the State Duma’s bill. However, we believe that everything must be seriously considered," he said, adding "There are quite a few areas where contacts with the United States are mutually beneficial, and there are some where a Russian response can be implemented."
According to Izvestia’s sources in the aviation industry, it is too early to say that the bill takes full account of Russian companies’ interests. A high-ranking source in the Russian Ministry of Industry and Trade told the paper, any response on cooperation with international companies should be carefully thought out.
"Russian plants today seek to forge partnerships with global majors. This concerns not only the economy, but also the nation’s image, our industry as a whole, which, despite sanctions, has shown its viability in the world’s high-tech markets. For example, most titanium products for the latest Boeing 787 Dreamliner are designed and manufactured in Russia," the source told Izvestia.
According to Izvestia, the bill on new sanctions still has gone through a whole series of interdepartmental approvals and improvements. "However, it is evident even now that the package of measures being developed can become one of the most stringent," the newspaper said.
Russian Prime Minister Dmitry Medvedev signed an order for the Finance Ministry, the Energy Ministry and the Economic Development Ministry to iron out the issue of cutting the mineral extraction tax for Gazprom projects with participation of foreign investors, sources told Kommersant. The measure would primarily affect joint ventures with Germany’s Wintershall and Austria’s OMV. The exact mechanism and the extent of the benefits are still unknown. According to the newspaper, the Finance Ministry wants to stay within the parameters included in the Tax Code, but companies could pursue more ambitious goals. According to analysts, raising the mineral extraction tax for Gazprom and its partners is not justified by the higher yield of gas exports.
According to Chief economist at VYGON Consulting Sergey Yezhov, the average rate of the mineral extraction tax on the Yuzhno-Russkoye field in 2016 was 807 rubles ($13.97) per 1,000 cubic meters. According to the newspaper, the management of Wintershall has repeatedly expressed its dissatisfaction with the sharp hike in the mineral extraction tax for Gazprom in 2016-2017, when the tax burden on the company's projects in Russia grew at least 1.5-fold. Gazprom traditionally pays higher mineral extraction tax than independent producers.
The Finance Ministry confirmed to Kommersant, "There is an order; the issue is being sorted out." At the same time, the ministry noted, "There are no exceptions for foreigners, we go by the principle of taxation equality." According to the officials, "only a cut in the mineral extraction tax in terms of Gazprom's markup effective since 2017 is being discussed, not a reduction to the level of independent producers.”
Thus, the companies’ benefit from the reduction in the mineral extraction tax will not be significant," the newspaper wrote. However, Kommersant's sources in the market are confident that the issue remains open and greater benefits are possible. For example, something similar to the situation with Gazprom Neft, which pays the mineral extraction tax on gas as an independent producer.
Experts interviewed by the newspaper believe contention on the issue is justified. "The initial markup for Gazprom was due to the difference in the profitability of gas deliveries to the domestic market and exports abroad, but since the spring of 2016, the yield has almost evened out," Yezhov added. According to him, the Gazprom markup does not look reasonable and is determined by the "fiscal needs of the budget, and not by the economy of gas supplies."
A proposed resolution drafted jointly by the UK and France aimed at Myanmar will be weighed by the UN Security Council, several sources in the organization told Izvestia. However, if the document is excessively critical of Myanmar’s authorities, Moscow will block it, sources in Russian diplomatic circles familiar with the situation in the region told the newspaper.
The world community zoomed in on the Myanmar state of Rakhine at the end of August after clashes by the Arakan Rohingya Salvation Army militants. In response to the violence, a large-scale operation by the Myanmar military resulted in the death of hundreds of people and a massive exodus of Rohingya Muslims to neighboring Bangladesh. The United States, Western European countries and a number of Islamic states unilaterally condemned the top military leadership of Myanmar. Russia, China and India on the other hand consistently urged the international community not to exert excessive pressure on Myanmar’s authorities.
"Myanmar is trying to sort out the situation from various angles, even through dialogue with Bangladesh, discussing the issue of repatriating refugees. This is a long process, but at least they started it. It is necessary to give them time - that is our position. All this criticism will not in any way contribute to normalizing cooperation between Myanmar and the United Nations," a source in Russian diplomatic circle told Izvestia.
"When it comes to Myanmar, we are talking about the situation as a humanitarian disaster. According to our colleagues from Bangladesh, the situation is serious, so a decision is needed. However, Moscow has always opposed sanctions, they won’t help. Therefore, we must first study the resolution by Paris and London. Russia will not introduce restrictions against one of the parties," Deputy Chairman of the State Duma International Affairs Committee Alexey Chepa told Izvestia.
The Russian Financial Corporation, 100% owned by Rosoboronexport (part of Rostec), has become the main candidate to fill the role of a specialized bank for providing services to the defense industry, several sources told Kommersant, including people close to the government and the presidential administration. The industry requires a special bank due to the high risk of tougher sanctions from the United States, which could cut off state banks from working with defense enterprises. A decision on the matter should be made before the end of the year.
The idea of creating a ‘defense bank’ has been in the works since US President Donald Trump signed the infamous "Countering America's Opponents through Sanctions" (CAATSA) act in early August. Currently, in order to reach the state armament program’s goals, Russia’s defense industry enterprises have resorted to borrowing money from large state-owned banks - primarily Sberbank and VTB.
Anxiety regarding Sberbank and VTB is understandable. They are afraid of sectoral sanctions, which would affect their own projects and capitalization, a source in the government told Kommersant. According to another source, the need for lending will remain in the next state armaments program for 2018-2025 (expected to be submitted to President Putin for approval in December).
Kommersant sources say VEB’s Svyaz-Bank and Novikombank - controlled by Rostec - are also being considered as alternative candidates for the role of a specialized bank for the defense industry.
The Russian Financial Corporation told the newspaper that it has the necessary funds for servicing the defense industry enterprises, noting, however, that the issue of appointing a bank for such services has not been discussed yet. According to experts interviewed by Kommersant, it will take 9 to 12 months to transform the Russian Financial Corporation into the defense industry’s main bank, while the issue is rather urgent and the bank is rather small in terms of assets. "We need to adjust the bank, add capital, recruit staff, ensure that all the necessary procedures are well documented," Head of the Expert RA Validation Department Stanislav Volkov told the newspaper.
The latest high-profile cyber attack dubbed, Bad Rabbit, which hit companies in Russia, Turkey, Germany and Ukraine, might have been caused by companies violating computer security rules, experts told Nezavisimaya Gazeta. However, intelligence veterans suspect their overseas counterparts in the most recent attacks, noting that it could have been a ‘dry run’ to assess the effectiveness of some cyber weapons.
According to Head of technical marketing department at ESET Russia Alexey Oskin, "Most of the attacks happened in Russia (65%), Ukraine (12.2%), Bulgaria (10.2%), Turkey (6.4%), Japan (3.8%), other countries (2.4% %)." The majority of experts, interviewed by the newspaper, believed that gaining profit is not what the viruses were used for in these latest incidents. Such attacks usually bring little or no profit to extortionists, experts told the newspaper, adding that earlier attacks by the WannaCry virus brought the scammers just several thousand dollars. At the same time, the Russian Communications Ministry said it is unlikely that hackers pursued any specific goal, the attack was likely random.
According to the newspaper, most likely, the number of such cybercrimes will only increase. Nevertheless, it is difficult to label what is happening today with the Russian media and Ukrainian enterprises a full cyber epidemic, some experts believe. "In this case, the scale of the attack is so insignificant that it is impossible to talk about an epidemic. However, perhaps, the attack was actually directed against one or two companies, and the rest were infected only to cover some tracks," leading analyst for Doctor Web Vyacheslav Medvedev told Nezavisimaya Gazeta.
Russian intelligence veterans consider it likely that the special services may somehow be involved in the virus attacks and telephone terrorism in Russia. Retired KGB Major General Alexey Kondaurov told the newspaper that the wave of telephone terrorism and an attack on computer networks in Russia might have been a form of revenge against Russian authorities for the alleged interference in the American elections. "We are witnessing today the most serious and professional attacks on Russia. Our relevant structures do not report the sources of these attacks and so we can only talk about possible versions. It cannot be ruled out that Islamic terrorists were involved in the wave of telephone terrorism or the cyber attack. However, this version seems less likely to me," Kondaurov said.
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