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Press Review: Putin’s year-end news conference takeaways and Central Bank to the rescue

December 15, 2017, 13:00 UTC+3 MOSCOW

Top stories in the Russian press on Friday

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© Mikhail Metzel/TASS

 

Media: President’s annual press conference highlights start of 2018 race

Vladimir Putin’s plan to run for president in the 2018 election as an independent candidate was one of the headlines of the traditional annual news conference in Moscow on Thursday. Meanwhile, some experts expect a whole range of organizations, including the United Russian party, to continue backing him publicly. Dmitry Orlov, head of the Agency for Political and Economic Communications, told Izvestia that newly-established voluntary organizations, and activists from major corporations and businesses will get on the bandwagon. "Putin is striving to set up a new collation and rev up the very ‘Putin’s majority’ that backs him, though in any case the United Russia (party) and All-Russia People’s Front will be dominating in this chain," he said.

Head of the ISEPR Fund Dmitry Badovsky explained why the opposition is lagging so far behind Putin. "In terms of substantive projects and proposals he is way ahead of his opponents. If people join the opposition in order to improve things and suggest changing or improving the system, they will be eventually heard. But if people go there seeking to ruin the political system and the country then this would be a red line, which distinguishes the anti-systemic opposition from the normal opposition’s political activity," he said.

According to Konstantin Kostin, chairman of the board of the Civil Society Development Foundation, the focal point of this year’s presidential press conference was the domestic agenda. "The first question was the most important. In his reply, the President said that he considered housing and public utilities, education, healthcare and people’s prosperity to be the core issues, and which will be the main topics of his pre-election campaign," the expert said, adding that this is the reason why he thinks this press conference may be referred to as part of Putin’s pre-election campaign.

Particularly, one of the issues touched upon on Thursday was the plan to write off tax debts for 50 mln people, including private individuals, accumulated over the past two years. This is the second time Putin announced a tax amnesty, though back in 2011 when he was Prime Minister the measure did not cover individual entrepreneurs, Vedomosti writes. This means that six years ago the incentive concerned 31% of potential voters, while now it affects almost 45% of them. Political scientist Abbas Gallyamov told the newspaper that this move may be considered to be one of Putin’s pre-election steps.

 

Media: Major Russian private lender to be bailed out

Another Russian bank is slated to be bailed out, as temporary administration is set to be introduced for Promsvyazbank, one of Russia’s three biggest private lenders and the country’s systemic financial institution, Vedomosti writes on Friday citing two sources close to the bank and another source close to one of its shareholders. Sources familiar with the situation also told Kommersant that on Thursday that the Bank of Russia decided on temporary administration, and that the group owned by two brothers, Alexey and Dmitry Ananiev, could undergo bailout procedures.

Earlier this week Vedomosti reported that the regulator had stated that the bank needed a capital injection of around 100 bln rubles, or $1.7 bln. Dmitry Ananiev told the publication that the amount of requested additional reserves was subject to negotiation, while analysts estimated that the announced 100 bln rubles was excessive. Now that the Central Bank is about to impose temporary administration procedures, the Ananievs are likely to lose their right to hold big stakes in the banking group and occupy high positions there, Kommersant says.

On Thursday, abnormal transactions were conducted with Promsvyazbank shares on the Moscow Exchange, according to Vedomosti. The total amount of transactions reached 16.5 bln rubles ($280 mln) in one day, with the average daily stock turnover for 2017 amounting to 2.5 bln rubles. In just one day, the bank’s shares dropped 7.4% to 0.07 rubles, while its subordinated bonds plunged 20%. Irregular transactions also proceeded the Central Bank’s decision to step in and rescue Otrkitie Bank, Russia’s eighth biggest lender in terms of assets. Here, the regulator announced bailout procedures in August 2017, the newspaper says.

Vedomosti: Russia’s central bank to minimally cut key rate due to threat of new sanctions

With just hours left before the last meeting of the board of Russia’s Central Bank on its monetary policy this year, analysts expect a cautious reduction in the regulator’s key rate by 25 basis points to 8%, Vedomosti writes on Friday. Most of them also expect similar moves at further board meetings until the rate hits 6.5% in the second quarter of 2019.

The alternative decision is to reduce the rate by 50 basis points to 7.75%, though analysts at Sberbank CIB doubt the Bank of Russia will do it now.

Alfa-Bank’s Chief Economist Natalia Orlova shares this view, saying that new significant risks have emerged. The US Senate has adopted a landmark tax reform law, which can push the Fed to make more aggressive rate hikes in 2018, she explained. In addition, the recent move by the International Olympic Committee to suspend Russia from the Olympic Games in 2018 is a signal for Moscow that another round of anti-Russia sanctions may follow. However, Orlova added, with such low inflation the regulator has no choice but to cut the key rate this time.

The Central Bank said in a press release following the previous monetary policy board meeting that inflation holds close to the targeted level of 4%, while the GDP growth outlook for 2017 had been raised to 1.7-2.2%. In October 2017, the Bank of Russia reduced its key rate for the fifth consecutive time to 8.25% per annum.

 

Nezavisimaya Gazeta: Western analysts warn of ruble collapse in 2018

With high expectations that the United States may expand sanctions against Russia in February 2018, particularly banning purchases of the country’s state securities including OFZs, some western analysts warn this may become the most powerful shock the Russian economy will endure next year, Nezavisimaya Gazeta says.

The external debt obligations of Russian companies and banks that currently stand at around $450 bln, will be under pressure if a new sanctions package is adopted.

In this case, the ruble will be hit the hardest, Chief Economist of Bank of America Merrill Lynch in Russia and CIS Vladimir Osakovsky warns. This means that the Russian currency may repeat the 2014 scenario when the Central Bank first spent billions to protect the currency, then sharply raised the rate and finally let the ruble go into free float.

However, this political pressure does not couple with a sharp drop in oil prices, the ruble may not weaken that much, Nezavisimaya writes citing the Banki.ru portal. The Bank of Russia, which successfully responded to the crisis and pursued a reasonable monetary policy as many say, may cope with the consequences of these imminent sanctions, the paper says.

 

Izvestia: Cyber conflicts could slide into new world war

Cyberspace is becoming increasingly vulnerable, and inaction by the global community may generate economic turmoil and a new world war if things get bad. Meanwhile the threat of cyber terrorism persists leaving opportunities for third parties to try and drive two deemed nuclear powers into a cyberspace showdown. Those are the main findings of the participants of a cybersecurity conference that just took place in Moscow, Izvestia says. Meanwhile, diplomats, politicians and experts on information security still hope there is a chance to prevent a worst-case scenario, which nevertheless requires agreements between countries to foster responsible conduct in an online environment and mechanisms to thwart cyber threats.

Special Representative of the President of the Russian Federation for International Cooperation on Information Security Andrey Krutskikh told the newspaper that the cyberspace climate has worsened over the past year. "A third world war is just around the corner if we fail to reach agreements. Cyberwars are a prelude to shooting wars. It is necessary to restart the work of UN government experts, and we are negotiating ways to restore this format. The goal is to adopt a resolution by the UN General Assembly on rules for responsible conduct by countries, so that all nations voluntarily sign the document," he said. Krutskikh explained that Russia is proposing a code of practice based on the principles of respect for human rights, freedom of access to information, securing sovereignty, noninvolvement in internal affairs and nipping conflicts in the bud.

According to Federation Council’s (upper house of parliament) committee member on international affairs Olga Timofeyeva, cybersecurity directly concerns national interests, since IT technology is a means of promoting unfriendly actions against Russia. Meddling in domestic affairs, into the electoral process, the demonization of Russia’s media and the Olympic doping crusade are all related to cyberspace, she said to Izvestia.

 

TASS is not responsible for the material quoted in the press review

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