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Press review: North Korea plays trump card ahead of summit and US cozies up to Uzbekistan

Top stories in the Russian press on Thursday, May 17


Media: North Korea raising stakes ahead of meeting with Trump

Pyongyang has rebuffed Washington’s push to force it to get rid of nuclear weapons. North Korea’s Foreign Ministry has warned that if the country is forced into a corner, the high-level meeting won’t take place, Nezavisimaya Gazeta writes on Thursday. The summit could be US President Donald Trump’s major diplomatic success. Its cancellation would deal a blow to the US leader’s image. In protest against the US-South Korea drills Pyongyang also postponed contacts with Seoul, the paper says.

According to Director of Russia’s Asian Strategies Center at the Russian Economics Institute within the Russian Academy of Sciences, Georgy Toloraya, "this is a tactical game by North Korea to raise the stakes." "Everything depends on backstage bargaining between North (Korea) and the Americans," he said. The expert noted that there are still chances that the summit will be held and that preparations are underway.

Pyongyang was angered by US National Security Adviser John Bolton’s remark that the so-called Libyan scenario for North Korea is preferable, Kommersant writes.

"Such statements along with the recent decision of Donald Trump to pull out of the Iran nuclear deal may seriously reduce the chances for successful talks," Head of the Asia-Pacific Program at the Carnegie Moscow Center Alexander Gabuev said.

Go Myong-Hyun, a research fellow at the Asan Institute for Policy Studies, told Kommersant that Bolton’s remark was made on April 29 and the drills started on May 11. Pyongyang’s delayed reaction signals that there was another reason for its dissatisfaction. According to the expert, the sides could have serious differences and North Korea decided to threaten that it could cancel the meeting.

"I believe that during the preliminary consultations, the US and North Korean representatives reached vague agreements on the future of North Korea’s nuclear disarmament. As the summit approaches, the Americans started getting down to the nuts and bolts, and the North Koreans did not like this," he specified.

The expert called on the parties not to bury the inter-Korean settlement explaining that North Korea easily canceled the meeting with South Korea as Pyongyang is sure that it may be held at any time after “a single phone call.”

According to Kommersant’s experts, the US-North Korean summit will be held, and the current events are just tactical moves by both countries willing to enter the talks with a winning position.


Kommersant: US cozying up to Uzbekistan poses a new challenge for Russia, China

Uzbek President Shavkat Mirziyoyev is paying his first official visit to Washington, which culminated on Wednesday in his meeting with US President Donald Trump, Kommersant writes. Tashkent’s restoration of its US priority partner status in Central Asia comes amid Washington’s rapprochement with Kazakhstan, another key player in the post-Soviet space. Kazakh President Nursultan Nazarbayev paid a visit to the US before the Uzbek leader and then Astana allowed American cargo transit through its ports in the Caspian Sea via the territories of former Soviet republics to Afghanistan. Bringing Tashkent and Astana closer to Washington’s orbit in the region is becoming a new challenge for Russia and China, the paper writes.

The deteriorating situation around Afghanistan, which demanded preserving the US military presence, forces the White House administration to search for new ways of rapprochement with Kabul’s neighboring states, the former Soviet republics, the paper says. Washington’s focus on Central Asia also triggers an unprecedented confrontation between the US and Pakistan, which flared up after Trump accused Islamabad of failing to meet its commitments and aiding terrorism.

"Half a year ago, Central Asia was a forgotten region for the US. However, since then the situation has drastically changed," Director of the Asian Security Project at the PIR Center Vadim Kozyulin told the paper. The new mutual objective for the US and the former Soviet republics is to create another transit route to Afghanistan, he said.

Washington’s amplified policy in Central Asia also pursues another goal, Andrey Kortunov, Director General of the Russian International Affairs Council (RIAC), said. "The US steps may be considered a response to the expansion of the Shanghai Cooperation Organization (SCO), which is trying to go beyond the region," he noted.


Vedomosti: Gazprom Neft may revise its strategy amid OPEC+ deal

Russia’s fourth largest oil producer Gazprom Neft may not live up to the strategy for 2013-2020 due to the OPEC+ deal, the company’s report based on the Russian Accounting Standards for Q1 2018 stated, according to Vedomosti. In two years, the company expected to produce 100 mln tonnes of oil equivalent per year. This output level had been forecast for at least five years until 2025.

Now the agreement on limiting oil production may delay these plans by one or two years, the company said. It is not ruled out that Gazprom Neft will reach the target level in 2021-2022. However, the strategic goal of maintaining output levels at no less than 100 mln tonnes of oil equivalent by 2025 may be still attained, the report said. Last year, Gazprom Neft increased production of raw materials by 4% to 89.75 mln tonnes of oil equivalent. In 2019, the company planned to produce 95 mln tonnes of oil equivalent.

The report does not specify on which deposits the production growth may slow down. A source close to the company said Gazprom Neft has been limiting production at some old fields to meet its commitments under the OPEC+ deal and may continue this practice.

Gazprom Neft’s current strategy was adopted in 2013 when oil prices were higher and market conditions were more favorable, said Andrei Polishuk, an analyst at Raiffeisenbank. Nevertheless, even if the company fails to reach the production level of 100 mln tonnes by 2020, the effect from the OPEC+ deal will compensate for the lost profits from cutting output, the expert explained.


Vedomosti: Corporate world slams Russian bill to penalize compliance with US sanctions

Most lawyers and staff members of Russian and foreign companies have criticized the draft law on criminal liability for complying with Western sanctions on Russian soil, which was passed in the first reading by the State Duma, the lower house, on Monday, Vedomosti writes. The second reading is scheduled for Thursday. Those refusing to sign any contract with companies targeted by Western sanctions face a penalty of up to 600,000 rubles ($9,700) or may be put in custody for up to four years.

Members of the Russian Union of Industrialists and Entrepreneurs (RSPP) strongly oppose this bill, explaining that the companies are caught between a rock and a hard place. They may be hit by new restrictions for failing to comply with US sanctions, while facing criminal liability in Russia.

The draft law is unlikely to alter corporate operations but may pose a danger of exerting more pressure on them, entrepreneurs questioned by Vedomosti said. The Kremlin administration also criticizes the bill, a federal official and a source close to the administration said.

The State Duma may hold additional consultations with businesses and experts and postpone the second reading, said Vyacheslav Volodin, the lower house’s speaker.

The bill also creates risks for those who refuse to work in Crimea due to the West’s sanctions, noted Alexei Panich, partner at Herbert Smith Freehills. Among them are state banks Sberbank and VTB as well as mobile operators.

This draft law may serve as a signal for foreign businesses to roll back their activity in Russia, the vice president of a major foreign company producing commodity goods said. Endorsing this bill is a mistake, which needs to be corrected in the future, political scientist Yevgeny Minchenko told the paper.


Kommersant: France’s Total warns of exit from Iran due to US sanctions

Iran’s only major Western partner, French energy giant Total, has announced plans to leave the country in the wake of the US decision to reinstate sanctions against Tehran. Total said on Wednesday it had to stop all works in Iran on developing the South Pars gas field as it may lose financing in dollars (US banks take part in 90% of Total’s operations) as well as US shareholders (who earn more than 30% of shares) and US assets to the tune of $10 bln.

However, Total will ask Washington to make an exception for it regarding the sanctions against Iran. This happened in 1996, when the administration of former US President Bill Clinton imposed extraterritorial sanctions for investing more than $20 mln in the energy sector of Iran and Libya. In response, the EU passed a number of blocking regulations, urging European companies not to comply with the US sanctions, and challenged Washington’s steps in the World Trade Organization. As a result, Total received Washington’s permission for work in Iran, the paper writes.

Besides, Total’s project in the South Pars field is designed for gas deliveries on Iran’s domestic market, thus increasing the company’s chances to be exempt from sanctions.

Meanwhile, experts interviewed by Kommersant agree that the reinstatement of sanctions means Iran’s hopes to become a major gas exporter in the near future have been shelved. Tehran had planned to carry out this strategy by building LNG plants, but under the current circumstances no Western company will risk furnishing its technologies.

Experts say that no Western company besides Total has so far joined the projects in Iran. "Now Tehran will focus on exporting gas via the pipeline to India and Pakistan," one of the market sources told the paper. Russian energy giant Gazprom plans to take part in this project. The company had expected to get shares in Iran’s fields, but now this is very unlikely, the paper says.

In this situation, Russian, Indian and most notably Chinese companies may become key bidders for Iran’s fields, and this will increase their positions at talks with Tehran, according to Kommersant.


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