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Press review: SPIEF spawns anti-sanctions coalition and will Gazprom, Turkey vie over gas

Top stories in the Russian press on Monday, May 28


Media: SPIEF gives rise to anti-sanctions coalition backing Russia

Foreign leaders and CEOs of major companies backed Russian President Vladimir Putin’s call to observe the rules of the game in the global economy and agreed with his stance that sanctions are harmful. Experts told Izvestia that the anti-sanctions coalition started forming at the St. Petersburg International Economic Forum and many countries and businesses are ready to join it.

The day before the forum, media reports said that the White House was studying an option of introducing a 25% tariff on imported cars and auto parts, and the US leader promised "big news" for the country’s automobile industry.

The Russian leader’s rhetoric at SPIEF was exactly the opposite. He called for refraining from protectionist measures, honoring agreements and not halting functions within the framework of the World Trade Organization. Putin also vowed that Russia’s development would be based on openness and active participation in global processes, the paper writes.

The only issue that raised concerns in relations with Russia voiced at SPIEF was a potential penalty for implementing Western sanctions. However, according to the participants of Putin’s meeting with foreign investors, the Russian president assured them that the "issue had been settled" and Moscow was not planning to punish its foreign partners. Later, the sides started discussing a format to fight against sanctions.

Both Japan and France understand that the sanctions policy is not working, Head of the Russian Direct Investment Fund (RDIF) Kirill Dmitriev told Izvestia. "Possibly, the wisest approach would be to build up the alliance which the president is obviously creating now. Essentially, an anti-sanctions coalition of major countries is emerging now, which says that sanctions are harmful in principle," he said.

The movement against sanctions "in certain countries" will only gain steam, Deputy Chairman of the Russian Federation Council’s (upper house) International Affairs Committee Vladimir Dzhabarov said. Partners in the EU awoke when they understood that their interests could be directly impacted by Washington’s steps, he noted. Foreign businesses are determined to work with Russia and given the statements made at the forum, it is accurate to say that an informal anti-sanctions coalition is now in the process of being formed, Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs, said.

Kommersant writes that while Russian and US businessmen at SPIEF were nostalgic about the "golden age" of bilateral relations, the European track looked much different. French President Emmanuel Macron announced plans to make his country a major investor in Russia and said that Moscow and Paris were drawing up a roadmap to enable the two countries to resume normal cooperation. Other official representatives of EU countries at the forum voiced a similar stance, the paper says.


Kommersant: Resurgence of Gazprom-Turkey gas feud on the horizon

Russian energy giant Gazprom will pay Turkey’s Botas $1 bln as a 10.25% discount for gas supplied in 2015-2016, thus settling the companies’ arbitration dispute, Kommersant writes. This sum will serve as payment for Ankara’s agreement to build the second leg of the Turkish Stream gas pipeline. The parties signed the deal on the project on May 26. However, according to Kommersant, the discount won’t cover Gazprom’s current price for Botas, which should exceed $260 per 1,000 cubic meters in the third quarter and may continue rising. This situation creates preconditions for resuming the price dispute.

Gazprom had rejected the idea of giving a discount to Turkey explaining that in 2016-2017 gas prices dropped due to falling oil prices. Sources told Kommersant that Gazprom decided to hurry up because the deep-water section of the first leg had already been built, so it has to get moving if it wants to finish the second leg by late 2019 when the Ukrainian transit contract expires.

Under the deal, Botas has the right to review the prices once in three years. The last time the company did this was in 2015 and this year it may start new talks with Gazprom using Turkish Stream as leverage. TurkAkim Gaz Tasima, a joint venture between Botas and Gazprom, will build the second leg. Turkish Stream is increasing Turkey’s dependence on Russian gas, which meets more than half of the demand, said Gulmira Rzaeva, a Research Associate at the Oxford Institute for Energy Studies (OIES). Russia is also becoming dependent on Turkey for gas transit to Southeast Europe.


Kommersant: ‘Moderate opposition’ suspected of deadly attack on Russian military in Syria

On Sunday, the Defense Ministry reported that four Russian servicemen, including two military advisers, were killed and three others were injured during a combat mission for a Syrian artillery battery in the Deir ez-Zor Governorate. Kommersant writes that combatants from the Islamic State (terror group, outlawed in Russia) are suspected of the attack, however, the Russian military is looking into another version.

According to a source in the military command, the battle in Meyadin (the Deir ez-Zor Governorate) occurred in the middle of last week. Several days earlier a group of nearly ten Russian servicemen had arrived in the governorate in order to coordinate operations with the Syrian military. After training Damascus’ forces they were expected to head to the Hmeymim base to fulfill a new mission and then return home. The attack on May 23 was swift and well-prepared, a military source told the paper. The fighting lasted for nearly an hour and 43 terrorists and six vehicles were destroyed.

The so-called moderate opposition is also suspected of being behind the assault. According to one of the sources, two days before the incident, militants from the so-called Free Syrian Army, whom Russia considers terrorist accessories, had been deployed to the Deir ez-Zor area from the Al-Tanf base in the Homs Governorate under the pretext of assisting Kurdish units.

Al-Tanf is a US-led international coalition military base set up in 2014 by the US special services, which is used for training the moderate opposition, the paper says. The Russian military said that Islamic radicals undergo training there to fight against Assad’s army rather than IS.

Russia’s official death toll in the Syrian campaign now stands at 91, according to Kommersant. More than half occurred over the past five months (after the announcement to cut back Russia’s military presence in Syria).


Vedomosti: What do sponsors expect from FIFA World Cup in Russia?

The 2018 FIFA World Cup in Russia, scheduled to be held between June 14-July 15, has three groups of sponsors. The world football association’s partners - Adidas, Coca-Cola, Wanda Group, Gazprom, Hyundai Motor Group, Qatar Airways and Visa, sponsors of this championship - Bud, Hisense, McDonald’s, Mengniu, Vivo, and also a new group - regional sponsors Alfa Bank, Alrosa, Rostelecom and Russian Railways. Experts interviewed by Vedomosti have different expectations about the World Cup’s impact on their business.

Adidas Group CEO Kasper Rorsted expects that the sportswear manufacturer’s sales in Russia will stop falling. During the World Cup, the company will open shops in fan attraction zones. The inbound tourist flow in Russia is expected to see a surge of 300,000 -500,000 people, a spokesman for Visa payment system said. Fans will boost spending with cards in the country by 10-25%. Alfa Bank also anticipates growth in profits. There will be new clients, more transactions and acquiring, the bank’s marketing director Oksana Belyaeva said.

Russian Railways, a regional sponsor, will be responsible for providing transportation services for guests and participants of the event. This will make the brand more recognizable around the world, and most notably in European countries connected with Russia by direct railways, a spokesman said.

The World Cup will also increase beer sales in Russia, Morgan Stanley investment bank forecasts that fans will contribute to increasing the market by 2%, the first growth in over the past 10 years. After the World Cup in Brazil, beer sales around the world from AB InBev, a Belgian-Brazilian transnational beverage and brewing company, rose 7%, Director General of the RMA business school Kirill Kulakov said.

However, the Brazilian population is 70 million more than Russia’s, Kulakov said. According to opinion polls, only 53% of Russian citizens will be involved in the championship, while in Brazil this number reached more than 80% in 2014. Moreover, certain Russian regions like Siberia and the Far East are not interested in football at all, according to Kulakov.


Vedomosti: Russian authorities may raise VAT to 20%

Russian Prime Minister Dmitry Medvedev has promised to find 8 trillion rubles ($128.5 bln) to fulfill the president’s new May decree. Vedomosti writes that the government and the Kremlin expect to find most of the sum in the pockets of Russian citizens. The budget may get some 2 trillion rubles ($32.1 bln) over six years from raising the value added tax (VAT) from 18 to 20%. This option was discussed and now it is one of the most probable ones, although no final decision has been made yet, three federal officials told the paper.

The budget may be replenished by another 2 trillion rubles from raising the retirement age, two officials said, without giving further details.

The remaining 4 trillion rubles ($64.3 bln) will be furnished by the already announced measures. The government will borrow some 3 trillion rubles ($48 bln) for financing infrastructure by placing the Federal Loan Bonds and setting up a temporary fund inside the budget. The state coffers will get another 1 trillion rubles from tax reforms of the oil sector.

Some decisions may be reviewed, sources told Vedomosti. Meanwhile, a final decision should be made during the spring session of the State Duma, the lower house of parliament, Finance Minister Anton Siluanov said earlier.


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