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Press review: Helsinki summit to decide fate of sanctions and China pursues more pipelines

Top stories in the Russian press on Tuesday, July 10


Izvestia: Future of anti-Russia sanctions depends on upcoming Putin-Trump summit

Italy’s former Prime Minister and former President of the European Commission Romano Prodi expects the anticipated meeting between Russian President Vladimir Putin and his US counterpart Donald Trump, to determine the fate of sanctions against Moscow. "If it is positive, hope will emerge that one day the restrictions may simply dissipate," he told Izvestia, adding that he believes it is a losing policy to stick to the sanctions that "splits political circles in one country and region." "I would not impose any sanctions, it breaks up the global economy, and it would be a great mistake for the United States to cause such a rift between Russia, the US and the EU," the Italian politician specified.

After attending the presentation of the Astana International Financial Center, the first institute of its kind in the Eurasian Economic Union (EAEU), Prodi said that he expects it to be a promising addition to Russia’s financial sources. "Currently the markets, like after the World War 2, look like a football field as each member is running in his own direction, and it looks as if there is no common force and general goal. As institutes like the Astana International Financial Center emerge, Asian finance will be able to reach new rising integration projects for investments, including those within the EAEU's framework. If everything goes as planned, this financial center may become a center of the whole football field," he said. "Russia and its companies are also taking great interest in raising Asian financing particularly at this platform, which as I understand is the only one in the Euro-Asian region," the ex-Prime Minister said, adding that further development of markets on Central Asian territory will depend on political issues and their settlement, including those between Russia and the US.


Nezavisimaya Gazeta: China’s growth to require more Power of Siberia

With Beijing having halfway completed the construction of the first section of the Power of Siberia natural gas pipeline that will pump gas from Russia’s Irkutsk and Yakutia to Shanghai, it looks likely that the alternative ‘western route’ of the pipeline, or Power of Siberia 2, will be constructed, Nezavisimaya Gazeta says. According to the paper, China is showing mounting interest in Russia’s gas supplies amid the background of an expected surge of gas demand domestically. "The environmental situation in big Chinese cities is stirring unrest, which is why the Power of Siberia deliveries will be important for China, which produced 149 bln cubic meters of gas and consumed 240.4 bln cubic meters last year. Meanwhile, consumption rose around 30 bln cubic meters in one year," Igor Yushkov, an expert at the National Energy Security Fund, told the newspaper.

Gazprom and China National Petroleum Corporation (CNPC) signed a sales and purchase agreement for gas to be supplied via the ‘eastern route’ (Power of Siberia) in May 2014. The 30-year agreement worth $400 bln provides for Russian gas deliveries to China in the amount of 38 bln cubic meters per year. Gas supplies are expected to start in December 2019. According to Yushkov, Russia’s pipeline supplies of gas to China is profitable due to the lack of transit countries and zones of international strife. "Besides, there is no serious separatist or terrorist threat in Russia, whereas China’s biggest gas supplier, Turkmenistan, faces the threat of terrorist pressure on its southern borders. The risks of a suspension or a reduction in Turkmenistan’s deliveries drive China towards more active talks with Gazprom over Power of Siberia 2," the expert explained.


Izvestia: Western European lawmakers tired of anti-Russian hysteria, Deputy Duma Speaker says

Western European delegations attending sessions of the Parliamentary Assembly of the Organization for Security and Cooperation in Europe (OSCE) are keen on expanding collaboration with Russia, and are fed up with the endless barrage of Russia-bashing rhetoric, State Duma (lower house of parliament) Deputy Speaker and head of the Russian delegation Pyotr Tolstoy said in an interview with Izvestia.

"Representatives from Western European parliaments say that they would like to move towards constructive cooperation with Moscow, and that they are tired of the constant condemnation of it (Russia). A great number of bilateral meetings on the sidelines of the Assembly (sessions), which turned out to be more effective than the plenary session talks, demonstrate that" he pointed out.

According to Tolstoy, an anti-Russian parliamentary majority is very active at the OSCE Parliamentary Assembly now, though many delegations abstain from voting when discussing draft resolutions concerning Russia. The Assembly’s work goes to three committees - on political issues and security, on economic issues, science, technologies and environment, and on issues related to democracy, human rights and humanitarian problems, which some delegates use for anti-Russia propaganda, member of the Bundestag (the German parliament) from the Alternative for Germany political party Markus Frohnmaier told the paper. Some delegations employ various issues - from human trafficking to child abuse - for raising the Ukrainian conflict, he said, adding that the US, Ukrainian and Swedish delegations are most hostile.

The annual session of the OSCE Parliamentary Assembly is taking place at Berlin’s Reichstag, the seat of the German Bundestag. About 300 lawmakers from 57 OSCE countries are participating in the event. Delegates are going to consider three draft resolutions concerning the human rights situation in Crimea, criticism of the Russian judicial system and the 10th anniversary of the developments in South Ossetia. These matters have been put on the session’s agenda despite Russia’s objections. They are expected to be put up for voting at the session’s plenary meeting.


Kommersant: Pension reform may hurt governors

The presidential administration is worried about the outcome of the September elections of governors and legislative assemblies due to the pension reform uproar, Vedomosti daily writes citing three people close to the administration. However, governors are expected to mitigate risks by offering various subsidies, one of the sources added. The decision to raise the pension age may trigger unrest, a source said. "People may come out to vote not for someone, but against (them)," he said, adding though that the spike in protest activity is expected not in September, but rather in October and November.

Another source agrees that the pension reform issue is likely to affect the outcome of the governors’ elections, though the effect is unlikely to be critical. "A combination of factors is more likely to take effect - higher fuel prices, and the potential VAT hike. If in August, at the middle of the harvest, fuel prices surge, the story may become really negative," he explained. Another source close to the presidential administration expects the reform to rattle the results of the United Russia party at the parliamentary election even harder, than the governors’ vote.

Earlier, the Russian government introduced a draft bill on changes to the national pension system to the State Duma, the lower house of parliament. They stipulate a gradual increase in the retirement age to 65 for men (by 2028) and 63 for women (by 2034). The authorities plan to raise the retirement age gradually starting from 2019. Currently, the retirement age for men and women is 60 and 55 years, respectively. The hike in the retirement age does not affect current pensioners (about 46.5 mln people.) They will continue to receive their pensions and social benefits that were earmarked for them earlier. According to Prime Minister Dmitry Medvedev’s forecast, thanks to the implementation of the retirement reform, pensions will grow by about 1,000 rubles ($16) annually.


RBC: Sberbank CEO warns oil sector of financial risks from tax reform

In a letter by Sberbank CEO Herman Gref to President Vladimir Putin late last week, the head of the nation’s top lender warned about the risks the oil refining industry and its lenders are facing as a result of the conclusion of the tax maneuver in the oil sector, RBC writes citing two branch consultants and an official from one of relevant ministries.

The so-called tax maneuver in Russia’s oil sector, which currently envisions full cancellation of export duties on oil and petroleum products with concurrent mineral extraction tax growth within six years to 2024, bears risks for the country’s petroleum refining industry and banks providing loans for it. The CEO cautioned that the tax maneuver as it is today, can turn investments poured into upgrading refineries into sunk costs, and even trigger the bankruptcies of a number of refining plants, sources told the publication.

Sberbank has extended around 455 bln rubles ($7.3 bln) worth of loans to oil producers for modernization works, while the total amount of funds provided by Russian banks to oil companies for plants’ upgrades tops 800 bln rubles ($12.8 bln), sources said referring to Gref’s letter. Once the tax maneuver ends, it can make oil producers unable to service loans, which means loans to banks will not be paid back. Eventually, it may snowball into a drop in Sberbank’s profit and dividend payouts of up to 240 bln rubles ($3.8 bln) until 2024, RBC says. According to the paper’s sources, Gref has asked Putin to revise the reform’s parameters, adding that the bank’s experts are ready to assist in polishing up the bill.


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