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Press review: US can’t twist India’s arms and new sanctions spook Russia’s bond market

Top stories in the Russian press on Thursday, August 23
S-400 anti-aircraft systems Vitaly Nevar/TASS
S-400 anti-aircraft systems
© Vitaly Nevar/TASS

 

Izvestia: Washington unable to twist India's arms over S-400 deal

The United States will not be able to influence India's purchases of Russian S-400 anti-aircraft systems, which could be announced during Russian President Vladimir Putin’s October visit, as well as all future defense deals between the two countries, two sources in the Indian military and diplomatic circles told Izvestia. According to one of them, military cooperation between New Delhi and Moscow meets Indian national interests, and the country’s authorities are not going to abandon it due to outside pressure.

The agreement on acquiring Russia's anti-aircraft missile systems was reached during talks between Russian President Vladimir Putin and Indian Prime Minister Narendra Modi in October 2016. The following summer, the United States passed the Countering America's Adversaries Through Sanctions Act (CAATSA). This piece of legislation, in particular, threatened countries purchasing Russian weapons with secondary sanctions. However, an exception was made for India - given the decline of arms purchases in Russia, and considering New Delhi's cooperation with the US government on other issues. As a result, Washington turned a blind eye to the S-400 deal.

"India has very clearly explained to the US that it will not tolerate interference in its relations with Russia. Washington made concessions with respect to CAATSA, given India's deep strategic interests in the defense sector and New Delhi's interest in continuing its time-tested relationship with Moscow," a source in India's military circles told Izvestia.

Another source in India's diplomatic community was confident that the deal would be signed. "India categorically told the United States that Russia is a strategic partner, with a strong and multifaceted relationship from the time of our independence. Most of our defense weapons are from Russia. Now the country badly needs the S-400 anti-missile defense system to ensure security," the source told Izvestia.

"Trump has no leverage to twist India's arms, since we do not get any loans or economic help from them (the Americans). However, the US needs India as a strategic partner for balancing an assertive China, and as a huge consumer market and arms market. Therefore, I believe that US hysteria will not affect the S-400 deal and other major contracts," a retired Indian military officer told the newspaper.

 

Nezavisimaya Gazeta: Trump's new sanctions spook Russian bond market

The new anti-Russian sanctions announced by Washington did not directly affect operations with state debt, however investors in Russian government debt securities are seriously worried, Nezavisimaya Gazeta wrote. The Russian Finance Ministry had to stop placing new portions of public debt, and at the same time resume buying currency through ruble tax revenues. Experts interviewed by the newspaper believe that the Ministry’s actions will accelerate inflation and lead to a tightening of monetary and credit policy. As a result, the price of loans will rise both for the general public and for businesses.

The new set of restrictions includes a ban on the supply of dual-use products to Russia, exports to Russia of all "sensitive" goods and technologies related to US national security, as well as deliveries of electronics, components and technologies from the oil and gas industry. The package still does not limit activities with the Russian national debt. Nevertheless, another bill has already been submitted to the US Congress, which could restrict dollar transactions for a number of state banks, ban investments in Russian public debt and restrict the export of technologies for the oil and gas industry.

At the same time, even the threat of imposing sanctions that are tougher raises alarm bells among investors. According to Nezavisimaya Gazeta, demand for Russian securities is declining.

Thus, according to the Central Bank of Russia, at the end of July the share of non-residents among holders of Russian OFZs was 27.5% against a record 34.5% before the announcement of April's US sanctions. "Unlike in April, when foreigners were selling, and our people were buying, now the situation is that everyone is spooked by the threat of sanctions, and everyone has gone into waiting. The demand for OFZs has also dried up," Director of the analytical department at Loko-Invest Kirill Tremasov told the newspaper.

The Finance Ministry's move to suspend auctions on OFZ placements is a forced measure, experts told Nezavisimaya Gazeta. "Under conditions of constant sanctions pressure, it is expensive to borrow through OFZs, with the yield of some issues reaching 9%," analyst at Alor Alexey Antonov told the newspaper. According to Nezavisimaya Gazeta, cancelling the auction also hints at inflationary fears and expectations of a further weakening of the ruble.

 

Kommersant: Russia’s Defense Ministry inks deals worth $2 bln with manufacturers

The Russian Ministry of Defense concluded agreements with enterprises to the tune of over 135 bln rubles ($1.98 bln), and they will be extended over the coming eight years (2018-2026). During this period, the military plans to receive two Sukhoi Su-57 jet fighters, six Mikoyan-Gurevich MiG-2 fighters, 132 BMD-4M combat vehicles, 58 BTR-MDM armored vehicles, 69 Typhoon (4x4) vehicles, and repair more than 1,000 Kamaz and Ural vehicles, Kommersant wrote. In turn, the fleet will receive a series of six small missile ships of the Project 22800, which will become carriers of Kalibr cruise missiles that were successfully tested in Syria.

The signing of 32 contracts was held at Patriot Park with Deputy Defense Minister Alexey Krivoruchko attending the event. According to him, with the timely implementation of these deals, the armed forces will receive more than 600 new units, as well as over 1,500 items of repaired weapons, military and special equipment. The execution cycle of most contracts is limited to the period of 2018-2020. A source in the Ministry told Kommersant, this was chiefly due to the practice of approving a three-year budget.

The military plans to obtain unguided missiles, as well as various satellite and tropospheric communication systems. In addition, the armed forces ordered the overhaul of the BREM-1 armored repair and evacuation vehicle (20 units), the BMP-3 infantry fighting vehicle (67 units), BMP-2 (230 units). A part of the contracts is designed for a longer period. Thus, the supply of four MiG-35UB fighters and two combat MiG-35S fighters will continue until 2023, and this, according to Kommersant, is partly due to the loading of the Russian Aircraft Corporation MiG with commercial orders.

The longest contracts were concluded with shipbuilders. The Vostochnaya Verf shipyard (Vladivostok) undertook supplying the Russian Navy with two small missile ships of the Project 22800 by 2023. Meanwhile, their colleagues from the Amur Shipbuilding Plant have a series of four such ships with the end of the delivery date set for 2026. According to Kommersant’s military source, the decision to build them was made based on the use of Kalibr strike complexes in Syria.

 

Izvestia: Russia’s Internal Affairs Ministry goes after bitcoin’s ‘shadowy’ profits

The government is mulling over criminalizing shadow turnover of cryptocurrencies, according to the Ministry of Internal Affairs documents, available to Izvestia. In early August, the department requested the opinion of the Finance Ministry on the matter. The Ministry of Economic Development told Izvestia that it is too early to talk about criminal prosecution for actions related to the turnover of cryptocurrency. The bill on digital financial assets passed only its first reading in the State Duma.

According to the letter by the Ministry of Internal Affairs to the Finance Ministry, the department is working on possibly amending legislation in areas that concerns the legalization of the turnover of open-source cryptocurrency (Bitcoin, Ethertum, etc.). The Ministry suggests doing this "through mandatory registration in government agencies that implement financial and tax regulations." In addition, the authorities are looking at introducing criminal liability for shadow turnover.

Head of Tax Law Practice at BMS Law Firm Law David Kapianidze suggested that cryptocurrency is being used to buy drugs, which is why the corresponding department of the Ministry of Internal Affairs is looking into the matter.

Deputy Minister of Economic Development Savva Shipov told Izvestia "it is too early to talk about criminal prosecution for actions related to cryptocurrency turnover." First, it is necessary to shape positive regulations, which are planned to be added in preparation for the second reading of the law on digital financial assets.

According to him, the subject of the alleged offense is not clear. "If cryptocurrency acts as a means of payment for the circulation of weapons, drugs or other goods that entail criminal responsibility, it is possible to criminalize the use of cryptocurrency now, and we can only talk about clarifying already existing elements of any offence," Shipov added.

 

Vedomosti: Deutsche Bank’s London office threatens to sever ties with Russian government

On June 27, the London branch of Deutsche Bank sent a letter to the Russian Government. According to the message, available to Vedomosti, Deutsche Bank said it analyzes services and documents available to the Russian government in the framework of the Know Your Customer (KYC) practice, which implies the process of identifying clients and obtaining information about them to prevent money laundering, as well as financing terrorism.

In accordance with the bank’s policy and the requirements of regulators in the jurisdictions where Deutsche Bank operates, information about customers should be periodically updated, the letter said. Therefore, the bank may require additional documentation from the government. Deutsche Bank warned that failure to provide the latest information could compel the bank to terminate business relations. According to Vedomosti, that deadline expired in July.

A representative of the Ministry of Finance confirmed receiving the letter, but refused to comment on the details. According to the source, there were no similar requests from other banks.

Two officials from the financial and economic bloc told Vedomosti that the government did not send a reply. However, they added that Deutsche Bank did not send any more notifications on the matter either.

Responding to a question from the newspaper, a representative of Deutsche Bank said "regular formal checks of all partners around the world are standard measures within the framework of KYC procedures."

 

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