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Press review: Russia eyes dumping US dollar and NATO backs Washington’s INF accusation

Top stories in the Russian press on Thursday

Izvestia: Russian cabinet mulls dumping dollar to shield economy from sanctions

Russia’s cabinet of ministers is hammering out a plan to support the nation's economy to weather the West's sanctions, a federal official and a source in the administration told Izvestia. The government is gearing up for a slew of restrictions ranging from harsh to mild ones. So with that in mind, reducing the Russian economy's dependence on the dollar is just one of the proposed measures, the paper says.

Russian Economic Development Minister Maxim Oreshkin said on Wednesday that the Finance Ministry, the Economic Development Ministry and the Bank of Russia had laid the groundwork for proposals to wean the economy off the dollar. This includes encouraging measures, which would be effective and convenient for companies.

Two sources stressed that Russia is not planning to fully dump the dollar, but will just develop accounts in national currencies with other states, in particular with China and countries, which are part of the Eurozone.

One of the proposed moves is to create a streamlined tax system in Russia to return capital to the country, a participant of the government meetings told the paper. For this objective, special administrative areas (offshores) have been set up on Russky Island in the Far East and Oktyabrsky Island in the Baltic exclave of Kaliningrad. Another idea is to introduce tax benefits for holdings like those in the Netherlands and Luxembourg.

A roadmap for the arrangement of a range of protection measures is in the works, a federal official said. A source in the government administration noted that the cabinet does not believe that the harshest scenario of sanctions will be introduced, nevertheless it is still preparing for it.

According to Fitch analyst Alexander Danilov, the Russian Central Bank has enough currency in cash - nearly $30 bln - in case restrictions on accounts in dollars are introduced. The banks also have some $13 bln or $14 bln in cash. This volume will be enough to return half of all deposits owned by the Russian citizens, he stressed. In the event banks really do lack dollars, the government will support them, Deputy Director of the Financial Institutions Ratings Group Valery Piven said.


Kommersant: NATO backs US claims of Russian cruise missile allegedly breaching INF

NATO Secretary General Jens Stoltenberg has accused Russia of violating the 1987 Intermediate-Range Nuclear Forces Treaty (INF Treaty) by conducting tests of the 9M729 cruise missile. The US was the first to ring the alarm, Kommersant writes. Now Stoltenberg echoed Washington's claims, saying that this missile threatens the entire alliance. Russia acknowledges that it has this missile, but denies that it violated the treaty. According to the US military, this missile has a flight range of over 500 km, exceeding the allowed limit.

A NATO representative told the paper on condition of anonymity that "the ball is in Russia’s court" and the alliance is waiting for an answer to its concerns over this missile. When asked if NATO members receive information about the missile from the US or have their own data, he said the alliance’s member-states share info, but the US plays a leading role here as a party to the treaty.

Russia argues that Washington, not Moscow, is violating the INF Treaty, namely by deploying Mk41 missile launchers to Poland and Romania, which it says can launch both anti-ballistic missiles and surface-to-surface cruise missiles.

Andrei Baklitsky, an expert with the PIR Center, noted that the discussion on the 9M729 cruise missile is "one of the most mysterious issues of the US-Russian relationship." "The US claims that this missile can fly further than allowed under the INF Treaty, but has never given any evidence of this, and could not name the date of the drills when their surveillance means registered that," he said, suggesting that US intelligence received access to the missile’s technical characteristics pointing to its possibilities.

The expert noted that Washington did not raise the issue of Russia’s alleged violation of the INF Treaty at the Putin-Trump summit in Helsinki this past July. The Russian leader earlier called on Trump to confirm his commitment to the landmark deal, but his proposal was left unanswered.

"I’m surprised that the Europeans have joined the accusations against Russia over violating the treaty," Baklitsky said. "They have avoided open accusations against Russia and preferred to say that they believe the US claims and called on the sides to come to terms."


RBC: US Congress delays consideration of Russia sanctions bills

Both houses of Congress are unlikely to discuss the new sanctions against Russia before the mid-term elections scheduled for November 6, two sources in the House of Representatives told RBC.

The new round of restrictions may be passed either late this year or in early 2019, said Steven Pifer, an expert at the Washington-based Brookings Institution. US legislators might adopt the sanctions bills between November and mid-December, but may also postpone it until 2019, Director of the Institute for US and Canadian Studies at the Russian Academy of Sciences Valery Garbuzov said.

Investors negatively viewed the delay of the new sanctions bill, said Barclays economist Liza Ermolenko. "This added uncertainty to the future of Russian assets. Whereas earlier investors waited only for November, now it is not quite clear what to expect," she noted.

The final version of the sanctions package may be a hybrid of the Defending Elections from Threats by Establishing Redlines (DETER) Act and the Defending American Security from Kremlin Aggression Act (DASKAA), expert at the US-based Atlantic Council think tank Anders Aslund said. There are three types of sanctions measures, which the US is ready to slap on Russia, Aslund noted. These are restrictions against Russia’s sovereign debt, or against three or five state banks, and adding more Putin’s allies to its blacklist.

A lot will depend on the mid-term elections, in particular, whether the US detects attempts by Moscow to influence the polls, head of the French branch of British consulting company Aperio Intelligence George Voloshin said. Speaking on possible sanctions against the Nord Stream 2 gas pipeline, he noted that the Trump administration has no consensus on this issue and no new restrictions are expected in the near future.

According to Pifer, the sanctions initiatives have a chance of securing broad support among legislators in Washington, like with the Countering America's Adversaries Through Sanctions Act (CAATSA). Under this scenario, Donald Trump will have to adopt the bill despite his skepticism about the measures, the expert said.


Kommersant: Foreign companies may soon get access to Russia’s SWIFT alternative

A bill allowing foreign legal entities to join Russia’s alternative to SWIFT - the system for transfer of financial messages (SPFS) - has been submitted to the lower house of parliament, the State Duma, Kommersant writes. The bill offers a direct exchange of messages for both Russian and foreign companies. The goal is to safeguard accounts between sanctions-hit companies and foreign contractors.

Negotiations are currently underway between the Eurasian Economic Union and BRICS, and lawmakers believe that it’s highly likely that agreements may be reached on providing access to the Russian system for China, Iran and Turkey.

According to the Bank of Russia, the SPFS system currently has 400 participants, including banks, the Federal Treasury, legal entities, and corporate clients. "Inside the country, our system fully solves the problem of sending financial messages," the regulator said. "Speaking about transborder operations, their implementation would be possible only provided that an agreement between several countries was reached. Such discussions are being held between the EAEU and BRICS."

"Although they plan to have accounts with Russia in national currencies, they do not rule out that the accounts may be carried out through Russia’s alternative to SWIFT," said head of the State Duma’s Committee for Financial Markets Anatoly Aksakov.

The SPFS was launched in December 2014 to safeguard Russian banks from the risk of being cut off from SWIFT, an international banking system for transferring information to carry out payments, after the first US and EU sanctions were introduced against Russia.

Soon, a European alternative to SWIFT may be also introduced, the paper says. In August, German Foreign Minister Heiko Maas said that the EU needed to create an independent counterpart to SWIFT to protect European companies from US sanctions.


Nezavisimaya Gazeta: Will Russia create a reliable air defense system in Syria?

Russia’s Defense Ministry has deployed an S-300 missile defense system to Syria. Defense chief Sergey Shoigu told President Putin and the Russian Security Council’s members that 49 elements of the system have been sent to Syria. According to the minister, it will take nearly three months to train the Syrian forces on how to operate the system. By October 20, work on installing a single control system will be completed, he said.

Nezavisimaya Gazeta writes that the commitments undertaken by the Russian military are challenging since the timeframe for fine-tuning the control system is very short. Shoigu also noted that only four launchers have been deployed, and this means that now only one S-300 battery has been supplied to Damascus.

Earlier media reports said that two regimental sets of S-300 missile system would be sent to Syria. Specialists told the paper that between six and eight divisions of this system along with other air defense means are needed to ensure the protection of Syria’s entire territory.

If Russia manages to create and fine-tune the modern air defense system in Syria, then Israeli F-16 fighter jets will face hard times since they won’t be able to use most means of air-to-surface missiles owned by the Israel Defense Forces. However, they have some types of ammunition, which may pose a serious threat, according to experts.

While politicians in Israel and the United States have voiced concerns over Moscow’s creation of the new air defense system in Syria, these countries’ militaries do not see any problems, the paper writes. First, dialogue between them and Russia’s General Staff will make it possible to avoid any direct confrontation. Second, the Pentagon and the IDF may create a grouping of forces and means for an air attack, which would destroy the Syrian air defense system, despite its cooperation with Russia’s Aerospace Forces. Since the battleground is far away, Moscow won’t be able to compensate for the losses within a short period.


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