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Press review: Ruble hammered by global economic upheaval and will COVID-19 cut off EAEU

Top stories in the Russian press on Thursday, March 19

Nezavisimaya Gazeta: Russia’s budget suffers major blow as dollar reaches 80 rubles

The ruble continues to fall against major currencies, and it seems that this plunge will only continue. Experts interviewed by Nezavisimaya Gazeta are awaiting the Bank of Russia’s upcoming meeting on the key rate, emphasizing that so far the regulator has taken few measures to stabilize the financial system. At the same time, the Russian authorities seem to be just now beginning to realize the real scale of the disaster, the newspaper wrote.

A number of experts do not rule out a further decline. Thus, Goldman Sachs expects a drop in oil prices in Q2 to $20 per barrel and a fall in global demand to a record 1.1 mln barrels per day.

Analysts expect to see a more serious reaction from the Bank of Russia to the developments. "A nervous atmosphere persists, and players are waiting for additional intervention by the Bank of Russia and the Finance Ministry. The regulator should show that it is really concerned about financial stability. If this trend continues, it will lead to a panic and many players will exit the market," Head of Operations at Metallinvestbank Sergey Romanchuk told the newspaper.

"The current devaluation of the ruble will hit the wallets of Russians, who are already insolvent, the hardest. What is happening with the exchange rate and the economy can plunge the average Russian family into a full-fledged crisis, and this is not a joke," senior analyst at Alpari Analytical Center Anna Bodrova said.

While analysts are wondering about the poor response of the Bank of Russia to the plummeting ruble, the Russian government seems to be only beginning to realize the scale of what is happening in the Russian economy and is counting up the losses.

Thus, Finance Minister Anton Siluanov admitted that "entire sectors of the economy are shrinking" due to the virus. He also does not rule out that the current global situation would lead to the rejection of macroeconomic forecasts previously voiced in the government, first of all, the federal budget.

The Russian economy may well spiral downwards in the near future, experts told Nezavisimaya Gazeta. "The state has taken certain steps to brace for negative events in the global economy (creating reserves, filling the National Wealth Fund). But this is not enough to avoid a recession, which may come soon. Over the course of this year, Russia, along with the rest of the world, will enter a global crisis that could last quite a while," Head of the AMarkets analytical department Artem Deyev told the newspaper.


Nezavisimaya Gazeta: Isolation threatens to push back EAEU development

COVID-19’s penetration into the Eurasian Economic Union (EAEU) is testing the alliance’s strength. Russia closed its borders, Kazakhstan and Armenia imposed a state of emergency, and Belarus and Kyrgyzstan are in isolation. Communication between the countries that are members of the EAEU has been virtually discontinued. According to Nezavisimaya Gazeta, the cut in ties is a major blow to the integration processes and is pushing the EAEU back.

"The situation negatively affects the EAEU. First of all, national egoism is surfacing. In times of economic turmoil, states act with less regard for others for their own survival. This harms any union, and the EAEU is no exception," said Alexander Vorobyov, research associate at the Institute of Oriental Studies of the Russian Academy of Sciences.

Advisor to the Prime Minister of Kyrgyzstan Kubatbek Rakhimov agrees that the situation is alarming. "As the experience of the EU has shown, all integration associations are at risk of relative disintegration in a few days, when borders are closed, and the movement of people and goods is limited. At least three sectors are automatically affected: transportation, tourism, and the labor market. The restrictions that Moscow and Nur-Sultan have now imposed will hit workers from Kyrgyzstan and from neighboring countries like Uzbekistan and Tajikistan," he told Nezavisimaya Gazeta.

The crisis has two faces — epidemiological and economic — and makes it possible to rethink many approaches to Eurasian integration. According to Rakhimov, it could be possible to more closely coordinate activities at the level of the Eurasian Economic Commission to work out a general mechanism for closer interaction.

The situation is aggravated by falling oil prices and the subsequent devaluation of the Russian ruble, a key currency in the EAEU. The process of devaluing national currencies has begun in other EAEU countries, which will affect the dollar’s performance. Trade volumes between EAEU countries will fall in dollar terms, although in physical terms they may not change much.

Expert on Central Asia and the Middle East Alexander Knyazev told the newspaper that the breakdown in ties is a major blow to the globalization processes, throwing it far back. "However, the EAEU is hardly worth considering in a special context. The disruption is happening in the EU and in all integration associations," the expert said.


Vedomosti: Experts warn oil price war will have no winners

The price of a barrel of WTI US oil with April deliveries fell by 29.5% to $20.81 per barrel, and Brent oil with May delivery by 15.66% to $24.84 per barrel. Raw materials began falling in January, when the outbreak of the coronavirus was followed by a decrease in demand for fuel. However, a greater collapse occurred on March 9, after the OPEC+ deal failed. Lower global prices could lead to a sharp drop in shale oil production in the United States first, experts told Vedomosti, but in the long run there will be no winners in the oil price war.

On March 10, following the drop in oil prices, shares of US shale companies collapsed, chief investment strategist at BCS Broker Maxim Shein told the newspaper. Thus, EOG shares fell by 35% and Continental Resources shed 40%. If the parties fail to agree, and Saudi Arabia continues the price war, then shale production in the United States might collapse, Shein warned. US shale oil producers have already announced cost reductions and cut output.

A group of US senators has already called on Saudi Arabia not to increase production and not to lower prices for its oil. They noted that Riyadh’s actions took place right when the coronavirus global crisis was in full swing, and hinted that a collapse in the oil market could undermine the long-term partnership between the two countries.

"There will be no winners in the price war", Igor Yushkov, senior analyst at the National Energy Security Fund told Kommersant. He recalled that cheap oil is forcing Russia to use the National Wealth Fund to ensure budget spending. But the agreements by exporting countries are not the only factor affecting prices. As a result of the outbreak of the coronavirus, the Chinese economy has slowed down, and European countries are closing their borders leading to a decrease in demand for fuel. Once the demand recovers, exporters can once again sit at the negotiating table, Yushkov noted.


Izvestia: Beijing expels US journalists as spat with Washington escalates

The US-China conflict has new "casualties" and this time it is reporters. This week, Beijing announced it would yank the accreditation of 13 US journalists working in China. Officially, this was a response to the US, which also dramatically cut back the number of Chinese media personnel eligible to operate in the United States. According to Izvestia, the information war between the two geopolitical rivals has been brewing for a long time, but with the coronavirus pandemic it has come to a boiling point.

The current expulsion of US reporters was largely predictable, Izvestia wrote. In February, the US ordered a major reduction of employees from several Chinese media outlets from 160 to 100 people.

"The fact that the Chinese expel almost full offices reflects the depth of the tensions. I know many of the journalists personally, and they are not anti-Chinese, many specialized in writing articles from areas not touching on ideology, but related to the economy," one of the journalists working in China for many years told Izvestia.

This time, both sides went too far, Izvestia wrote. "The US media and the government, against the backdrop of the coronavirus epidemic, crossed some red lines, which greatly affected China’s mood," Vasily Kashin, senior researcher at the Institute of the Far East of the Russian Academy of Sciences, told Izvestia.

"China understood that it was important for any major media to be present in the country, and they were playing a difficult game. They made it clear that it was impossible to cross a certain line. For example, they could not update the journalist visa for a long time, issuing it at the very last moment, while visa denials were rare and were considered an extreme measure," Izvestia’s source added.

Speeches by officials on the epidemic only exacerbated Beijing’s resentment, the newspaper wrote, adding that US President Donald Trump branding the pandemic a "Chinese virus" was most likely the last straw.


Izvestia: Eurovision scrapped amid coronavirus fears

For the first time in its 64-year history, the Eurovision Song Contest has been canceled. While such decision was expected, the contestants learned about this from the news, PR director of Russia’s entry Little Big group Polina Khramova told Izvestia. Meanwhile, former contestants support the decision.

Immediately after the news, Little Big was in a light shock. The artists did not expect such a sudden cancellation. "It’s still difficult for us to comment on this," Khramova told Izvestia. "Like you, we have learned about this from the news. No one had told us about this in advance," she added.

Past winners and participants of the Eurovision Song Contest, interviewed by Izvestia, agree that although the competition is broadcasted, the live audience matters. "If someone imagined Eurovision online, then this is not Eurovision," Ksenia Rubtsova, producer of Russia’s earlier contestants, the Buranovskiye Babushki, told Izvestia. "The feature of this competition is in the atmosphere and the spirit of competition. And, frankly, [holding] Eurovision in such an alarming atmosphere would have looked like a feast during the plague," she added.

Meanwhile, the European Broadcasting Union (EBU), the contest’s organizers, were confident that the competition will be held safely in 2021 in Rotterdam.



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