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Press review: Putin’s pandemic economic rescue package and China’s possible dollar dump

Top stories in the Russian press on Tuesday, May 12

Vedomosti: Russia’s third anti-crisis package to cost over $10 bln

The new measures to support the population and business amid the pandemic, announced by President Vladimir Putin on May 11, will cost the state about 800 bln rubles ($10.87 bln), two federal officials told Vedomosti. Among the most expensive measures are going to be the tax write-offs and new salary loans. Taxes of small and medium-sized businesses, individual entrepreneurs from affected sectors and socially oriented non-governmental organizations will be completely written off (except the VAT), as well as insurance payments for the second quarter. The cost of the program to write off loans will exceed 300 bln rubles ($4.07 bln), two officials told the newspaper.

Individual entrepreneurs and self-employed citizens will receive additional support. For the former, unemployment benefits will be increased, becoming the same as for other people who have lost their jobs — 12,130 rubles ($164.87). Self-employed individuals will be given what’s called a "tax capital" to pay taxes in 2020. This measure will cost the budget about 15 bln rubles ($203.81 mln), a source told Vedomosti.

Families with children will also receive new help. For non-working parents, the minimum childcare allowance will be doubled to 6,751 rubles ($91.75). Also, from June 1, the state will begin to dole out 10,000 rubles ($135.92) for each child aged 3-15 years. All families will be able to obtain these benefits, according to Putin. Based on Rosstat’s data, the cost of this measure will exceed 200 bln rubles ($2.72 bln).

According to an official, a new program to support the economy could add up to 1.5% to the GDP. The budget has the money for this anti-crisis package. Finance Minister Anton Siluanov noted that proceeds from the acquisition of Sberbank from the Bank of Russia would be used to finance the support of the economy to the tune of 1.07 trillion rubles ($14.54 bln) this year.

Putin also instructed the government to draw up a national plan for the long-term development of the economy, and the restoration of employment and incomes. The emphasis will be on systemic measures, including those related to the business climate, a federal official told Vedomosti.


Izvestia: Georgian politician blasts Saakashvili’s re-entry into Ukrainian politics

The appointment of Mikhail Saakashvili as head of the executive committee of Ukraine’s National Reform Council will spark a crisis in relations between Kiev and Tbilisi and will negatively affect Russian-Ukrainian dialogue, former Chairman of the Georgian parliament, and leader of the opposition party "Democratic Movement - United Georgia" Nino Burjanadze said in an interview with Izvestia. In her opinion, Ukrainian President Vladimir Zelensky, like his predecessor Pyotr Poroshenko, will regret his decision to give the former Georgian leader this position.

"Saakashvili’s appointment will not bring anything good to Russian-Ukrainian relations. After all, his main trump card is an anti-Russian card. And, of course, he will use his position in Ukraine to gain extra points in the eyes of the West, criticizing Russian President Vladimir Putin and Russia," she predicted.

According to Burjanadze, "One way or another, what happened in Ukraine with Saakashvili says a lot. The country, which we consider as a strategic partner, does not respect the government of Georgia at all, and does not respect the interests of our state. A criminal case has been officially filed against Saakashvili, and the Georgian justice system is looking for him. And when a strategic partner appoints him to a high position, this means that Ukraine does not care about the decision of the Georgian government or justice."

Speaking about Russian-Georgian relations, the politician noted that the resumption of air connection would be gladly received. "Believe me, guests from Russia are always welcome. Despite the complicated relations between our states, the political anti-Russian sentiment did not morph into Russophobia. And this is very important. Among people, at the interpersonal level, there is no such sentiment," she told Izvestia.


Nezavisimaya Gazeta: Uzbekistan chooses EAEU integration

Uzbekistan has become an observer in the Eurasian Economic Union (EAEU). On May 11, the Senate of the Oliy Majlis (the upper house of Uzbekistan’s parliament) by a majority vote approved the cooperation of his country with the regional integration association, Nezavisimaya Gazeta wrote.

Participating in the union might allow Uzbekistan to expand its export markets, foster ties, develop inter-regional cooperation and create favorable conditions for external labor migration.

First Deputy Director of the Institute of Strategic and Interregional Studies Akramjon Nematov told the newspaper that the results of the vote in the lower and upper houses of the Oliy Majlis showed a completely new parliament on the country’s political scene. The decision was made not by a simple approval, as it was before, but by the result of a nationwide discussion.

"Our country is conducting large-scale economic reforms that require attracting investment, technology and know-how, we are looking for new promising markets. In this regard, Uzbekistan is increasingly integrating into the international economic space, pursuing an open and pragmatic foreign policy. The chosen course dictates the need to build up effective interaction with international and regional associations, including the EAEU. This is due, on the one hand, to the fact that our strategic partners and allies, such as Russia, Kazakhstan and Kyrgyzstan, participate in this association, and, on the other hand, that an opportunity has opened up to boost the competitiveness of our products in the wider economic realm," the expert told Nezavisimaya Gazeta.

In recent years, Uzbekistan has been expanding bilateral cooperation with EAEU countries. For example, in 2016-2019, Uzbekistan’s total commodity turnover with them grew by 60% to $10 bln. Today, the Central Asian country’s share of foreign trade with the EAEU has hit 30%, and the volume of agricultural exports exceeds 75%.


Nezavisimaya Gazeta: China might dump US debt securities, likely triggering dollar collapse

China may reduce investment in US public debt in the coming months. This could be the way Beijing responds to surging trade tensions and a war of words between the two largest economies over the origin the coronavirus outbreak, Nezavisimaya Gazeta wrote. If China immediately puts $1 trillion on the market, which is stored in US government bonds, this could trigger the collapse of the dollar and financial markets, which could also harm China, experts warn.

The likelihood of China ditching US debt cannot be ruled out, according to experts interviewed by the newspaper. "There is no real problem in the fact that China could reduce purchases of US government debt. No one in the world is now confident in the future, and the fact that Beijing was reviewing the structure of its investments seems reasonable and logical. It needs the money itself," said Anna Bodrova, a senior analyst at Alpari Analytical Center.

A massive sell-off of US debt by China could happen if the Chinese currency comes under excessive pressure and the authorities have to use all measures to protect it, Anton Pokatovich, chief analyst at BCS Premier, believes. "A large outflow of capital from Chinese assets can lead to this state of affairs, for example, if the United States embarks on a new round of increasing trade duties and imposing tough sanctions on China," he pointed out.

At the same time, selling US debt can also lead to significant capital outflows from risky assets, including Chinese ones, experts noted. "In addition, if such a sale begins, then US securities will begin to lose value," Pokatovich forecasted.

Director of BCS Broker sales office Vyacheslav Abramov noted that this sell-off could cause unpleasant effects on financial markets, and collapse the US dollar. "But it is not beneficial for anyone, especially in the era of trade wars. If national currencies rise against the dollar, this will greatly affect the export revenues of all countries. Russia included, which is strongly tied to exports of oil, gas and other minerals, which will lead to an even greater drop in revenue amid low oil prices and a budget deficit," Abramov said.


Vedomosti: Half of restaurants in Russia may not survive lockdown

On May 12, Russia is set to embark on a phased exit from its quarantine, Russian President Vladimir Putin announced earlier. The food service industry, one of the sectors that suffered the most from the lockdown, will be the last to get back to work, Vedomosti wrote. According to the plan of the Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing, there will be three stages of exiting the quarantine. The food service industry will work only in the third. In Moscow, the lockdown is still in effect until May 31.

By mid-summer, about 40-50% of all catering establishments may not open because they have not received adequate assistance from the state, President of the Federation of Restaurateurs and Hoteliers Igor Bukharov told Vedomosti. Many people will emerge from the quarantine being afraid of getting infected, so restaurateurs will lose another two or three months, Executive Director of Restcon Andrey Petrakov added.

At present, 77% of food service companies are not operating, 23% continue to exist in delivery mode, more than 50% of staff have been reduced, he noted. Recommendations on the phased opening of establishments will bury the business completely, Bukharov fears.

Restaurants in the mid-price segment suffered the most, Petrakov noted. Most of their customers were those people who were now left without work and savings. Some of them switched to fast food, some cook at home, he said.

Gourmet cuisine is not oriented for delivery, in fact, restaurateurs themselves said that a month ago. They did not close, but decided to adapt to the situation — their consumers even during the crisis did not change their habits, Petrakov explains.

Only fast food has good chances to survive. The enterprises focused on delivery, Petrakov stated. Fast food accounts for about 45-50% of the total delivery, according to an employee of one of the delivery aggregators. The average bill there is small, but people order often, Petrakov said. McDonald’s, Burger King, and KFC have closed all establishments in shopping centers and are actively working on delivery and takeout. According to a McDonald’s spokesperson, approximately 70% of establishments are open for takeout orders, Burger King has 60%. Since the start of the self-isolation regime, McDonald’s delivery growth has already reached 300%, the representative added. Burger King has the same increase in orders, the company’s spokesman said, with the average check in recent weeks having grown by 20%.


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