Izvestia: US manufacturing pullout from China to hinder global economic growth

The steadily increasing trade war between the United States and China will retard the global economic recovery after the COVID-19 pandemic, analysts interviewed by Izvestia predicted.

According to a survey by Bank of America, relations between the two countries will be at loggerheads until the US presidential election in November. Senators have a bill in the making to slap sanctions on China. If adopted, US companies will step up the process of moving production from China to other countries, experts said. Russia will not be able to benefit from it either, due to the ongoing sanctions set in place by the US and the EU, Izvestia wrote.

The majority of experts interviewed by the paper believe that the US-China spat will intensify closer to the November election, but others said that an escalation could be expected this month.

For the United States itself, moving production from China back home would be economically beneficial, Ekaterina Novikova from REU told Izvestia. Because of the pandemic, the country faced a wave of enterprise shutdowns on its soil, which led to a record increase in the number of unemployed - up to 22 mln people, she recalled. However, most likely, production will be relocated to other countries in Southeast Asia and Latin America, the commentators noted.

Leaving the Chinese market can be extremely expensive for US companies, because they will have to spend time on establishing logistics links and distribution channels, Alexey Antonov from Alor Broker told the newspaper. Transferring plants can affect many sectors of the economy, most significantly, the field of IT technologies, said Alexandra Falkova, a portfolio manager at Sberbank Asset Management.

Russia is more likely to lose from the trade war. An intensified confrontation between the two largest economies would weaken the fragile recovery after the crisis, chief economist at Sovcombank Kirill Sokolov warned Izvestia. The aggravation of the geopolitical confrontation between America and China would negatively affect the price of oil, the Russian stock market, and the ruble exchange rate, he believes.

According to experts, moving production from China to Russia is unlikely due to the sanctions imposed on Russia by the US and the European Union.

 

Nezavisimaya Gazeta: Palestinians turn to Russia over fears of Israeli annexation

Palestinian President Mahmoud Abbas has announced in response to Israel’s Jordan Valley annexation bid that it would end all accords signed with Israel and the US. According to experts interviewed by Nezavisimaya Gazeta, it is unlikely that agreements, on the basis of which the Palestinian National Authority has existed for more than a quarter of a century, will indeed be broken. Meanwhile, Abbas turned to Russian President Vladimir Putin requesting to hold a conference on the issue. Russia once again might become a mediator in the peace process, the newspaper wrote.

Abbas reaffirmed the Palestinian commitment to the peace process with Israel via the Middle East Quartet, that is, with the mediation of Russia, the European Union, the United States and the United Nations. Moreover, according to the Palestinian Embassy in Russia, Abbas turned to Putin with a proposal to convene an international conference in Moscow to hammer out a new mechanism for resolving the Israeli-Palestinian conflict. "Thus, Russia was offered the role of the main mediator in the peace process," Nezavisimaya Gazeta wrote.

Alexander Shumilin, who heads the Europe-Middle East Center for at RAS Europe Institute told the newspaper, he believes that Abbas’s decision is proactive. "With his dramatic step, which, of course, complicates the situation, he wants to restrain Netanyahu until the annexation already happens. What effect this will have is not clear. I believe that Abbas will be able to somewhat slow down the annexation," the expert forecasted.

According to Shumilin, the fact that the Trump administration has recently begun to act much more cautiously in the Middle East plays in favor of Abbas. At the same time, the expert noted that Netanyahu is unlikely to abandon his plans, unless he faces overwhelming pressure. "A lot depends on the reaction of Arab countries, primarily Saudi Arabia. Trump is listening to [kingdom’s] opinion," Shumilin said. Meanwhile, although all Arab countries condemned Netanyahu’s plans, no one suggested any specific measures.

 

Izvestia: Russia’s air travel slowly coming back to life

After the end of the non-working holidays, a budding revival in demand for air travel was noticed in Russia in May, compared to April - it quintupled - ticket services told Izvestia. Airlines have also begun to prepare for the summer by increasing the number of direct flights from the regions to Russian resort cities in the south.

The revival of air traffic will depend on regional policies to lift the coronavirus restrictions and conditions for transporting passengers, experts told the newspaper.

On May 12, a phased easing of the COVID-19-related quarantine began in Russia. In particular, the regions were allowed to gradually loosen up their lockdowns. Amid a more favorable situation in the regions, airlines began to expand their routes.

From May 1 to May 18, airline ticket sales quintupled compared to April, the Kupibilet service told Izvestia. Another company, Tutu.ru also confirmed a surge in airline ticket sales from last week to Izvestia. According to a service representative, demand began to grow after the end of the May holidays.

A source in a major airline told Izvestia that people, fearing difficulties with cancelled flights, began to purchase more tickets through carriers' websites, bypassing intermediaries. Therefore, their figure can even be somewhat underestimated.

S7 Airlines intends to restore almost all domestic routes, the company told Izvestia. Last June, its route network totaled about 120 destinations in Russia. Ural Airlines noted that they did not expect a quick recovery in demand, as Russians fear travel due to the pandemic. However, the carrier also wants to expand its flight program from the regions in the summer, the company told the newspaper.

"Given the restrictions, airlines are trying to somehow stimulate demand by selling tickets at the lowest possible prices. The main thing now is to start with the most popular destinations," PR Director of Nordwind Airlines Alexander Sukhorukov told Izvestia.

Despite some recovery in the market, summer traffic will remain much lower than last year, Head of Infomost consulting agency Boris Rybak told Izvestia. This is confirmed by the latest data. A decrease in sales in May compared to the same period in 2019 at Kupibilet reached 64%, and at Biletix - by 75%.

 

Kommersant: Russia’s plans to extend Northern Sea Route may prove problematic

The formal territory of the Northern Sea Route can be almost doubled to include the water zone from Murmansk to Sakhalin, such a decision here is being worked out along the lines of the state commission on the Arctic, Kommersant wrote. The Ministry for the Development of the Russian Far East came up with the idea. If the decision is made, it will make it possible to formally execute the order of the Russian head of state to increase freight traffic along the Northern Sea Route to 20 mln tonnes by 2024. However, this could come to loggerheads with international law and other problems may arise, the newspaper cautioned.

The current water zone of the shipping route is limited by the borders designed to sustain the peculiarities of international law related to the freezing of seas. At the end of 2018, Rosatom became the infrastructure operator of the Northern Sea Route, and the Russian Ministry of Transport was responsible for the regulation of the industry and issuing permits for sailing in the water area.

A source told Kommersant it is "quite difficult" to prove the presence of ice in the new water areas amid global warming. In addition, the so-called Polar Code has been functioning in the Arctic since 2017, and the Route’s new zone extends far beyond its limits, which "is unlikely to be adequately perceived by the international maritime community," the source said.

Another source told the newspaper that Rosatom is currently responsible for ports within the Northern Sea Route and the question arises as to whether new terminals, and port charges will be transferred to it. This will almost certainly create a new conflict between the state corporation and the Ministry of Transport, the source believes.

 

Kommersant: Russia’s car sales plummet amid pandemic

The Russian car industry is experiencing the most serious crisis in its recent history amid the coronavirus pandemic, even far deeper than the 2008-2009 meltdown, Kommersant wrote. The automotive market, which was never able to fully recover, according to analysts, will reach the level of 2019 only by 2023. Although Russia’s government is trying to help restore demand, support is relatively small and unevenly distributed even among localized players. As a result, some foreign concerns may be forced to curtail production in Russia.

The Association of European Businesses, summing up the results of automobile sales in Russia in the first full month of the lockdown, dubbed it “Black April”. For the first time in the history of the Russian automobile industry, sales of cars and light commercial vehicles fell by 72.4%.

The current market situation is not similar to the earlier problems in the Russian car market, Kia told Kommersant. The market will inevitably shrink against the redistribution of consumer priorities due to falling incomes, the concern noted. Meanwhile, Nissan told the newspaper that limitations due to the epidemic are the main difficulty now. Avtovaz believes that this year the market "will show significant negative dynamics compared to 2019, with very low sales in April-May and the possible start of a slight recovery in June".

Given this background, some players might leave the Russian market, the newspaper wrote. Thus, Nissan is potentially under threat, which is also represented in Russia by the budget brand Datsun. Nissan’s sales last year fell by 20% to almost 70,000 cars, according to the newspaper. Meanwhile, the Russian Ministry of Industry and Trade told Kommersant that so far none of the carmakers have officially announced their departure from the country.

 

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