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Press review: Can Turkey’s opened skies harm Russian tourism and Covid cuts Russia’s goals

Top stories in the Russian press on Tuesday, July 28

Izvestia: Coronavirus tests Russia’s National Projects

The coronavirus pandemic could change Russia’s strategy for its national goals. The Expert RA rating agency in their report dubbed "National Projects: Expectations, Results, and Prospects" forecast a reduction in funding for these projects in 2020 by 150 bln rubles ($2.1 bln), and next year financing is anticipated to diminish by 100 bln rubles ($1.3 bln), Izvestia wrote. According to the authors of the report, future investments will provide the country's economy with moderate support: in 2020, the drop in GDP will be 3.8% instead of 4.5%, and next year, the implementation of the strategic goals will add 0.6%. This figure was previously planned to be almost three times higher, the newspaper wrote.

According to Expert RA’s analysts, the implementation of the National Projects was slowed both because the projects were not ready and because of the changes in priorities in the 2020 presidential message and in the new government, followed immediately by the pandemic. Its consequences turned out to be multi-layered. The budget went from a surplus to a deficit, and enormous spending was required, Izvestia wrote.

Some National Projects were bound for revision even before the pandemic, and the crisis only accelerated it, like with the Digital Economy project, associate professor at the Plekhanov Russian University of Economics Olga Lebedinskaya told the newspaper. "In 2019, the budget for the program was cut by more than 50% - from 3.5 bln to 1.6 bln rubles," she recalled.

Head of the Department of Corporate Finance and Corporate Governance at the Moscow Financial University Konstantin Ordov urges everyone to look closer at the role of National Projects in Russians’ current life. "The expected contribution to GDP from National Projects is not related to their efficiency or return on investment, but only arithmetically reflects the amount of funds spent that were previously collected by the state and withdrawn from economic circulation," he explained.

According to the expert, the National Projects should be adapted to the development strategy of small and medium-sized businesses, as well as the introduction of universal basic income for people who have lost earnings against the background of state support for automation.


Kommersant: EU carbon regulation might cost Russia roughly $4 bln annually

Analysts continue to assess the costs for the Russian economy if the EU introduces a border carbon tax on carbon-intensive imports. According to BCG consultants, monetary losses may be moderate, however, the outlook is pessimistic in terms of the time lost by the authorities and business to prepare for the innovations. Russia, which has ignored the EU's announcement of tighter carbon regulations for more than a decade, is now giving in to China, which has been preparing for a tax in partnership with the European Union, Kommersant wrote.

According to BCG consultants, Russian exporters will suffer the most significant losses from the onset of these tighter regulations. Russia ranks second after China in carbon-intensive supplies to the EU. BCG analysts expect that the European Union will impose a tax of $30 per tonne at the end of 2021-early 2022. This will affect not only carbon-intensive supplies but indirectly all sectors of the Russian economy.

BCG calculated the direct losses of Russian exporters at $3-4.8 bln per year. The oil and gas sector might annually lose $1.4-2.5 bln, the ferrous metals and mining sector could shed $0.6-0.8 bln, the non-ferrous metals sector could see a hit of $0.3-0.4 bln, and the rest might lose $0.8-1.1 bln.

According to Kommersant, the situation for Russian exporters is complicated by the fact that with the advent of the tax, they will begin to lose not only money but also markets.

The losses to the Russian economy can exceed China’s due to the lack of efforts by the authorities and businesses to create an internal carbon market and mechanisms to comply with international requirements, the newspaper wrote. Although the EU has been warning about the potential introduction of such a tax for more than a decade, Russian carbon regulation continues to be under discussion.


Vedomosti: Lukoil intends to pour millions of dollars into Senegalese project

Vagit Alekperov's Lukoil will buy a 40% stake in the RSSD (Rufisque, Sangomar and Sangomar Deep) hydrocarbon project in Senegal for $300 mln. The agreement with Cairn Energy Plc also stipulates that after the start of production, it can be paid a bonus of $100 mln. Lukoil’s press service told Vedomosti that the bonus payment and its value depend on the start date of production and the average oil price during the first six months of output. The move is consistent with the company’s recent Africa venture.

The recoverable hydrocarbon reserves of the Sangomar field are about 500 mln boe (barrels of oil equivalent). The launch is set for 2023, the planned production volume will be 5 mln tonnes of oil per year, Lukoil said. The project is being implemented under a production sharing agreement (PSA). Woodside, the project’s operator, owns 35% of the shares, FAR has a 15% stake, and the Senegalese state-owned company Petrosen owns 10%.

The PSA guarantees a return on investment, but limits the amount of profitability, Raiffeisenbank’s Andrey Polishchuk told Vedomosti. According to him, the average profitability of such projects in Russia, which is considered good, is about 16% per year in foreign currency. Head of the analytical department at AMarkets Artem Deev recalled that in recent years, Lukoil has been intensively buying up promising projects on the African continent and in the Gulf of Mexico. "On the one hand, the company has a large free cash flow and can afford it. On the other hand, in Russia, Lukoil no longer has the opportunity to expand its resource base: there are almost no large unallocated deposits left, and it is difficult to access the existing ones due to competition from state-owned companies," the expert told Vedomosti.

Vasily Karpunin, an expert at BCS Broker, said that the project that Lukoil is investing in was relatively small in comparison with the company's financial indicators (EBITDA for 2019 is almost $20 bln), so it will not affect capitalization.

Meanwhile, the company’s main owner and CEO Vagit Alekperov noted that the purchase of a stake in a project with a proven resource base at an early stage is fully consistent with the company’s strategy and enables it to strengthen Lukoil’s presence in West Africa.


Izvestia: Flight resumption to Turkey might undermine Russia’s domestic tourism sector

After the Russian government announced that flights to Turkey would be resumed, Antalya became the most popular destination among Russians. At the same time, ticket prices to Antalya from Moscow shot up 42%, and to Istanbul they were 30% higher than last year, the ticket aggregator told Izvestia. Nonetheless, interest in Russian domestic destinations in August will remain high. The Russian Association of Tour Operators (ATOR) assured the newspaper that the resumption of flights to Turkey would not hurt domestic tourism, since bookings for August have already been closed. The Turkish parliament told Izvestia that the flow of passengers will not be one-way - businessmen will go from Turkey to Russia.

According to, ticket prices to popular Russian resorts are lower than last year. Nevertheless, the service recorded a drop in demand for flights to domestic destinations. After the announcement of the resumption of air travel with Turkey, the demand for tickets to Simferopol, Sochi and Kaliningrad decreased by 10%, the company noted.

Meanwhile, ATOR does not believe that opening up overseas flights will harm domestic tourism. Russians had planned their vacations in advance, so there is no need to expect that August bookings will be shifted in favor of Turkey, Vice President of the association Dmitry Gorin explained to Izvestia. "Opening new destinations will not affect the flow of tourists to Crimea or to the Krasnodar Region, where 17 mln Russians went on vacation last year, while only 7 mln headed to Turkey. Tourists picked Russia. And this trend has been observed for the past three years, that is, the coronavirus has nothing to do with it," the expert emphasized.

Gorin also added that having a foreign alternative will have a positive impact on the Russian travel industry, because this will stimulate competition.

Reviving flights between Russia and Turkey will help strengthen economic ties, in particular, the inflow of investments, Turkish lawmaker Ozturk Yilmaz told Izvestia. According to him, not only are Russians interested in Turkish resorts, but Turkish businessmen will also visit Russia.

The volume of mutual investments between Russia and Turkey exceeds $20 mln. Last year, Ankara became Russia’s fifth largest foreign trade partner.


RBC: China overtakes Ukraine as largest Russian meat buyer

The entry of Russian meat to the Chinese market has changed the general structure of buyers for this product. China has become the largest export market for domestic poultry farmers, ahead of the former leader, Ukraine and the Donbass republics. In the first half of 2020, Russia more than doubled its meat exports, and the largest number of deliveries went to China, the Center for Industry Expertise of the Russian Agricultural Bank told RBC.

Mainland China’s share during this period accounted for about 45% of meat exported from Russia, yet with Hong Kong included that totaled 54%. Earlier, Ukraine was the top buyer of Russian meat, but in the first half of 2020 its share decreased from 28% to 16%, while rising in monetary terms from $42 mln to $53 mln.

From January to June 2020, Ukraine imported 40,900 tonnes of meat from Russia, while deliveries to China amounted to 79,900 tonnes, which is 11 times more than the Asian country’s purchases last year (7,000 tonnes), the newspaper wrote with reference to the federal center, Agroexport. In total, in the first six months of 2020, Russian enterprises exported meat and meat by-products to the tune of $336 mln, yet for the same period last year, supplies amounted to $149 mln.

On November 7, 2018, Moscow and Beijing signed protocols on veterinary and sanitary requirements for mutual supplies of frozen poultry meat and dairy products. Thanks to the documents, Russian poultry farmers, producers of cow, goat and sheep milk, as well as products made from it received export opportunities to China.


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