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Press review: Belarus sanctions may hit Moscow and Europe chooses LNG over Russian gas

Top stories in the Russian press on Friday, August 14


Nezavisimaya Gazeta: Western sanctions against Belarus might hit Russia

Protests in Belarus will result in losses for Russia if Moscow officially supports Minsk and shares the burden of Western sanctions with it, or even if Russia completely withdraws from the situation, Nezavisimaya Gazeta writes. In any case, it seems that Moscow will have to forget about the timely repayment of Minsk’s debt to Russia in the amount of almost $8 bln. Experts interviewed by the newspaper believe that Moscow would have to help Minsk with the repayment of other foreign loans for another $10 bln. And if ties are severed, then Russia will lose an ally worth some $9-10 bln of investment per year.

In the first hypothetical scenario, with Moscow officially and openly supporting Minsk, Moscow would directly or indirectly assume the sanctions burden of Minsk, the newspaper writes. "It is obvious that now there are very serious risks of restricting access to borrowed capital. To repay foreign currency debts, Belarus needs to borrow, and if sanctions follow, the list of possible lenders would shrink to the minimum," Chief analyst at Alor Broker Aleksey Antonov told Nezavisimaya Gazeta.

The second scenario is that Moscow completely withdraws from the events in Minsk, allowing the situation take its course. According to the most conservative estimates, Russia's instant losses would exceed $20 bln. "Our countries are carrying out many joint projects in the field of geological exploration and nature management, medicine, space industry, energy, agriculture, industry, science," Associate professor of Plekhanov Russian University of Economics Diana Stepanova said. According to the expert, Belarus may begin to take an increased fee for the transit of Russian goods or refuse to fulfill its financial obligations to Russia. "Russia runs the risk of losing virtually the only remaining land transport artery with Europe," Stepanova added.

Although there are other assessments in the expert community. "Events in Belarus by themselves do not have a serious impact on the Russian economy due to the small size of the Belarusian economy compared to Russia’s," Associate professor at the Russian Academy of National Economy and Civil Service Sergey Khestanov told the newspaper. He noted that "in theory, sanctions pressure on Russia could also increase, but this will mainly depend on the outcome of the political struggle in the United States."


Nezavisimaya Gazeta: A US-Chinese tech war could be a win for Russia

The confrontation between the United States and China is spilling into an increasing number of sectors and industries. From trade contradictions, the conflict has spread to the technology sector and mutual ideological claims. According to Nezavisimaya Gazeta, direct financial constraints should be expected next. Experts told the newspaper that the current confrontation could lead to a full-fledged cold war between the two countries, which will have negative consequences for the entire global economy, including Russia.

It is impossible to predict the further development of relations between the United States and China, professor of the Department of Oriental Studies at MGIMO Alexey Voskresensky told the newspaper. However, now that the two largest economic superpowers are "separating," the confrontation between them could lead to a cold war, he said.

At the same time, Russia can also get its benefits from this "war", experts told the newspaper. "The planned US sanctions for activities with Chinese IT companies, including Huawei and ZTE, can help Russian manufacturers in terms of competition," Director of the information technology department at CROC IT company Maria Ukolova said. Potential difficulties for Chinese manufacturers will help Russian products be more competitive, she added.

Russian scientists and engineers would benefit from the technological war between the United States and China, which gives them the opportunity to stay in the country and work in the field of high technologies, Finam analyst Leonid Delitsyn agrees. "The Russian market is not as big as the American, but it is still attractive. This is a plus for those who use equipment made in China, although from the point of view of developing their own technologies it creates a certain obstacle - why make your own, if there is an inexpensive alternative from large manufacturers," the expert told the newspaper.


Kommersant: Israel signs first diplomatic agreement with an Arabic state in 26 years

Israel and the United Arab Emirates have reached a deal to normalize relations with the agreement that was negotiated with the mediation of the United States. Israel agreed to suspend its plans to annex parts of the occupied West Bank. According to experts interviewed by Kommersant, the deal might be controversial, but it could bring major political gains to all parties - especially to Trump right before the elections.

According to the document, in the coming days the delegations of the two countries will meet in order to sign bilateral agreements in various fields - from security and economy to tourism. It was noted that the three countries - the US included - share similar views on security threats in the region.

The reaction of Israelis and Arabs to the agreement is ambiguous, the newspaper writes. However, "Most Israelis, like many citizens of Arab countries, will perceive this step as progress," expert at the Interdisciplinary Center in Herzliya Ksenia Svetlova told Kommersant. She recalled that Israel and the UAE had been moving towards this agreement for decades, but the regional agenda hindered its conclusion. "Now the Gulf countries see benefits in relations with Israel, including those for the sake of confronting Iran. The Palestinian topic, which was used to unite the Arabs, faded into the background," the expert noted. She added that the agreement with the UAE is a victory for Benjamin Netanyahu, which will be a significant bonus in his struggle for power, even in the event of the next early elections.

President Trump also received an election bonus - peace between Israel and the Palestinians remained almost his only unfulfilled pre-election promise. "Despite the lack of tangible progress on the 'deal of the century', Trump will certainly present his Middle East policy as successful to his supporters and donors," Senior researcher at MGIMO Maxim Suchkov told Kommersant.


Kommersant: European consumers choose LNG over Russian gas

In the first half of the year, Gazprom curbed its gas sales to Europe much faster than most of its competitors. The company reduced its exports to non-CIS countries by 18%, while market demand fell by only 6.5% due to the coronavirus and a warm winter, Kommersant writes. Germany, Gazprom's largest customer, has cut gas purchases that it got almost exclusively from Russia. By contrast, LNG suppliers - Qatar and the United States - have gradually increased their share in the European market. Analysts told the newspaper that in the second half of the year Gazprom would be able to partially restore supplies, but tough competition with LNG would not go away.

In January-June, Gazprom cut gas exports to Europe by 18% to 78.9 billion cubic meters (bcm). In the main sales market - in Western Europe - supplies fell by 17% to 60 bcm. At the same time, exports to Germany, the largest market for Russian gas, fell by 25% to 20.1 blm, to Italy - by 14.6% to 9.9 bcm. The worst dynamics was shown by Turkey - exports to this country, where Gazprom has specially built the direct gas pipeline TurkStream, collapsed by 41% to 4.7 bcm, Kommersant writes.

According to experts, the situation could be more favorable for Gazprom the second half of the year. So far, however, supplies in July-August continue to fall drastically. However, starting from Q4, support for Gazprom's supplies may be provided by prices under old contracts with oil product price adjustment, gas analyst at the Skolkovo Energy Center of the Moscow School of Management Sergey Kapitonov told the newspaper. "A lot will depend on the marketing strategy in Turkey, where the supply situation has become catastrophic," Kapitonov added. In his opinion, although the second half of the year may turn out to be somewhat easier for Gazprom from the point of view of economic factors, competition will not become less fierce - if gas prices in Europe rise, then LNG producers will also increase supplies to Europe.


Izvestia: Russia’s business borrows more amid threat of second COVID wave

In April-June, small and medium-sized businesses in Russia took out loans for 699.5 bln rubles ($9.59 bln), which is 26% more than a year earlier, Izvestia writes citing the data of the United Credit Bureau, SPARK, and Frank Research Group. At the same time, contrary to expectations, in the midst of the coronavirus, micro and small companies were able to improve payment discipline, as well as attract new loans at preferential rates. A slight deterioration in the quality of the portfolio occurred in medium-sized businesses. Experts told the newspaper that future will largely depend on the epidemiological situation.

Alfa Bank told Izvestia that business recovery after a period of restrictions is indeed happening faster than anticipated, and the worst expectations were not met. This was evidenced by the growing trend of clients leaving credit holidays for the standard repayment schedule.

If the Russian economy continues to recover in the second half of 2020, then there will be no significant growth in delinquencies and restructuring on SME loans, managing director of the corporate ratings group at NKR agency Dmitry Orekhov told the newspaper. If the second wave of the pandemic comes in the next months, banks would not be able to avoid deterioration in the quality of the loan portfolio of small and medium-sized businesses, he summed up.

The Bank of Russia told Izvestia that forecasts for further lending to SMEs depend on the pace of economic recovery in the second half of the year. If there are no new restrictive measures, many companies will cope with a temporary period of declining revenues and gradually return to normal levels of operation.



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