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Press review: What SPIEF-2021 is focusing on and Russia moves to dump dollar

Top stories from the Russian press on Friday, June 4th

Izvestia: SPIEF-2021 focuses on green economy and post-COVID-19 growth

The economic recovery after the COVID-19 pandemic, as well as new challenges for the international community, such as green production, the demand for supporting the social sector, and forward inflation dominated the first day of the St. Petersburg International Economic Forum (SPIEF). At the long-awaited face-to-face business event, top officials also discussed the digitalization of the financial sector, the active development of ecosystems, and a stock market boom. Russian President Vladimir Putin, who joined the event via a video link-up, called the agreements on developing Crimea’s resort infrastructure among the most important contracts signed there, Izvestia writes.

Some 14 bln rubles ($191 mln) will be poured into building a new resort facility under a contract between the Crimean government and the Semeyniye Kurorty (Family Resorts) company, according to the president. The second deal, which is due to be inked between the Crimean authorities and the Tkachev Agrokomplex, will envisage the creation of a theme park and a resort and hotel facility. The president stressed that Russia was successfully overcoming all the coronavirus-period challenges, and its economy was on the way out of this challenging time.

Russian Minister of Economic Development Maxim Reshetnikov expects that the Russian economy will be restored to the level of the fourth quarter of 2019 by June-July 2021. Russian Presidential Aide Maxim Oreshkin noted that the COVID-19 crisis deepened the inequality between countries and the population inside them while noting that the world was passing the peak of this inequality at the moment, and in the future economic policy would swing to the left. The government is expected to spend more on the social sector, environment, and infrastructure. In turn, the head of Russia’s Accounts Chamber, Alexei Kudrin, noted that in the future basic income payouts would become a reality for Russia. Finance Minister Anton Siluanov stressed the importance of stepping up spending on infrastructure, noting that this would stimulate Russia’s economic growth. He also spotlighted the major shift towards a "green economy," suggesting that due to this factor, global oil demand might not be restored to the 2019 levels. First Deputy Governor of the Bank of Russia Ksenia Yudaeva said lately that the term ‘green swan’ was used more often when environmentally unfriendly companies face major risks of a tax burden, and there is a capital outflow from such enterprises.

Director of the Center for Market Research at the Higher School of Economics Georgy Ostapkovich notes that SPIEF is the first major business event held both in Russia and globally in general over the past 1.5 years. The forum’s key issues on the agenda were the restoration of economies in the post-COVID era and a shift to "green" production, he said. According to him, the major advantage of SPIEF and other similar events is that they offer a unique opportunity for people who make crucial decisions to meet and hold close contacts.


Media: Russia’s move to dump US dollar from rainy day fund won’t affect ruble rate

Moscow plans to fully abandon the US greenback in the structure of the National Wealth Fund (NWF) within a month, and those dollar assets will be replaced by an increase in the euro and gold, Finance Minister Anton Siluanov announced on the sidelines of the St. Petersburg International Economic Forum. As of May 1, Russia’s rainy day fund (National Wealth Fund-NWF) stood at 13.8 trln rubles (nearly $190 bln), with $39.84 bln in dollar assets.

This decision is a signal that Russia does not view Washington as a reliable partner, Alexander Shirov, Director of the Institute for Economic Forecasting at the Russian Academy of Sciences, told Izvestia. Besides, this step points to fears over new restrictions against Russia’s public debt. The dollar share in Russia’s gold and currency reserves has been declining over the past several years, and this is a deliberate policy of the financial authorities, the expert noted. So, the ruble rate is not expected to sharply rise amid this news. Today, the rate has come under serious geopolitical pressure and the upcoming Putin-Biden summit is likely to have a more positive effect on it, Shirov predicted. "Europe is Russia’s major trade and economic partner, and that’s why choosing the euro as an alternative to the dollar looks quite natural. The gold purchases for the NWF will support the gold mining industry, the expert noted. The more diversified the NWF’s assets are, the safer they are, said Alexandra Suslina, who heads the fiscal policy section in the Economic Expert Group. According to her, the dollar is a very good asset, and it’s inadvisable to fully abandon it. The change in the NWF’s structure is unlikely to trigger any crucial consequences for the exchange rates or the economies in general, the expert noted.

Brian O'Toole, a former senior advisor at the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury, told RBC that the decision to ditch the dollar in the Russian government’s reserves makes sense. The sovereign fund is named among the potential targets for sanctions, and that’s why the measure will make it possible to avert a full blocking of the dollar portfolio in the event of such tough measures. Meanwhile, the decision is not expected to have a fundamental effect on the market because the greenback will be abandoned as a result of "an internal transaction" between the Finance Ministry and the Central Bank, Chief Economist at ING in Russia and the CIS Dmitry Dolgin said. Managing Director at Gazprombank Private Banking Yegor Susin also notes that the Finance Ministry’s decision to get rid of its greenback assets from the rainy day fund won’t affect the ruble exchange rate, explaining that the budget rule will remain unchanged.


Nezavisimaya Gazeta: Cyber attack likely to change Putin-Biden summit’s agenda

US Secretary of State Antony Blinken announced that the hackers, who have recently targeted American companies, are based in Russia. The Federal Bureau of Investigation (FBI) also accused Moscow of being linked to the latest cyber attacks. Kremlin Spokesman Dmitry Peskov admitted that the hacking attacks could be discussed at the upcoming Geneva meeting between Presidents Vladimir Putin and Joe Biden. Meanwhile, the US leader cautiously reacted to the FBI’s claim that Russian hackers were behind the attacks on the JBS meat supplier and Colonial Pipeline, the largest fuel pipeline in the United States.

It is expected that the hacking activity will somehow change the course of the talks between Putin and Biden, Nezavisimaya Gazeta writes. However, it is unclear whether the cyber activity will become a separate issue of the meeting’s agenda. The Russian side stresses that the event’s format has not been approved so far. In her turn, White House Press Secretary Jen Psaki did not rule out tit-for-tat measures against the Russian state in response to the cyber attacks.

Experts note that there is no unity in the Biden administration on its Russia policy right now. Senior Research Fellow at the Russian Academy of Sciences’ Institute for US and Canadian Studies Vladimir Vasilyev told the newspaper that Biden’s view on how to build contacts with Putin is not shared by his entire team. Although the Trump team did not have full unity on foreign policy issues either, the situation with Biden is special. The White House bears in mind that Biden is 78 years old, and his term in office can end at any time that’s why it’s important for the US president to achieve quick, visible, and significant results in his work, the expert says.


Vedomosti: Netanyahu loses Israeli prime minister’s seat

One of the Israeli opposition leaders, Chairman of the Yesh Atid centrist party, Yair Lapid, has announced that he is ready to form a government. For the first time in the past 12 years, the government won’t be represented by incumbent Israeli Prime Minister Benjamin Netanyahu and his party Likud, Vedomosti writes.

The deal on creating the government was also signed by leader of the right-wing Yamina party, ex-Defense Minister Naftali Bennett and Chairman of the Arab Israeli Ra'am party Mansour Abbas. This is the first coalition deal in Israel’s history with the participation of an Arab party. The new Israeli government will consist of eight different parties. The Knesset (parliament) is expected to approve it next week.

In his turn, Abbas has set a condition for participation in the coalition. According to The Jerusalem Post, the Arab leader had held long talks with Netanyahu, who promised to cancel fines for buildings constructed by the Arabs illegally. Thus, Abbas joined the coalition on the condition that the new government won’t impose these fines. Meanwhile, Netanyahu, who has served as Israel’s prime minister since 2009, absolutely disagrees with the opposition’s decision. He announced that the Bennett-Lapid government, which includes right-wing, left-wing, centrist, and Arab forces, would lead the country down a path to disaster. It’s noteworthy that earlier Netanyahu had carried out coalition talks with Ra'am, however, they did not bear fruit, and the incumbent prime minister failed to create a government. This political deadlock has plagued Israel for two years. Over this period, the elections to the Knesset were held four times, but no stable government has been set up yet.

According to Dmitry Maryasis, who heads the Department of Israel and the Jewish Communities, the era of Netanyahu has apparently come to an end. There are many chances for forming an opposition government, and everything signals that the Knesset will endorse it. Meanwhile, Maryasis notes that the government is divided and unviable. Normally, a government serves in Israel for four years, but the new government is unlikely to last at least two years, the expert explained. Netanyahu, who is known to be a master of political intrigue, could pull off some surprises for his enemies. His Likud party will continue its activity in the opposition and could vie for a seat in the next government. The expert does not anticipate any significant changes in the new government’s domestic or foreign policy.


Nezavisimaya Gazeta: Mounting sanctions push Russia, Belarus closer towards integration

The new round of restrictions is increasing Belarus’ dependence on Russia though its unlikely that the United States and the European Union want this to happen. The lists of European sanctions for President Alexander Lukashenko’s government will be renewed on Friday and next week. However, there might be no bans on the imports of Belarusian goods on these sanctions lists, Nezavisimaya Gazeta writes.

The EU is planning to slap sanctions on June 4 against Belarusian air carriers over the incident with the emergency landing of a Ryanair flight in Minsk. Brussels also seeks to discuss proposals on restrictions against at least seven individuals and one entity. Besides, Reuters reported citing its own sources that sanctions could be slapped against crucial economic sectors for Minsk - the export of potassium fertilizers, oil products, and foreign borrowings. The new EU restrictions against Belarus could reduce the country’s export revenues, leading to a further decrease in its foreign currency reserves, S&P analysts say.

According to the analysts, strong economic ties with Russia will mitigate the sanctions blow. If the restrictive policies result in Belarus’ further isolation, the prospects of its economic development will depend more than ever on Moscow and the government’s readiness to provide support to Minsk. Russia could provide new loans on the condition of political concessions, which Belarus had earlier refused to make. An alternative solution - a deal with the EU on carrying out economic and political reforms in return for financing and investments - seems to have become increasingly remote.

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