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Press review: Russia eyes hiking interest rates and Serbia unwilling to join EU sanctions

Top stories from the Russian press on Tuesday, June 8th
Russian Central Bank Gavriil Grigorov/TASS
Russian Central Bank
© Gavriil Grigorov/TASS

RBC: Finland calls for cooperation between EU and Russia, top diplomat says

Cooperation between the European Union and Russia is valuable and Moscow benefits from it as well, Finnish Foreign Minister Pekka Haavisto said in an interview with RBC.

He pointed out that many companies from European Union countries had created jobs in Russia, including numerous Finnish companies active in the country. According to the top diplomat, bilateral relations between Finland and Russia are based on the search for solutions, particularly concerning the fight against the coronavirus pandemic. Haavisto was confident that trade between the two countries would return to pre-pandemic levels soon. There are many areas where Helsinki and Moscow could boost cooperation, including in waste management and forestry, he specified.

The Finnish top diplomat believes that it is crucial to figure out the reasons why EU-Russia relations weakened. The European Union is willing to maintain dialogue with Russia, EU top diplomat Josep Borrell visited Moscow in February, Haavisto pointed out, adding that he himself had met with Russian Foreign Minister Sergey Lavrov twice in 2021.

Finland’s foreign minister also emphasized the need for the EU and Russia to exchange views despite their disagreements. Haavisto highlighted cooperation under the Schengen Agreement, which is important for many Russians as it makes it possible for them to travel not only to the destination country but also to all other Schengen nations.

According to Haavisto, there are many areas where dialogue is required, including the fight against climate change, environmental protection and healthcare. Cooperation aimed at resolving such common issues is in the interest of all parties. In addition, it is very important to maintain person-person contacts, which had to be limited during the pandemic, the Finnish top diplomat stressed.


Izvestia: Russia’s Central Bank determined to act to curb inflation

Russia’s Central Bank will raise the key interest rate to 5.5% at a Board of Directors meeting on June 11, Izvestia writes, citing experts. The move stems from rising prices and high inflation expectations.

The regulator toughened its rhetoric after inflation rates showed no signs of a steady decline in May, Senior Debt Market Strategist at SberCIB Investment Research Igor Rapokhin pointed out. "The public’s inflation expectations neared a four-year high in May, hitting 11.3% for the next 12 months. Notably, the key rate stood at 10% in early 2017, when people's inflation expectations were similar, while today, the rate is 5%," the expert noted.

The effect from an increase in the key rate will be felt in the second half of the year, PSB Chief Analyst Denis Popov said. According to him, consumer inflation will stabilize for the time being amid a seasonal decline in food prices, though the prices of non-food goods and services continue to grow.

Another reason for raising the key rate is the regulator’s concern about banks’ increasing retail loan portfolio, which grew by 20% in early May compared to last year, the NRA rating agency emphasized. At the same time, individual deposits only rose by 5%. Since the Russian Central Bank’s goal is to ensure the balanced growth of retail loans and encourage the public to transfer their money to financial institutions, the regulator will take steps to contain lending and make bank deposits more attractive, particularly by raising the key rate, NRA analysts said.


Izvestia: Serbia reluctant to impose sanctions on Russia, parliament speaker says

Serbia will not join the European Union if it compromises the country’s national interests, Serbian National Assembly President Ivica Dacic said in an interview with Izvestia. The parliament speaker announced plans to produce four mln doses of the Sputnik V coronavirus vaccine in the country in the next 12 months and clarified expectations from the upcoming meeting between Presidents Vladimir Putin of Russia and Joe Biden of the United States.

According to Dacic, "Serbia is one of the few countries that has made several vaccines available at a time." "The Serbian people can choose between the Pfizer, AstraZeneca, Sputnik and Sinovac," he noted. "The Russian medication is certainly very popular. I myself was vaccinated with Sputnik after the vaccination campaign began in January," the Serbian parliament speaker said. "Serbia is now launching vaccine production and we expect to produce four million doses in the first year. It’s crucial for us to meet our people’s needs. We also plan to export the vaccine. I am sure that many countries will be interested in purchasing Sputnik V," Dacic added.

When speaking about Belgrade’s political ambitions, he emphasized that "the Serbian people stand for joining the European Union." "It is one of our goals based on our geostrategic situation. However, we don’t plan to join the EU if it turns out that the move runs counter to our state and national interests. Russia is our friend and partner, Moscow supports the Serbs in the Kosovo issue, which concerns the territorial integrity and sovereignty of our country. Serbia certainly won’t impose any sanctions on Russia," Dacic stressed.

When asked about Belgrade’s expectations from the Putin-Biden summit, he said that "everyone would benefit from easing tensions between Russia and the US." "We would very much like the meeting to help increase the level of global trust and cooperation. A positive outcome of the meeting would be very important for peace and stability," the Serbian parliament speaker concluded.


Nezavisimaya Gazeta: New clashes looming on China-India border

As soon as the snow began to melt in the Himalayas, China and India started sending more patrols on reconnaissance missions and to build defenses. Last year, thousands of troops faced each other along the Line of Actual Control. Since the line is not properly marked, clashes sometimes erupt over segments 100 to 200 meters long. Analysts don’t rule out that a new conflict may break out though Moscow and Washington seek to prevent it, Nezavisimaya Gazeta writes.

According to Consultant Editor at the India Strategic monthly Vinay Shukla, India closely analyzed what Russian President Vladimir Putin said in St. Petersburg about the India-China border dispute. He noted that the leaders of India and China, Narendra Modi and Xi Jinping, were responsible people capable of finding a solution to any complicated problem. Shukla pointed out that Putin was the only world leader who could quickly get in contact with Xi Jinping if a need arose, so the Kremlin had a chance to positively influence the situation.

"Putin emphasized that no external power should interfere in the dispute," the expert noted. "It is a very important message. New Delhi pursues an independent foreign policy and seeks to resolve issues with neighboring countries on a bilateral basis, without any mediators," Shukla added.

Daniel Markey, a senior research professor in international relations at the US-based Johns Hopkins University, pointed out in this regard that the United States had sought to nurture closer relations with India to make the country capable of better countering China. Now that US-China relations have entered an era of the so-called extreme competition, according to US President Joe Biden, India is becoming even more important for Washington. At the same time, the risk of confrontation between India and China is growing.


Izvestia: Russia’s de-dollarization effort drives gold prices up

The Russian National Wealth Fund will completely dump the dollar within a month. The dollar, whose share used to stand at 35%, will be replaced by the euro, the yuan and gold, whose share will rise to 20%, Izvestia writes.

Russia has been actively increasing its gold reserves for the past 12 years. In 2008, the Russian Central Bank had only 400 tonnes of gold, and in May 2021, the amount reached almost 2,300 tonnes, taking Russia to the global top five for gold reserves after the US, Germany, Italy and France.

The National Wealth Fund long ago set on a course to reduce its share of dollar assets. Gold became one of the most attractive options due to its price movements in the past 15 years in comparison with other currencies that serve as an alternative to the dollar, growing nearly six-fold.

TeleTrade Chief Analyst Petr Pushkarev believes that the move has largely been completed, foreign currencies and gold have been purchased. According to him, the May increase in gold prices from $1,770 to nearly $1,920 per ounce indirectly confirms that this is where things stand. Perhaps, the Russian Finance Ministry’s activities were one of the reasons behind the rise in prices.

"If the National Wealth Fund moves to regularly purchase gold on the domestic market, it will provide significant support to the Russian gold mining industry. In fact, this year, many central banks were attracted by the idea of increasing the share of gold in their gold and currency reserves in order to boost financial stability amid rising sovereign debts and currency emissions across the world," said Airat Khalikov, an analyst at the Gazprombank Center for Economic Forecasting.

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