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Press review: Why is Russia luring more investment and will Kurz’s exit impact Moscow ties

Top stories from the Russian press on Monday, October 11th

Kommersant: Surging oil and gas prices attract foreign investors to Russian market

Global investors are pouring record amounts of money into the Russian stock market. Over the past week alone, they invested $170 mln. They are attracted by the Russian market’s focus on raw materials which is benefiting from the booming growth of oil and gas prices. The bulk of the investments went to the oil and gas sector, but some interest was noted in the shares of Sberbank and manufacturers of fertilizers.

April Capital Investment Manager Dmitry Skvortsov noted that "markets and demand for hydrocarbons are sharply recovering after the 2020 downturn while this sector turned out to be majorly underinvested over the past year and a half due to COVID and the green agenda. As a result, European and Asian countries began to encounter a gas deficit."

However, market players are questioning the stability of these inflows. "It is obvious that there is an opportunistic demand for the Russian risk dictated by the desire to obtain exposure to oil and gas manufacturers, so this surge in interest, unfortunately, can be hardly viewed as a stable mid-term trend," Friedrich Wilhelm Raiffeisen's Vladimir Vedeneyev said. Additionally, the Russian stock market has grown significantly over recent weeks. As of Friday, the MOEX Russia index closed at 4,238 points which is 3.8% higher than the previous week’s closing and 29% higher than the end of last year. "It is necessary to realize that the Russian market has already climbed rather high and is ripe for some correction," said Ilya Golubov, an analyst at PSB.


Rossiyskaya Gazeta: How the EU’s gas crisis affects Russia

European countries will have to revise their energy policy to avoid a repetition of a gas crisis which would impact Russia as their major natural gas provider. The gas deficit can be avoided in several ways. One of the optimal ones for Russia is concluding long-terms contracts with gas prices pegged to oil prices which does not suit Europe since such contracts are usually made on a take-or-pay basis. Vygon Consulting’s Maria Belova notes that the share of such gas contracts has significantly decreased over the past 15 years while the share of long-term contracts pegged to spot quotes is approaching 90%. Additionally, at current European market prices, the natural gas has lost any economic lure since the price of $1,000, $1,200 or $2,000 per 1,000 cubic meters is simply unmanageable for the common consumer, according to Deputy Director General at the National Energy Security Fund Alexey Grivach.

If Europe starts concluding new long-term LNG contracts with Qatar or the US, production volumes in these countries may push Russian gas off the European market. However, while LNG prices in Asia surpass the European ones with its deficit on the global market, deliveries to Europe are of no interest to the manufacturers.

Another danger facing Russian gas exports is the revival of an old idea of building pipelines from Iran which is very possible with the looming lifting of US sanctions. Iran is second worldwide in terms of the natural gas supplies following Russia and, while it doesn’t possess its own means and technologies to implement a pipeline project, Europe does. However, Belova thinks that current anomalous prices are a short-term tendency which won’t impact investment decisions on new pipeline projects. First Vice-President of Opora Russia Pavel Sigal shares that opinion, asserting that Russia will remain the main fuel supplier for the EU while its positions on the European gas market will become only stronger with the launch of Nord Stream 2.

However, politics may interfere with economic considerations. Russia has already been accused of causing the gas crisis. If the EU decides that its dependency on the Russian gas is too strong, it may find the money for the potential Iranian project. The continued gas crisis is absolutely not in Russia’s interests. The best way out is the launch of Nord Stream 2 with lowered tensions and gas prices as a result.


Vedomosti: Austrian Chancellor Sebastian Kurz steps down

Austrian Chancellor Sebastian Kurz submitted his resignation on October 9 following searches in the offices of the Austrian People’s Party (OVP) over a corruption probe. According to law enforcement, in 2016-2018, the Ministry of Finance paid for advertisements in the Osterreich tabloid in exchange for falsified opinion polls supporting Kurz. Initially, Kurz refused to step down but the Greens, his junior partner in the coalition insisted. All opposition parties have also been calling for his resignation. Meanwhile, Kurz maintains his innocence and remains the formal party leader. He proposed a fellow party member, Foreign Minister Alexander Schallenberg as his replacement.

Researcher at the MGIMO Center for European Studies Artyom Sokolov thinks that Kurz’s career may be over if these accusations are confirmed. At the same time, he enjoys significant popular support and may return to big-league politics if the scandal turns out to be insignificant. Alexander Kamkin of the Russian Academy of Sciences’ Institute of European Studies thinks that Kurz’s party may suffer because of these accusations. The expert thinks that the resignation is a forced measure in order not to tarnish the party, while Kurz retains his immunity as a legislator which protects him from any possible criminal case. According to the expert, in the short-term perspective the resignation may lead to early parliamentary elections and a creation of a new coalition.

Kurz’s resignation won’t significantly impact Russian-Austrian relations, but the experts think that the Kremlin will view it with some regret. However, Austria’s political course with regards to Russia is unlikely to significantly change. The Greens who are more critical of Moscow may take over, yet Austria in general is less dependent on trans-Atlantic relations, especially compared to Germany. According to Kamkin, whoever replaces Kurz won’t stray too far from Vienna’s current policy.


Nezavisimaya Gazeta: Difficult talks on Syria ahead for Putin, Israeli PM

Israeli Prime Minister Naftali Bennett will visit Moscow this month, media outlets indicate a tentative date of October 22. This will be his first meeting with Russian President Vladimir Putin after Bennett replaced Netanyahu who held that office for 12 years. Despite the high quality of coordination on Syria that both countries managed to retain, there are signs of growing disagreements in this sphere. It still remains to be seen whether the Israeli cabinet of ministers is going to stay committed to the existing policy.

Expectations are that the talks will be above all dedicated to regional problems. The Israelis are concerned over the intention of the P5+1 (Russia, the US, China, Germany, France and the UK) to return to restoring the nuclear deal - the 2015 Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear program. Israel still doesn’t think that Iran, its regional adversary, is capable of adhering to international agreements.

However, Syria, where the Israeli air force continues to strike pro-Iranian formations fighting on the side of Damascus, is a separate issue. The fact that lately the Russian side has been emphasizing the role of its own weapons in neutralizing Israeli attacks is viewed by Arab observers as a sign of heightened disagreements with Israel. There were rumors that Moscow concluded that the IDF should curb its activities in Syrian air space, especially after the Putin-Biden summit allegedly made Russia believe that the US did not approve the scale and frequency of Israeli operations in Syria.

If previously, Russia and Israel resolved conflicting issues thanks to the high quality of personal relations between Putin and Netanyahu, it remains to be seen whether Bennett will manage to establish such a contact. According to former US Special Envoy to Syria Frederic Hof, the general mood of the Russian-Israeli understanding on Syria will remain the same. In his opinion, Israel will continue to strike targets related to Iran and Hezbollah while avoiding those related to the Assad regime. According to the retired diplomat, difficulties may emerge only if the Iranians and Syrians are in the same zone during Israel’s strikes while the presence of Russian servicemen may make the situation even more complex. The expert thinks that this is a difficult balance since Russia and Iran support the Syrian president while the Kremlin understands that Iran has its own agenda regarding Israel. At the same time, Russia fully realizes that Israel won’t be passive when there is a threat to its security.


Nezavisimaya Gazeta: Conflict over Taiwan increases risk of war between US, China

Following the celebration of the 110th anniversary of the Xinhai Revolution, Beijing and Taipei drew radically opposite conclusions. Chinese leader Xi Jinping promised to reunite China and Taiwan, while Taipei announced that it will defend itself and nobody can force it to follow the course proposed by Beijing. The balance of powers around the island has changed with China’s military prowess growing and Washington’s influence in the region fading. This raises the possibility of a war between the superpowers over Taiwan

According to Evan Medeiros who served on the US National Security Council during Obama’s administration, the Taiwan issue takes center stage in the strategic contest between the US and China. Experts cite Beijing’s recent unprecedented pressure with over 150 Chinese military planes entering Taiwan’s air space in four days. According to the New York Times, the balance of powers around Taiwan is changing and the situation that has remained frozen over seven decades is shifting to a dangerous stage. Until recently, the US thought it could retain China’s expansion yet a simulated attack during recent war games demonstrated otherwise. Washington is debating whether to guarantee Taiwan’s security or to bolster military forces around China. However, Robert Thomas, a US retired Vice Admiral, does not think Americans are ready to die defending Taiwan.

Alexander Lukin, who heads the International Affairs Department at the Higher School of Economics, expressed a different point of view in a conversation with the newspaper: "Given the current conditions, the Americans, without a doubt, will defend Taiwan. In the 1990s, a rather serious conflict emerged. The Chinese were launching missiles into the sea not far from the island to test the American reaction. The Americans immediately sent their Seventh Fleet there. The Chinese retreated. Now relations between the US and China are much worse than then. No US President can afford to cede Taiwan. The Americans won’t accept this."

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