Press review: Why are Western diplomats leaving Kiev and geopolitics pressuring ruble

Press Review January 25, 2022, 13:00

Top stories from the Russian press on Tuesday, January 25th

Vedomosti: Why is the West withdrawing diplomats from Kiev

On January 24, the US Department of State ordered the families of US embassy employees in the Ukrainian capital of Kiev to leave the country. The "voluntary departure of US direct hire employees" was also authorized due to the alleged threat of a Russian invasion. The British Foreign Office also announced a partial withdrawal of diplomats. However, EU top diplomat Josep Borrell stated that the union had no plans to pull its diplomatic staff out of Ukraine, Vedomosti writes.

Meanwhile, the New York Times reported that US President Joe Biden had discussed options for the deployment of additional US troops to Eastern Europe with Pentagon officials. NATO, in turn, said that its members were sending more warships and aircraft to the bloc’s eastern border in order to contain Russia and protect Ukraine. Besides, Ukraine has received over 80 tonnes of US weapons, with the second batch of military aid totaling $200 mln.

Western nations continue to raise media tensions around Ukraine, Russian International Affairs Council expert Alexander Yermakov pointed out. The forces that NATO is sending to the east don’t look like a prompt response to the ‘Russian threat’. Moreover, according to the expert, the troop deployment was planned long ago and now NATO "is trying to fit it into the current agenda." Since tensions are escalating in the media field, Russia will respond accordingly, making statements about provocations that are being prepared and blaming the West for arming Kiev. Similarly, the deployment of Russian troops to Belarus for the Union Resolve 2022 drills does not indicate preparations for an invasion, rather it is an effort to intimidate the West, Yermakov emphasized.

Western countries seek to keep tensions high in Ukraine in order to put pressure on Russia, Director of the Franklin D. Roosevelt Foundation for United States Studies at Moscow State University Yury Rogulev noted. The expert believes that NATO’s threats of a military escalation are a media and political project. The main danger for Ukraine is that Western weapons supplies give Kiev an illusion of support that the country will not receive if "Russian aggression" actually takes place, Rogulev stressed.

 

Nezavisimaya Gazeta: Risk of riots persists in Kazakhstan

Kazakhstan has created the Armed Forces Special Operations Command in a bid to improve the national security system. A decree ordering the formation of the new body was signed by President Kassym-Jomart Tokayev. He also suggested strengthening military intelligence that must provide the country’s leadership with up-to-date and reliable information about external and internal threats. The move to review the national security system stems from January’s upheaval, which Tokayev described as a coup attempt. However, it is too early to say that stability has been restored, Nezavisimaya Gazeta notes.

International Projects Director at the National Strategy Institute Yury Solozobov has outlined three basic scenarios for Kazakhstan. The first one, the "Syrian" scenario, implies that there will be a temporary lull with militants regrouping their forces and conducting a new attack somewhere unexpected. Statements about another victory and a troop pullout will be followed by new rounds of a counterterrorism operation until terrorist infrastructure is destroyed and funding channels are cut off.

The second scenario, the "Afghan" one, involves the reinforcement of Russia’s troops in Kazakhstan. On the international stage, it will result in collective pressure on Russia from the West, as well as from Turkey and even China. Kazakhstan’s society is extremely negative about such a prospect.

The third scenario, the "imperial" one, envisages systematic work to gain a foothold in a territory with initially hostile atmosphere, including the establishment of fortified areas and logistics centers and the upgrading of airfields, as well as interaction with local residents and regional elites. We have reached a dangerous line, which makes it clear that all standing problems cannot be solved through propaganda and special operations, the expert pointed out.

 

Kommersant: European market concerned about Russian gas supplies

Europe’s gas prices continue to climb amid traders’ concerns about possible disruptions in Russian gas supplies due to the mounting geopolitical tensions around Ukraine. On January 24, futures prices increased by 13% to $1,100 per 1,000 cubic meters, despite warm weather and growing LNG supplies to Europe, which offset a decline in Russian supplies. Normally, this would lead to a decline in prices regardless of the low level of gas in European storage facilities, Kommersant writes.

Vygon Consulting’s Maria Belova expects that average monthly spot gas prices in Europe will fall below $1,000 per 1,000 cubic meters after the spring sets in, the winter peak demand for gas is over and two major LNG projects with a total capacity of 15.2 mln tonnes are launched in the United States.

"As for long-term prospects, the unprecedented introduction of LNG facilities will peak before 2025, so spot gas prices will remain higher than in the past four years, when the market belonged to buyers with prices ranging between $350-550 per 1,000 cubic meters," the expert emphasized.

Dmitry Marinchenko from Fitch points out that the $1,000 per 1,000 cubic meter price benchmark is not stable. "Once the heating season is over, prices should go down but they might remain higher than usual in the summer. The trend will depend both on the geopolitical situation and the situation around Nord Stream 2 and Russian supplies," he specified.

 

Izvestia: Russia to expand presence along Northern Sea Route

Chances are that Russia will expand its Northern Sea Route fleet. The country’s oil giant, Rosneft, plans to build ten Arc-7 oil tankers at the Zvezda shipyard by 2027. The first one will be ready as early as in 2024. The construction of such vessels will help Russia significantly bolster its presence in the north, said experts interviewed by Izvestia.

The construction of tankers will make it possible to expand hydrocarbon transportation along the Northern Sea Route and consequently, increase their production in the country’s north, which will boost the economic development of a number of Russian regions, leading expert at the Finam Management asset management company Dmitry Baranov noted. In addition, such a project will provide enough orders to many Russian enterprises, from steel and chemical producers to cable and radio electronic equipment manufacturers. As a result, the domestic production of tankers will improve the competencies of Russian shipbuilders and confirm the country’s status as a technologically developed nation, Baranov added.

The construction of new tankers will help Russia effectively implement its ambitious plans to develop the Far East and strengthen the country’s fleet, BitRiver Director of External Relations Andrey Loboda pointed out.

It will cost about $350 mln to make each tanker in the first batch, Loboda estimates. However, given the considerable rise in energy demand in Southeast Asia and elsewhere, investment in the project looks very attractive, the analyst concluded.

 

Kommersant: Geopolitical news pressuring ruble assets

A bear trend on the Russian financial market continues for another week. Stock indices hit new lows and the dollar exchange rate reached its highest level since late 2020. Media reports about the withdrawal of Western diplomats from Ukraine and the deployment of troops and weapons to Eastern European countries are making investors get rid not only of ruble assets but also of Western companies’ stocks, Kommersant writes.

Players on the Russian stock market are close to panicking, Aricapital investment strategist Sergey Suverov said. Investors are selling indiscriminately, but it is the stocks of state banks that are suffering the most. Tech companies, including Yandex, VK and AFK Sistema, also are among outsiders. For them, the overall global weakness of such stocks adds to Russian political risks, Suverov noted.

According to market participants, the collapse of the past few days is excessive. The current prices have already been affected by the looming military activities in Donbass, though most of the interviewed market players view them as unlikely. This factor aside, the Russian market is fundamentally one of the most attractive in the world, given high oil prices and a weak ruble.

Andrey Kochetkov, a leading global research analyst at Otkritie Investment, believes that the current drop "paves the way for effective long-term investment." However, in his words, it’s not clear yet if "prices have hit their lowest possible level."

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