Kommersant: El Pais reports reaction of US and allies to Russian demands on security guarantees

The US and NATO turned down Russian key demands on security guarantees but are ready for dialogue on arms control and the avoidance of armed incidents, according to confidential responses from Washington and Brussels to Moscow published by Spain’s El Pais on Wednesday. The Russian authorities have not yet given a final assessment of these documents. Simultaneously, the sides continue the display of force. Russia is beefing up its military presence near Ukrainian borders and in Belarus while the US is deploying contingents in Eastern Europe.

According to Senior Research Fellow with the Institute for International Studies at Moscow State Institute of International Relations Andrey Baklitsky, "NATO’s response does not contain anything that would be of interest to Russia." Dmitry Stefanovich, a researcher at the International Security Center with the Russian Academy of Sciences’ Institute of World Economy and International Relations, notes that "the American side tried to give answers tied to specific points of the document drafts proposed by Russia."

According to Fyodor Lukyanov, editor-in-chief of Russia in Global Affairs magazine, the US response was "expected and generally constructive as much as it is possible at this stage." "It was clear that Russia’s political demands won’t be accepted and there is an invitation to negotiations on ‘secondary’ issues. They won’t start right away because Russia does not intend to and won’t reject the stated order of actions - politics first, then military-technical issues. Yet later, another attempt is probable, a more productive one," the expert notes.

Earlier, Moscow warned that a "military-technical response" would follow if its demands are not met. On Wednesday, the Pentagon reported that Russia continues to increase its presence near Ukraine and in Belarus where large-scale drills will start soon. The US announced that it was relocating additional contingents to Europe. "The de-escalation is not seen so far: the sides are waiting who blinks first and are concerned that the diplomatic process may be a mere smokescreen," Stefanovich concluded.

 

Nezavisimaya Gazeta: Gazprom increases fuel deliveries through Ukraine

On Wednesday, gas prices in Europe went up 10% after reports that Gazprom did not renew gas deliveries through the Yamal-Europe pipeline. A day earlier, the prices were going down after a sharp increase in the gas being pumped through Ukraine and the booking of Yamal-Europe’s capacities. On Wednesday, Gazprom’s head Alexey Miller announced the prospects of building the Soyuz-Vostok gas pipeline which would direct gas to China instead of Europe.

The increase in deliveries through Ukraine occurred the day after the US and the UK threatened Russia’s elite with tough sanctions, according to Reuters. A source in the Biden administration said that measures within the framework of the CAATSA law (Countering America’s Adversaries Through Sanctions Act) would be employed if Russia invades Ukraine. It was reported that the new sanctions would cut off Russia’s privileged circles from the global financial system. Earlier, the UK’s top diplomat Liz Truss did not exclude the confiscation of property owned by Russia’s elite in London and the freezing of assets owned by Russian energy companies traded on the London stock market.

Experts do not see any political underpinning to Gazprom increasing its deliveries through Ukraine. "Given the prejudice of foreign courts, the Russian company is trying to avoid suspicions that its decisions are political. Gazprom is clearly satisfying all the demands of its counteragents within the framework of existing contracts. That said, the company, probably, won’t step up deliveries above the agreed on the level if this can negatively impact the price of deliveries," Artem Lyutik of Univer Capital notes. He attributed the increase of transit through Ukraine to the fact that contract prices are tied to oil market prices or spot gas prices with a certain time lag. "Accordingly, the prices in effect since February are more attractive to the company than those in January," the expert explained.

"The increase in supplies in early February is related to the change of the base month in some of Gazprom’s contracts - from December 2021 to January 2022," according to Aleksey Kokin, an oil and gas analyst with Open Investments. In February, gas will be sold tied to January spot quotes that are much lower than the December ones. Dmitry Alexandrov of Univer Capital notes that: "The changes in the routing of deliveries are also related to the aggravation of the military-political conflict."

 

Vedomosti: Russia to remain key energy supplier to Europe for years to come

On February 2, the European Commission (EC) submitted a coordinated "green taxonomy" draft. This is part of the 2019 European "green deal" aimed at cultivating sustainable financing and decarbonizing the EU economy. The document published on the EC’s website proposed to classify investments in gas and nuclear energy as "green" ones, just as renewable energy sources, yet only for a transitional period in order to reach carbon neutrality.

Adding gas generation to the "green taxonomy" for the mid-term perspective may mean preserving the current volumes of gas deliveries to the EU and the further replacement of coal generation, according to KPMG’s Yevgeny Tananaiko. Andrey Sulin, a partner at EY, notes that including the nuclear industry in the "green taxonomy" will be a major victory for this branch and will further stimulate the development of Rosatom’s projects in Europe. However, Oksana Lukicheva, a commodity market analyst at Otkritie Broker notes that overall, if this taxonomy becomes effective, Rosatom’s prospects may not change much since working in the nuclear energy sector in Europe is seriously limited by political measures. According to Vladimir Sklyar from VTB Capital, the limitations on approval deadlines for projects may be a deterrent yet considering the growing price volatility of energy resources. That said, the nuclear energy sector is practically becoming the single basic energy supplier in the green energy sector.

 

Kommersant: OPEC+ demands its members to increase oil production as planned

As predicted, OPEC+ members kept the agreement of increasing oil production in March to 400,000 barrels per day. Separate attention was given to those countries that are not keeping up with the increased production plan. They were recommended to make up for the deficit in the summer, otherwise, prices may continue to rise. The price hike, in turn, may mean the activation of US shale producers and a resurgence of the overproduction crisis. However, the experts polled by the newspaper think that the OPEC+ production increase may cool off oil prices as early as the second quarter.

Despite the fact that the OPEC+ quota was increased, the actual growth of supply may be lower, according to Dmitry Marinchenko of Fitch, since some OPEC+ countries, with Russia among them, need some time in order to fully increase production within the new framework. According to his estimates, the market will switch to a state of surplus no later than the second quarter of this year which should lower prices. Meanwhile, the market is operating under a deficit.

According to Maria Belova of Vygon Consulting, the oil price hike by $10 per barrel over the past month is more of a seasonal factor due to the rising geopolitical tensions in the Middle East and around Russia. If by March prices continue to grow, OPEC+ may decide to increase production more significantly. Nevertheless, in her opinion, oil prices may gradually begin to decline as early as the second quarter, reaching about $70 per barrel by the end of 2022.

 

Izvestia: Russians begin to spend more on jewelry

In 2021, jewelry sales in Russia increased by 20-25% while there was a downturn last year, the Jewellers’ Guild of Russia told Izvestia. This trend was confirmed by market players as well. The growth was stimulated by online sales, the redistribution of spending from travel to luxury purchases as well as delayed demand. The situation may change in 2022 since a price hike of 10-15% is expected that may affect demand.

According to General Director of 585*Zolotoy Aleksey Feliksov, the average amount spent on jewelry also increased last year, and it turned out to be 27% higher than in 2020 and 17% more than in 2019. According to the company, wedding rings were among the most popular items in 2021, with their sales 19% greater than in 2020 and 15% higher than in 2019. Gold chains and bracelets and jewelry with precious and semi-precious stones are also enjoying increased demand.

"During the pandemic, we saw a decline in customer interest in jewelry. That was the rational spending trend’s influence during the crisis and the uncertainty about the future. However, in 2021, according to our data, demand began to climb. As for the monetary equivalent, sales grew by 12%," Marketing Director of the Adamas chain of jewelry stores Anastasia Tutbayeva said. According to Eduard Utkin of the Jewellers’ Guild of Russia, the growing demand for jewelry is related to the redistribution of spending planned for travel. People had to cancel their trips but felt the urge to spend their money on beautiful objects.

According to the President of the Almaz Holding company Fluna Gumerova, the rising demand for jewelry is also related to limited supply volumes. If in 2014, almost 100,000 jewelry items were produced in Russia, in 2020 their production amounted only to 39,000 items. Additionally, customers are being motivated by a possible price hike in the near future, the expert added.

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