Russia’s Finance Ministry managed to make a $117 mln interest payment to foreign bondholders from accounts frozen overseas, acting on a general license issued by the US Office of Foreign Assets Control, which is valid until May 25. That said, Moscow avoided falling into technical default that was possible due to sanctions on the country’s foreign exchange reserves. The license may be extended further because it would be no benefit for the United States to deny revenues to its investors, experts say.
Russia could have faced issues with foreign debt payments due to Western sanctions that froze about $300 bln of the country’s foreign exchange reserves overseas. The Finance Ministry elaborated that if it was impossible to use part of the frozen assets, Moscow was ready to pay in rubles. However, had Russia been unable to make a payment on March 16, the country would have fallen into technical default.
The payment was forwarded to Citibank where Russia has dollar accounts with frozen funds, Chief Economist at the TeleTrade information and analytical center Mark Goikhman explained. Payments may be made in a similar way until May 25 when the US license will expire.
The next date when Russia’s foreign currency debt payment may fall into question is May 27, said Leading Debt Market Analyst at Otkritie Investment Alexander Shurakov. This is when Russia will have to make a $71 mln payment of coupons on eurobonds with a maturity in 2026. If the US license is not extended, Russia may go back to the idea of ruble payments, the expert noted.
There is no point for the US government to irritate its own investors stuck in Russian bonds so the US authorities are highly likely to extend the license authorizing the use of Russia’s frozen assets for payments on eurobonds, Associate Professor at the Plekhanov Russian University of Economics Denis Domashchenko pointed out.
The United States may remove Iran’s Islamic Revolutionary Guard Corps from its list of foreign terrorist organizations, Vedomosti writes, citing US media outlets.
According to Adlan Margoyev, a researcher with the Center for Middle East Studies at Moscow State Institute of International Relations, the move is closely connected to talks on restoring the Iran nuclear deal. It’s not right for Tehran to maintain negotiations with Washington when an important part of the Iranian state such as the Islamic Revolutionary Guard Corps is designated in the US as a terrorist organization. The corps being on the US Department of State’s blacklist is also economically painful for Iran, given that the organization is deeply incorporated into the country’s life, Margoyev added. According to some estimates, up to 60% of Iran’s economy - including both state and private companies - is controlled by individuals and entities linked to the Islamic Revolutionary Guard Corps, the expert noted.
The removal of the Islamic Revolutionary Guard Corps from the list of terrorist organizations is a reasonable move in terms of the United States’ global strategy aimed at ensuring the success of the Joint Comprehensive Plan of Action, as well as at containing and economically strangling Russia, Deputy Director of the Center for Comprehensive European and International Studies Dmitry Suslov emphasized. Moreover, information available in the media makes it clear that the decision would be presented as de-escalation and a concession by Iran since the country would promise to end its expansion in the so-called Shiite Crescent of Syria, Lebanon and Iraq in return for what is actually a formality on the part of the United States.
However, the ultimate goal of the Biden administration is to release Iran’s oil reserves. The amount of Iranian oil that may enter the market once sanctions are lifted is estimated at over two mln barrels a day, Commodity Market Analyst Oksana Lukicheva explained earlier.
The ministers of environment of the European Union’s member states met on Thursday to discuss the green agenda under the current circumstances. Abandoning Russian gas will mean the need to either use dirtier energy sources or step up the development of alternative energy and seriously reduce the living standards of EU citizens. However, the EU started to lower requirements for the green economy before the Ukrainian conflict had broken out, particularly softening its approach to the use of gas and nuclear energy, Nezavisimaya Gazeta notes.
The EU’s goal is to find a replacement for Russia as the main energy exporter and at the same time, mostly maintain its plans to diminish carbon footprints. "EU member states will try to find compromises but it’s not the first time that they are departing from a tough environmental policy, it started a year and a half ago. For instance, a softer approach to nuclear energy is under consideration. In addition, gas will be recognized as a cleaner energy source," said Associate Professor with the Integration Processes Department at Moscow State Institute of International Relations Alexander Tevdoy-Burmuli.
The expert pointed out that the West would first search for ways to adjust itself to the current situation for the short term. The green economy will stop being a priority for a while. A compromise is likely to be found that would involve petrol subsidies.
"If Iran is freed of sanctions and manages to restore oil supplies, the West will be able to achieve an important goal and quickly return to the environmental agenda. Besides, active talks are underway with Venezuela, though they aren’t being advertised much," Tevdoy-Burmuli added.
The position of the US dollar on the Russian currency market is slowly weakening. Investors’ hope for a ceasefire between Moscow and Kiev and the Russian Finance Ministry’s ability to pay foreign debts are supporting the ruble, Kommersant writes.
With no international investors on the market, the situation depends completely on local players. According to Head of the Analysis Unit at Zenit Bank Vladimir Yevstifeyev, the Russian Central Bank’s measures in relation to cash currency have proved particularly helpful in diminishing the panic purchase of foreign currency by individuals and businesses. Stock Market Expert at BCS World of Investment Dmitry Babin emphasized that banks had reduced their demand for foreign currency following a drop in demand among their clients.
"Reports about the prospects for resolving geopolitical risks and signing a peace agreement are the main reason why the Russian ruble is strengthening," Director of Russian Standard Bank’s Department of Financial Market Operations Maxim Timoshenko noted.
However, experts point out that the situation is far from stabilized and uncertainty is still there. "The main factor that can help stabilize the national currency is a decline in geopolitical tensions and the signing of a peace agreement," Timoshenko said.
According to Babin, if a deescalation process begins, the dollar exchange rate may fall to 90-95 rubles.
Turkey’s fast food chain Chitir Chicken is gearing up to enter the Russian market, having held the first round of talks with Russian shopping malls, President of the Union of Shopping Centers Bulat Shakirov told Izvestia. According to him, if the parties come to an agreement, the new brand will open up to ten locations in a month, while development plans include the launch of a franchise network of 500-600 locations.
If McDonald’s, which has suspended operations in Russia, fails to reopen in the near future, shopping malls are ready to hold talks on terminating lease agreements, Shakirov pointed out. It would make way for Turkish restaurants. The US-based fast food giant continues to pay rent while its operations remain suspended but shopping malls are still losing revenues because when there is no activity in food courts, consumer traffic falls, the expert explained.
However, landlords will hardly be willing to terminate agreements with McDonald’s as long as the company continues to pay rent, said DNA Realty Director General Anton Belykh. It is a popular chain that attracts consumers to shopping malls. "More likely, shopping malls will offer vacant locations to the Turkish project as nearly all fast food chains saw closures in the past two years," the expert noted.
It’s hard to say at the moment what future awaits the new restaurant chain in Russia, Director of the Retail Space Department at CBRE Marina Malakhatko said. There have been cases where eating establishments of this kind failed to catch on in Russia though the country’s fast food market is steadily growing, she added.
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