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Press review: Europe opposes paying for gas in rubles and Russia’s currency flexes muscles

Top stories from the Russian press on Tuesday, March 29th

At the end of the first month of the Russian-Ukrainian negotiation process, which started on February 28, the parties decided to hold the next round in person on March 29-30 in Istanbul. Kremlin Spokesman Dmitry Peskov noted the importance of continuing the dialogue between the parties in a face-to-face format, but specified that so far there were no "significant achievements". Meanwhile, Kiev reiterated the unconditional territorial integrity of Ukraine. Experts told Nezavisimaya Gazeta, they saw a backtracking from the previous Ukrainian position in these statements.

For Kiev, such statements about its unconditional territorial integrity have become a step backwards, Deputy Director of the Center for Comprehensive European and International Studies at the Higher School of Economics Dmitry Suslov told the newspaper. Last week’s statements from the Ukrainian president about being ready to discuss Crimea and Donbass at a personal meeting with Putin could be due to the desire to achieve a top-level summit. And when it became clear that such a meeting could take place only for signing the final documents, Kiev decided to backpedal, Suslov explained.

According to the expert, so far there are no fundamental grounds for a breakthrough in the negotiations, since there is no turning point in the hostilities. Although the very fact that the negotiations are held in person shows the possibility of some progress, which we do not yet know about, the expert stated. As he admitted, after the outcome of the upcoming round, the negotiators could, say, fix those positions on which they have fully or partially agreed.


Izvestia: Latest Nagorno-Karabakh flare-up may morph into open conflict

Nagorno-Karabakh could face the most serious flare-up in the past year and a half. Armenia openly admits that the situation that deteriorated on March 24 may escalate into a full-fledged conflict with Azerbaijan, as it did in the fall of 2020, Ambassador-at-Large of the Armenian Foreign Ministry Edmon Marukyan told Izvestia. Meanwhile, the parties are still negotiating the withdrawal of the military, but in the diplomat’s opinion, the outlook is discouraging. According to experts interviewed by Izvestia, a resumption of hostilities is not out of the question, but the key difference in the current scenario is the presence of Russian troops.

The situation on the contact line is far from calm, it is tense. Currently, Azerbaijani troops are in the area of Karaglukh, Ambassador-at-Large of the Armenian Foreign Ministry Edmon Marukyan told Izvestia. "We are waiting for negotiations with the Azerbaijani side to lead to something, so they will withdraw their troops. However, I am not positive. The situation is heating up and may turn into a full-scale clash, just like in the fall of 2020. But I hope it won’t come to that, given the presence of the Russian peacekeeping forces," the diplomat stressed.

He also noted that the peacekeepers "remain the guarantors of stability", therefore any provocation by Baku would be directed not only against the Nagorno-Karabakh military, but also against them.

Director of the Armenian branch of the Institute of CIS Countries Alexander Markarov also believes that a full-scale resumption of hostilities cannot be ruled out. But the main difference now is the presence of the peacekeepers. In his opinion, Baku is creating a dubious situation, embroiling the Russian contingent.

The current actions of the Azerbaijani Armed Forces in the direction of the village of Farrukh are not related to the crisis in Ukraine, Rasim Musabekov, a lawmaker from the Milli Majlis (parliament of Azerbaijan), told Izvestia. Nevertheless, according to him, the actions of Russia and Ukraine "could increase the fears of the Karabakh Armenians about a possible significant decline in the numbers of the Russian peacekeeping forces."


Nezavisimaya Gazeta: Europe refuses to pay for Russian gas in rubles

European politicians have divulged their unwillingness to pay in rubles for Russian gas and are ready to abandon its imports before the end of 2022. Experts told Nezavisimaya Gazeta they do not rule out that one of the possible scenarios could include a gradual transition to the new payment plan and delivery terms as the existing contracts are completed. The largest of them are agreed on until 2036.

Europe is trying to get out of Russia’s proposal and form a unified position on the issue. "Political heavyweights in Europe vying with each other make statements that rejecting Russian gas was their initiative," the newspaper writes. High Representative of the EU for Foreign Affairs and Security Policy Josep Borrell said that the EU will be able to walk away from Russian gas within two years. Meanwhile, the European Commission plans to get rid of Russian energy resources by 2027. However, no one still knows exactly where the replacement will come from, and even the 15 bln liquefied natural gas (LNG) promised by US President Joe Biden is reportedly up in the air, according to the newspaper.

Leading expert at the Financial University and the National Energy Security Fund Stanislav Mitrakhovich believes that in reality "finding rubles" is very easy. "It is enough to come to the Moscow stock exchange or simply open an account in a Russian bank and make a conversion," the expert said.

Nikolay Vavilov, specialist from the strategic research department at Total Research, believes the situation does not require switching to ruble settlements over a very short time. The expert did not rule out that the current contracts may contain force majeure clauses related to sanctions and the inability to accept payments in euros. "If there are such loopholes, then buyers will not be able to ‘close’ them. In any case, it seems that a sudden transition to rubles will be extremely problematic," he said.


Vedomosti: Russian airlines shrug off sanctions and hold on to foreign aircraft

The deadline for European lessors to terminate aircraft lease agreements with Russian airlines and return the aircraft expired on March 28. This date was set in the next package of sanctions measures approved by the Council of the European Union at the end of February 2022. Air transport has already become one of the most affected sectors of the Russian economy, Vedomosti writes.

A source in one of the top 10 airlines told the newspaper that so far, the deadline has not affected current operations. "Lessors sent letters to terminate the lease agreements, but they won’t come to pick up the planes in Russia," the source said. Formally, the lessors could themselves become sanctions violators from March 29, the source added.

"The planes were not returned. There are those who are ready to return them, but cannot, since the return is carried out only with the permission of the intergovernmental commission on import substitution," another source said, suggesting that now lessors will turn to insurance companies, but "insurers are unlikely to have enough money to cover them".

Pavel Ikkert, managing partner of the Ikkert & Partners law firm, believes that lessors, as the actual owners of aircraft, can legally oblige operators to return these aircraft or demand reimbursement. "If the courts agree with their demands, which is quite possible, and the operators evade court decisions, then leasing companies can begin to force airlines to comply with their requirements by seizing airline assets around the world," he told the newspaper. Such measures could also apply to the offices of Russian airlines abroad.


Izvestia: What spurred the ruble’s strengthening to 90 per dollar

The ruble may remain at levels just below 90 to the dollar and 100 to the euro, according to analysts interviewed by Izvestia. The Russian currency rose sharply on March 28 as a result of exporters selling foreign exchange earnings and a drop in demand for dollars from resident enterprises and residents. The strengthening of the rate to 90 rubles per dollar coincides with the resumption of trading in all shares on the Moscow Exchange after almost a month-long hiatus.

The ruble is supported by the requirement for exporters to sell 80% of their foreign exchange earnings, while selling Russian gas to "unfriendly" countries for rubles, a measure announced by President Vladimir Putin, will actually bring this figure to 100%, Oleg Syrovatkin, a leading analyst at the global research department of Otkritie Investments, explained to Izvestia.

Meanwhile, a sharp decline in international tourism from Russia has also led to the strengthening of the ruble, and as a result the demand for foreign currency has naturally fallen, investment strategist at BCS World of Investments Alexander Bakhtin said. He noted that commodity prices remain high, which is also a positive sign for the Russian currency.

Meanwhile, experts interviewed by Izvestia note the sluggish dynamics of trading. The negative dynamics on Monday could reflect the lack of progress in the negotiations between Russia and Ukraine, as well as the expected increase in sanctions pressure, Director of the department for working with shares of Sistema Capital Management Company Konstantin Asaturov believes.

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