Izvestia: Russia seeks to escape technical default

Foreign creditors will accept Russia’s payment on its international debt obligations, which will allow the country to avoid a technical default, said experts interviewed by Izvestia. May 4 marks the end of a grace period when Russia had to make a payment on two sovereign bonds. The payment was made in dollars and now the US and UK regulators need to approve the transaction.

Concerns about Russia’s possible default started rising amid Western sanctions, which include the freezing of about $300 bln from Russia’s gold and foreign currency reserves. The first payment after the introduction of the sanctions was due on March 17. At that time, the Russian Finance Ministry issued a payment order involving the frozen reserves and the US Department of the Treasury provided a special license. However, Russia’s next payment was rejected on April 4. The Finance Ministry then made a payment in rubles but the money was sent back. This was when a month-long grace period began so Russia could have faced a technical default on May 4. However, the Russian Finance Ministry announced on April 29 that it had made foreign currency payments. According to Bloomberg, the move involved domestic dollar reserves.

The Western regulators are unlikely to reject the payment on Russia’s sovereign debt, Associate Professor at the Plekhanov Russian University of Economics Denis Domashchenko pointed out. According to him, the West has achieved its goal, making Russia use the part of its foreign currency reserves that wasn’t frozen. Foreign creditors expect that they will be able to make money through long-term investment in Russia so there is no need to push the country towards a default, the expert noted.

Russia earns a lot of foreign currency from exports, making more than $500 bln in a year, TeleTrade Chief Analyst Mark Goikhman emphasized. In no way are there insufficient funds, even if it is about paying the entire foreign debt. This is why there can be no debt default, which happens when a borrower has no money to make payments or refuses to pay, the analyst stressed.

 

Vedomosti: Russia, Israel engage in war of words over Ukraine

The Russian Foreign Ministry has reacted to Israeli top diplomat Yair Lapid’s demand that Russian Foreign Minister Sergey Lavrov apologize for his statement that one of the goals of Russia’s special military operation in Ukraine, the country’s denazification, cannot contradict the fact that Ukrainian President Vladimir Zelensky is Jewish. Lapid said that accusing Jews of being antisemitic was racism. In response, the Russian Foreign Ministry blamed Israel for supporting the "neo-Nazi regime" in Kiev, where "antisemitism has blossomed" since 2014, Vedomosti writes.

Until early April, Israel held a cautious stance on Ukraine. Tel Aviv was providing humanitarian assistance to Kiev, accepting refugees and making efforts as a mediator to help resolve the situation. On May 3, the Haaretz newspaper reported, citing sources, that Israel planned to increase the volume of military and civilian cargo being sent to Ukraine, seeking, however, to avoid a radical deterioration of relations with Russia. This is why, according to Haaretz, the aid will more likely be a symbolic step.

As far as Tel Aviv is concerned, Moscow is an important player in the Middle East as it can influence the situation around Iran, particularly as a participant in the nuclear deal, said Dmitry Maryasis, who heads the Department of Israel Studies at the Russian Academy of Sciences Institute of Oriental Studies. Besides, Israel needs to be able to maintain peaceful contact with Russia’s Jewish community, the expert added.

Israel is not interested in tensions with Russia, orientalist scholar Alexandra Appelberg noted. However, the country’s government is under constant pressure to more explicitly denounce Russia, she added. "Tel-Aviv’s military and humanitarian aid is far from what Western countries are providing to Ukraine and what Israel could potentially do. Still, Lavrov apparently understands that Israel condemns Russia’s actions and supports Ukraine," Appelberg said.

 

Izvestia: Russia to increase freight transport along Northern Sea Route

Western sanctions haven’t affected freight transport on the Northern Sea Route and there are plans to transport 32 mln tonnes of cargo along the route in 2022, Izvestia writes, citing Russia’s Rosatom State Nuclear Energy Corporation. The figure is expected to rise 2.5-fold to 80 mln tonnes a year by 2024.

When speaking about the exit of major players from the Russian market, namely the Maersk shipping company, Rosatom pointed out that "no major foreign companies were involved in freight transport activities on the Northern Sea Route." Meanwhile, China’s interest in the route is growing, Rosatom added.

The sanctions won’t have any impact on the construction of Russia’s icebreaker fleet as it is fully funded and more than 90% of components are made domestically, the Atomflot company noted.

Professor with the Department of International Relations and Political Science at the Northern Arctic Federal University Konstantin Zaikov pointed out that the main goal in terms of the Northern Sea Route was to ensure the escort of ship convoys. "The Northern Sea route has so far been used for exporting goods mostly to the West. We can see that in the current situation, exports will have to be redirected to the east, which will require powerful icebreaker support because the eastern part of the Arctic is covered with ice most of the year," the expert explained.

European companies will not abandon the Northern Sea Route, Zaikov stressed. However, most of them "have taken a break" until foreign policy tensions ease. Russia needs to build infrastructure facilities and ensure logistics in order to bolster cargo transit and increase the Northern Sea Route’s attractiveness in the eyes of foreign companies. It is a national priority, the expert stressed.

 

Vedomosti: Where protests will lead Armenia

Opposition forces in Armenia against Prime Minister Nikol Pashinyan are holding major protests in the country’s capital of Yerevan. This turbulence was triggered by the prime minister’s statement on Nagorno-Karabakh, Vedomosti notes.

When addressing the Armenian parliament on April 13, Pashinyan said that the international community demanded that Armenia should "lower the bar" in terms of the Karabakh issue. "We have stated that Armenia has never had territorial claims against Azerbaijan, while the Karabakh issue is a legal issue rather than a territorial one. The status of Karabakh is not a goal but a tool for ensuring the safety and rights of Armenians in Nagorno-Karabakh," the Armenian prime minister emphasized. Following the statement, the opposition accused Pashinyan of plans "to give up Karabakh."

Despite the political drama in Armenia, Pashinyan is quite capable of retaining power, Senior Researcher with the Center for Post-Soviet Studies at the Russian Academy of Sciences' Institute of World Economy and International Relations Stanislav Pritchin noted. According to him, Pashinyan is a skilled politician who has been able to maintain his position even after losing a war. Pashinyan has supporters in Armenia’s society and he also knows how to deal with those who take to the streets.

Pashinyan was more likely to be ousted during the protests that carried on in 2020 and 2021, but it did not happen then. However, today, Armenia’s public has accepted the actual Karabakh defeat, Caucasus researcher Nurlan Gasymov pointed out. Pashinyan is standing on firm ground because the previous protests took place before elections and now, the electoral cycle is over and he enjoys a free hand. The expert believes that even after Pashinyan’s term is over, forces demanding a reconsideration of the outcome of the war are unlikely to come to power. The negotiation process with Azerbaijan will be a long one and Pashinyan is paving the way for it because an agreement will have to be made in any case, Gasymov emphasized.

 

Kommersant: Looming US recession may support gold prices

Gold prices plunged to their lowest levels since mid-February on May 3. The prices are being affected by expectations of a sharp tightening of the US Federal Reserve’s monetary policy. However, prices may be supported by a looming recession in the US and demand from some countries’ central banks that seek to diversify their foreign currency reserves, Kommersant writes.

Sovcombank Chief Analyst Mikhail Vasilyev points out that gold is competing with other defensive assets, which include dollar deposits and US treasury bonds.

Head of Personal Brokerage Services at BCS World of Investment Sergey Yermolenko noted that the current geopolitical tensions "make it possible to simulate future development scenarios, which helps market participants purposefully rebalance portfolios." As a result, gold is once again losing its attractiveness as there are no dividend payments and coupons.

However, certain factors may support gold prices. According to Freedom Finance Leading Analyst Natalya Milchakova, reports of some central banks increasing the share of gold in their international reserves may stop gold prices from falling further.

Vasilyev stressed that the US government bond yield curve "continues to flatten and there is inversion on some segments, which indicates a looming economic downturn." This is why Milchakova does not rule out that after the US regulator announces its decision, the dollar may weaken and gold may rise in price.

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