A five-day referendum on joining Russia kicked off in the Donbass republics and in the liberated territories of the Kherson and Zaporozhye Regions on September 23. The residents of these areas will be able to vote in various ways: at home, in public locations, or at polling stations. More than 5 mln people will become Russian citizens if they answer the referendum’s question in the affirmative. According to the local authorities, the regions are fully prepared for the procedure and security is guaranteed. Experts told the newspaper that the plebiscite would be conducted with the participation of Russian and foreign observers. To that end, a four-person delegation from Russia’s CEC along with over 100 representatives of regional election committees will take part.
The Independent Public Monitoring Association will also assist in ensuring the referendums’ transparency. The organization’s experts plan to remotely track the observance of voter rights during the entire balloting period, the association’s executive director Alyona Bulgakova told Izvestia. "We will conduct expert monitoring and check the observance of voter rights. We have contacts with civil society institutions on the territories of the Donetsk and Lugansk People’s Republics, and in the Zaporozhye and Kherson Regions. We will exchange information with our colleagues and make various decisions," she explained.
German political scientist Christoph Hoerstel who came to Donbass as an observer told the newspaper that people there want to finally exercise their rights after eight years of oppression. According to him, up till now, they have not had the opportunity to choose, which is undemocratic and undermines the reputation of Western countries.
Russia and Ukraine have conducted the largest POW exchange since the onset of the special military operation: Moscow got 55 servicemen and Ukrainian politician Viktor Medvedchuk, while Kiev got back 215 troops, including members of the Azov nationalist battalion (outlawed in Russia). However, sources in Russia’s parliament told Izvestia that this swap does not mean that Moscow and Kiev may go any further or renew talks on a peace deal. The POW swap was not hammered out directly but through the mediation of Saudi Arabia and Turkey.
"Russia and Ukraine do not have [a resource to reach agreements]. These were definitely not agreed on between Russia and Ukraine but between our and US secret services, maybe, also the British ones," Andrey Gurulev, a member of the State Duma Committee for Defense, told Izvestia.
"This is not about Medvedchuk. There were a lot of our servicemen and pilots, whom Ukraine was ready to trade only for Azov members. Can you imagine how much joy we brought to the families of these people who were languishing in captivity for months?" First Deputy Chairman of the Federation Council Committee on Foreign Affairs Vladimir Dzhabarov said. According to him, this is not about Medvedchuk, though he was among those who fought the Anti-Russia project in Ukraine, it’s about the freed Russian servicemen.
"The Arabs have been observing Turkey’s mediation for a very long time and concluded that it was time to join this effort," Yelena Suponina, an expert with the Russian Council on International Affairs, told Izvestia. "Saudi Arabia managed to preserve good relations with Russia without losing ties with the West. That said, the kingdom’s relations with the US have significantly deteriorated during the Biden administration and only now have some attempts to improve them emerged," she added, noting that Riyadh intends to use this mediation to bolster its positions in the Arab world and beyond. The expert thinks that Saudi Arabia will continue to get involved in the mediation process between Russia and Ukraine.
The imminent unification of the Zaporozhye Region with Russia as a result of the coming referendum on September 23 will raise the question of the Zaporozhye nuclear station’s status, the world's first nuclear power plant to be in an active combat zone. Europe’s largest nuclear station may end up in a grey area of international regulations which has also never happened before.
Only a Russian legal entity that has the necessary licenses and is included in a special list may operate a nuclear power plant in Russia, says Mergen Doraev, a partner at the EMPP Russian Law Firm. By default, this is done by Rosenergatom (part of Rosatom) but in order for it to obtain the property and create its subsidiary in the Zaporozhye Region, Ukraine’s Energoatom’s property has to be nationalized and included in the organization’s authorized capital, the expert says.
However, the IAEA is not likely to recognize the nuclear facility as Russia’s property. This is precisely what happened in 2014 with a research reactor in Sevastopol after Crimea reunited with Russia: the IAEA still considers it to be Ukrainian, senior associate at the UN Institute for Disarmament Research Andrey Baklitsky thinks. He cautions that the Zaporozhye plant will end up in the grey area with international interaction ceasing. That said, at the initiative of IAEA Director General Rafael Grossi, a new mechanism emerged: two staffers from the atomic agency remained at the nuclear plant as observers. "Until now, the IAEA could use the mechanism because Russia recognized the nuclear station as a Ukrainian one and provided access from the Ukraine. If this changes, it is difficult to envisage how the IAEA director general can continue this activity," the expert noted.
Western experts consider the Russian government’s three-year financial plan to be excessively optimistic, saying that an attempt to retain at least a nominal level of state expenditures may not produce any results. The government may cut the budget’s current financing by 10-15% in order to keep the deficit of federal coffers within 3% of GDP, according to the Institute of International Finance (IIF). In order to compensate for the lacking oil and gas revenues, Mikhail Mishustin’s government is planning to introduce new taxes, including on soft drinks.
Meanwhile, the IIF’s experts think that the Russian authorities will resort to weakening the ruble in order to receive a larger volume of ruble budget revenues.
According to their estimates, a change in the exchange rate by 10 rubles per dollar would change the budget revenues from crude oil, petroleum products and natural gas by 1.2% of GDP.
Russia’s Economic Development Ministry has adjusted its forecast on the ruble rate towards its strengthening. In 2022, the dollar’s annual average value is expected to be at 68.1 rubles/USD. In 2023, the authorities expect the national currency to weaken to 68.3 rubles/USD, in 2024 to 70.9 rubles/USD, and in 2025, to 72.2 rubles/USD. These parameters of the socio-economic development forecast are included in a document outlining the Finance Ministry’s main budget and tax policy trajectories made available to Vedomosti. The previous forecast made in late August envisaged the 2023-2025 exchange rate at the levels of 69.2 rubles/USD, 72.9 rubles/USD and 74.8 rubles/USD, respectively.
A drop in the ruble rate is forecasted as early as the end of this year, Natalya Lavrova, a BCS Global Markets senior economist, notes. According to her, the main cause is the drop in actual exports, the increased price discount on Urals oil and the further revival of imports. The introduction of a budget rule may become an additional factor which may both decrease the exchange rate’s volatility and stabilize it at lower levels, the expert thinks.
The ruble’s main support is still provided by high oil and gas prices, a substantial balance surplus and the policy of de-dollarization conducted by the Bank of Russia, according to Sovcombank Chief Analyst Mikhail Vasilyev. Russian companies and individuals still have supplies of unfriendly countries’ currencies worth tens of billions dollars which creates a potential market overhang and may facilitate the strengthening of the ruble, the expert adds.
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