The EU’s sanctions policy and its desire to abandon Russian energy products may cost Europe up to 1.6 trln euros in 2023, according to analysts of Yakov & Partners, McKinsey’s former Russian division.
In the consulting company’s study of the current European energy situation available to Vedomosti, the experts note that EU countries have launched "active regulatory and financial interventions," attempting to mitigate the impact of the ongoing energy crisis. According to them, the main downside is the possible loss of competitiveness and the subsequent shutdown of a number of the most energy-intensive industries due to a lack of gas and the overall price hike on energy products.
"Conducting the interventions will lead to a budget deficit of up to 2 trln euros annually with the level of the debt burden of the EU’s state sector at 100% of GDP," partner at Yakov & Partners and the study’s co-author Yelena Kuznetsova concludes.
Overall, experts polled by the newspaper agree with these conclusions. Finam analyst Alexey Kalachev stresses that the successful development of the European economy "to a significant degree was ensured" by accessible energy resources, including those from Russia. Sergey Grishunin, managing director of the NRA's rating service, thinks that the worst-case scenarios of a slump in production in the EU are "very unlikely." "Enterprises will shut down gradually. This will be followed by a price hike on their products which will allow them to retain an acceptable level of profitability of remaining capacities," he explains.
In order to stabilize gas prices it is necessary to reduce consumption or increase deliveries of energy products, according to Finam analyst Alexey Kovalev. Yet, according to him, it is already impossible to further reduce consumption. Therefore, in his opinion, a price lower than $600 per 1,000 cubic meters "is not on the horizon for 2-3 years." Kalachev thinks that the further development of EU economies will depend on how long the rupture of economic ties between the EU and Russia is going to last.
The new regions that joined Russia do not want to be subsidized and are ready to contribute to the country’s budget, their officials told Izvestia after four international treaties had been ratified and the Federation Council approved constitutional laws on October 4. The Donbass republics are known for their coal production, major metallurgic enterprises as well as mechanical engineering and food industries. The Kherson and Zaporozhye Regions are famous for their rich agriculture. The new regions see certain difficulties in organizing local governance, but no one expects their instant integration into the Russian system - in general, this will take several years.
Chairman of the LPR People’s Council, Denis Miroshnichenko reiterated that since Soviet times, Donbass has been known for its developed coal industry while currently the LPR has large metallurgic enterprises that can be useful to Russia. He noted that people who can and love working are the region’s main asset.
The Donetsk People’s Republic is ready to contribute in the sphere of metallurgy, mechanical engineering and the food industry, Chairman of the DPR People’s Council Vladimir Bidevka said. He stressed that the republic has substantial economic potential and therefore does not want to be perceived as a subsidized region. "The Donetsk People’s Republic, when it was Ukraine’s region, amounted to more than 20% of its GDP. And about 30% of the country’s foreign currency revenues was thanks to the Donetsk Region. We really hope and want for the DPR to be useful to Russia and become a full-fledged region which will contribute to its development," he told the newspaper.
Crimean senator, member of the Federation Council (upper house) Committee on Constitutional Legislation and State Building Olga Kovitidi, in a conversation with Izvestia also talked about the regions’ future fate. According to her, the Kherson and Zaporozhye Regions can contribute a lot to the country’s well-being since these are large agricultural regions rich in vegetables, fruit and grain. However, major work is ahead on mine-sweeping their lands and clearing them of abandoned equipment.
Ukrainian President Vladimir Zelensky issued an official decree blocking any possibility of talks with Russian leader Vladimir Putin. However, at this stage, Western sponsors instructed Kiev to widen its window of opportunity on the battlefield and wouldn’t have allowed it to continue negotiations with Moscow anyway, according to experts. They were also skeptical about the emergence of any alternative Russian negotiators.
Is it possible for Zelensky to change his stance in the future? Replying to this question, Russian International Affairs Council Director General Andrey Kortunov told the newspaper that a lot would be determined by subsequent developments. "Anything is possible. And, of course, everyone can change their mind. Yet for a political leader it is difficult to do so without losing face. It seems that in this case, Zelensky has taken yet another step towards the irreversibility of events," he said. In his opinion, it is impossible to negotiate a political settlement under the current circumstances. And apparently, the Kremlin foresaw the possibility of this happening since no Ukrainian leader would have recognized that Kiev lost not only Donbass but also the country’s southern regions.
It is obvious that the West wouldn’t have allowed Kiev to resume negotiations with Moscow, says leading researcher of the Institute of CIS countries Alexander Dudchak. Ukraine still has resources to carry on so it was recommended to get the most out of them before the winter season, the expert says.
Under these circumstances, in his opinion, it is only possible to talk about capitulation in the future. And in this sense, by rejecting peace talks, Zelensky even did Moscow a favor. That said, dialogue on other issues not consistent with Russia’s interests should be rejected as well, such as the grain deal, the conditions of which, according to the Russian president, were violated, the expert pointed out.
Ex-US Secretary of State Henry Kissinger is trying to rescue his brainchild - the US-Chinese alliance. Speaking at a forum of New York’s Asia Society, he expressed concern over a potential war between Washington and Beijing over Taiwan. He hoped that a meeting between Xi Jinping and Joe Biden at the November G20 summit would decrease tensions. According to Kissinger, the Chinese leader is heading in this direction, being dissatisfied with the progress of Russia’s special military operation in Ukraine. The veteran diplomat thinks that Xi is concerned that the West will impose harsh sanctions on China for supporting Moscow.
In a conversation with the newspaper, Deputy Director of the Russian Academy of Sciences’ Institute of World Economy and International Relations Alexander Lomanov noted: "Kissinger, of course, deserves respect since, while having lived to this age and keeping a clear mind, he is fighting as hard as possible for resuming dialogue between the US and China. This is his life’s work, he was there at the inception. He is mostly alarmed by the robotic weapons systems which may accidentally harm both countries. Here his logic is convincing. Yet when <...> he says that Xi, essentially, gave Putin a free hand, this sounds more like a fantasy. We don’t know the content of that conversation. Yet, knowing Moscow’s adherence to the principle of state sovereignty, it is hard to imagine that Russia would or wouldn’t do something depending on China’s will."
The very suggestion that Putin and Xi discussed something in February and now Xi is thinking of taking the US’ side is absurd, the expert thinks. "This is an exaggeration with the US audience in mind. Kissinger has to convince the political elite and society that there are possibilities for dialogue with China, that China will be happy to do so and will even reject its partnership with Russia in favor of a partnership with the US. Yet this is an illusory plan, it is unlikely that Washington will be guided by it," Lomanov concluded.
Russian companies have already started to conduct trans-border deals using cryptocurrencies although these deals have not yet been officially regulated, Head of Financial Policy Department at the Ministry of Finance Ivan Chebeskov told Izvestia. The Chamber of Commerce and Industry explained that the digital currencies are mostly used for deals with unfriendly states, above all, with exports of Russian products and imports of industrial components. Amid sanctions, the volume of such deals has increased several fold.
The use of cryptocurrencies against the backdrop of sanctions should help settle international payments since traditional channels have largely folded or completely shut down, says Co-Chairman of the Delovaya Rossiya (Business Russia) Association Anton Danilov-Danilyan. In his opinion, it is better to conduct such deals in a centralized format, through stock markets.
Conducting cryptocurrency deals widens the possible circle of partners for Russian companies, moreover, such payments may remain outside of sanctions control in some countries, Finam analyst Leonid Delitsyn says. In his assessment, over the past year, the volume of trans-border cryptocurrency deals has reached about $5-10 bln while after their legalization, this figure may grow to $15-20 bln.
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