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Press review: What’s on the World Economic Forum’s agenda and US seeks better China ties

Top stories from the Russian press on Wednesday, January 18th

MOSCOW, January 18. /TASS/. Participants in the World Economic Forum in Davos are discussing "Cooperation in a Fragmented World," the US seeks to improve relations with China at Russia’s expense and the world is about to pay a high price for economic wars. These stories topped Wednesday’s newspaper headlines across Russia.


Izvestia: Global elites searching for way out of crisis at Davos

Business discussions kicked off at the World Economic Forum in Davos on January 17. Representatives of the European Union, China and the United States expressed their views about "cooperation in a fragmented world." Western countries pledged to create a tank brigade for Ukraine. European Commission President Ursula von der Leyen, in turn, emphasized the need to step up global green policy after rejecting Russian energy. However, experts interviewed by Izvesita doubt that Brussels will be able to easily carry out its plans.

Although participants in the World Economic Forum in Davos mostly discuss economic challenges, this time, the Ukrainian crisis came under the spotlight as it proved to be the main catalyst of changes in terms of international cooperation. However, there were calls for increasing weapons supplies to Ukraine instead of ideas about ending the energy crisis and avoiding a recession.

Meanwhile, European Commission President Ursula von der Leyen expressed confidence that Europe should take advantage of shunning Russian energy in order to diversify supplies and boost efforts to shift to green energy. However, "while replacing Russia, its former major energy partner, the EU is becoming dependent on the US and Norway," Deputy Director of the Russian Academy of Sciences’ Institute for Europe Vladislav Belov pointed out.

In a bid to achieve its green goals, the EU is betting on a partnership with China. Chinese Vice Premier Liu He said in his address to the Davos meeting that Beijing’s goal to reach zero emissions by 2060 was not imposed from outside. He also highlighted the importance of international cooperation for ensuring global economic stability. "China will engage with the US and the EU on green economy issues, though not in a subordinate position, but through creating a greed agenda for the developing countries of the Global South. In the coming years, we will see China play an increasingly crucial role in establishing a single platform for these nations," Russian International Affairs Council member Yaroslav Lisovolik noted. This is why, in his words, China’s cooperation with the EU and the US will not affect its partnership with Russia.


Nezavisimaya Gazeta: US seeks to improve relations with China at Russia’s expense

US Secretary of the Treasury Janet Yellen will meet with Chinese Vice Premier Liu He in Zurich on Wednesday. After that, US Secretary of State Antony Blinken will travel to Beijing to discuss the Ukraine issue, China’s nuclear arsenal and the resumption of contact between the two countries’ militaries. The US also wants to probe how strong the Chinese-Russian partnership is, Nezavisimaya Gazeta notes.

Senior Researcher at the Higher School of Economics Vasily Kashin points out that both the United States and China "would like to put the deterioration of relations on hold and or at least make it manageable."

"I believe that Blinken’s visit is actually unlikely to change relations. As for Washington’s desire to sow discord between Beijing and Moscow, there’s more rhetoric than truth here," the expert went on to say.

"The Americans keep saying that China will sooner or later abandon Russia. The Chinese also use rhetoric, which depends on who they talk to. When the Chinese deal with the Europeans and the Americans, they do verbally distance themselves from Russia. But the reality is different," Kashin explained. Bilateral trade skyrocketed last year, making it possible for Russia to ensure economic sustainability. Chinese industrial enterprises are replacing the foreign companies that left the Russian market, the expert stressed.

"As for nuclear arsenal talks, it is indeed an important issue for the Americans. China is the only official nuclear power that is rapidly building up its arsenal, as well as intercontinental ballistic missiles. This raises the question of creating communication channels to prevent conflicts and ensure at least a minimum level of transparency," Kashin emphasized.


Nezavisimaya Gazeta: People across the world to pay high price for economic wars

The damage from economic conflicts, fragmentation and regionalization processes became a key topic at the World Economic Forum in Davos. Experts from the International Monetary Fund expect the fragmentation of the global economy to cost up to seven percent of global GDP, Nezavisimaya Gazeta writes.

European politicians are confident that the world is about to face more economic conflicts and trade wars. Europe is concerned that the United States’ Inflation Reduction Act will become a serious problem. In response, France suggests the EU adopt its own "Made in Europe" strategy. Meanwhile, the IMF is warning about the risks that the fragmentation of the global economy carries.

However, experts doubt that the process will seriously affect Russia. "Russia mostly exports standard goods, the demand for which is not directly impacted by fragmentation issues," said Sergey Khestanov, an advisor to the Otkritie Investment company’s director general. Still, in his words, the possibility of a tougher trade standoff between the US and China does pose a danger. "China is an important buyer of Russian commodities and any slowdown in its economy will noticeably impact Russia’s economy," the expert noted.

"The sanctions that have been imposed are gradually cutting Russia off from the global financial system and the previously formed markets. Supply chains for commodities and other goods are being redirected from the West to the East. That said, Russia is already going through what other countries will face in the future," Freedom Finance Global analyst Yelena Belyayeva pointed out.

For Russia, the fragmentation of the global economy means a chance to shift from the resource-based economic model to a more diversified one, where the share of manufacturing industries will significantly grow, TeleTrade analyst Alexey Fyodorov stressed.


Rossiyskaya Gazeta: Russian gas almost completely disappears from EU’s market

Europe’s stock prices for gas have dropped below $600 per 1,000 cubic meters. The prices are very likely to start rising again when the cold weather sets in but it’s not as important for Russia now as it was, say, a year ago. Russia gained the maximum benefit from Europe’s gas market in 2021-2022, but the country’s economy and gas industry no longer depend on stock prices in Europe.

Turkey aside, the export of Russian pipeline gas to Europe has nosedived by 4.5 times. While 25% of the country’s gas used to be exported to the West, now, the share has fallen to 10% and even to 5% if Turkey is excluded. So only five percent of exports are tightly tied to Europe’s stock prices.

Oil prices have been far more stable in recent years compared to the situation at gas hubs, where volatility is extremely high, deputy head of the National Energy Security Fund Alexey Grivach noted. This is why many buyers once again seek to make contracts based on oil prices, he added.

However, Kirill Rodionov from the Institute for the Development of Technologies believes that, despite last year’s price rise, European customers will hardly return to long-term contracts linked to oil prices. According to head of the Energy Development Center Kirill Melnikov, the gas market is becoming more global because of liquefied natural gas trade that is increasingly based on hub indexation. The 2022 gas price surge certainly worsened customers’ outlook on the hub linkage but a return to the oil price linkage looks doubtful.


Media: Russian Central Bank to offer yuan liquidity to banks

Russia’s Central Bank is launching Chinese yuan currency swaps as a new financial instrument. It is a reasonable substitute for swaps involving "unfriendly" currencies that the Central Banks dropped in the wake of sanctions. The tool is expected to reduce the excessive demand for the Chinese currency and smooth out volatility spikes on the market, Kommersant writes.

On January 19, the Russian Central Bank will start making one-day deals with banks, selling them yuans for rubles. The Central Bank plans to use the instrument to limit the volatility of money market rates in case imbalances arise. At the same time, the new instrument’s importance will grow due to rising payments in national currencies between Russian and Chinese companies.

Chief Economist at PF Capital Yevgeny Nadorshin points out that the Central Bank is currently unable to effectively use the dollar swap instrument throughout the market because of sanctions. When usual currency swaps cannot respond to the needs of the entire market, they need to be replaced and the yuan is quite appropriate for that purpose, the analyst noted.

The new instrument will expand the opportunities for banks and other financial market participants to satisfy their needs for currency liquidity, said Director of Sistema Capital Management Company’s equity department Konstantin Asaturov. It will also become a positive step for both Russian and Chinese big businesses that have direct access to the exchange, as companies will be able to quickly and flexibly get rubles and yuans for contract payments, the expert added.

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