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Press review: Who’s next to downgrade Russia ties and US won’t pursue lower price cap

Top stories from the Russian press on Wednesday, January 25th
Estonian Embassy in Moscow Artem Geodakyan/TASS
Estonian Embassy in Moscow
© Artem Geodakyan/TASS

MOSCOW, January 25. /TASS/. The West seeks to encourage Ukraine to step up military activities, a few more countries may downgrade diplomatic relations with Russia after the Baltic nations, and the US is unwilling to lower the price cap on Russian oil. These stories topped Wednesday’s newspaper headlines across Russia.


Nezavisimaya Gazeta: West seeks to encourage Ukraine to step up military activities

Chief of the Russian General Staff Army General Valery Gerasimov has confirmed that planned changes in the country’s armed forces will run parallel with the special military operation in Ukraine. Meanwhile, the United States is now openly emphasizing the need to step up weapons supplies to Kiev, Nezavisimaya Gazeta writes.

"The Russian military leadership has for the first time informed the public that three motorized infantry units will be formed in Russia’s two new regions, Kherson and Zaporozhye, as part of the Russian army’s integrated combined-arms force," military expert retired Lieutenant General Yury Netkachev points out. "The Armed Forces of Ukraine are also gathering strength and building reserves. While Moscow plans to form three new divisions in the special operations zone in the next three years, Kiev is already doing it," the analyst noted. He stressed that new packages of Western military aid to Kiev included armored personnel carriers, infantry fighting vehicles and tanks. This makes it clear that the Ukrainian military is gearing up for a large-scale offensive, with armored vehicles and perhaps aircraft from NATO countries potentially boosting Ukrainian troop mobility.

"Russia can prevent such actions by launching its own active offensive operation and taking further action to destroy the enemy’s critical infrastructure, particularly from the direction of Belarus, as it was done in February and March of 2022," military expert retired Colonel Nikolay Shulgin said. "Ukraine is apparently wary of such developments, which is why it continues to play a military and diplomatic game with Russia’s allies. This is how Belarusian President Alexander Lukashenko’s recent statement should be regarded, in which he said that Kiev had asked Minsk to conclude a non-aggression pact," the expert noted.

However, in his view, Ukraine will hardly succeed. "The Belarusian president has repeatedly stated that threats to the Union State [of Belarus and Russia] particularly come from Ukraine. This is the reason why Moscow and Minsk are pooling efforts to jointly ensure the security of their borders, organizing military drills and the training of units and formations from the Union State’s regional group of forces," Shulgin explained.


Izvestia: What countries could downgrade ties with Moscow after the Baltic states

The "war of embassies" between Russia and the European Union will continue in 2023 but there is no sign that ties will be completely severed in the near future, said experts interviewed by Izvestia amid mounting diplomatic tensions.

On January 23, Russia and Estonia announced that they were downgrading diplomatic relations to the charge d'affaires level. In solidarity with its neighbor, Latvia demanded that the Russian ambassador leave Riga, which triggered a tit-for-tat response from Moscow. EU countries started to massively expel Russian diplomatic workers in 2022 in a show of support for Ukraine. About 600 diplomats have so far returned to Russia, while Moscow has expelled about 300 members of European diplomatic missions.

Experts doubt that the purge of ambassadors will dramatically affect the work of diplomatic missions. "The absence of an ambassador is always a complicating factor but still, it’s not critical. Problems can be discussed and solved via other channels, including through the central offices of foreign ministries," Russian International Affairs Council Director General Andrey Kortunov noted.

Warsaw could demonstrate solidarity with the Baltic states, given Poland’s strained relationship with Russia. "Together with the Baltic nations, Poland is at the anti-Russian policy’s forefront, so the downgrading of relations with Warsaw cannot be ruled out," said Deputy Director of Higher School of Economics’ Center for Comprehensive European and International Studies Dmitry Suslov.

The Czech Republic, which significantly reduced Russia’s diplomatic staff before February 2022, is another candidate for building up the diplomatic crisis. However, former Czech parliament member Jaroslav Golik told the paper that downgrading diplomatic ties would be a silly thing to do, given the already reduced embassy staff. "There is a need to search for ways to cooperate instead of creating new barriers," he noted.

Suslov believes that it’s too early to talk about the downgrading of diplomatic relations with major EU countries, let alone severing ties. However, Kortunov expects that the diplomatic war will continue in one form or another. "Restrictions on the number of diplomats will be imposed in countries where there are both embassies and consulates. It’s hard to say at this point whether it will lead to the recall of ambassadors. I think that a couple of countries may show their solidarity with the Baltic nations but the number won’t be high," the expert emphasized.

In the meantime, Kortunov does not rule out that there will be more restrictions from the European Union, including the reduction of the Russian permanent mission’s staff in Brussels. Russia has not yet appointed its new permanent envoy to the EU, while the EU’s new Ambassador Roland Galharague arrived in Moscow in late September 2022.


Nezavisimaya Gazeta: US House speaker’s potential visit to Taiwan to harm relations with China

US House of Representatives Speaker Kevin McCarthy’s possible trip to Taiwan has alarmed the Pentagon. The US Department of Defense is getting ready to see Beijing responding to the visit in the same way it did when former House Speaker Nancy Pelosi traveled to the island in 2022, that is, by displaying its military might. US and Chinese officials maintain contact, trying to stabilize relations between the two countries. As for Washington, it seeks to kill two birds with one stone, calling on Beijing to show restraint on the Taiwan issue and refrain from providing assistance to Russia, Nezavisimaya Gazeta notes.

"The exact date of McCarthy’s trip is unclear. In any case, it will happen after US Secretary of State Antony Blinken’s visit to China. It’s possible that the house speaker’s trip will raise tensions but I hope that it won’t lead to a use-of-force scenario. When emotions ran high over Pelosi’s visit back in August, many commentators said that a real attack might follow military drills," Head of the School of Asian Studies at Higher School of Economics Andrey Karneyev noted.

"Given the lessons of military activities on the European front, China will exercise the greatest caution, operating on the principle of ‘measure twice, cut once.’ China has long taken a position, making it clear that it could use force if Taiwan declares independence or indefinitely postpones reunification," the expert explained.

Scientific Director of the Russian Academy of Sciences’ Institute of China and Contemporary Asia Alexander Lukin believes that US President Joe Biden "has actually been written off as a presidential candidate, while McCarthy surely can become one." "He wants to show how cool and independent he is and McCarthy doesn’t care that creating such a reputation for himself will damage US-China relations," the analyst said.


Rossiyskaya Gazeta: Why US is unwilling to lower price cap on Russian oil

The European Union’s embargo on the import of Russian oil products and the introduction of a price cap on them have been officially cited as the reason why talks on lowering the Russian oil price ceiling were moved to March. The authors of the sanctions say they want to figure out how the market will react to those measures, which will come into force on February 5, and then make a decision, Rossiyskaya Gazeta writes.

Earlier, it was expected that the price cap on Russian oil would be reduced to $55 per barrel from the current level of $60. Many EU countries called for the move but the US opposed it. It’s not that the US is concerned about a possible decline in Russian oil export. The reason behind its cautious approach is that Western sanctions on Moscow have already plunged the global market into such chaos that a hasty decision could lead to completely unexpected results. All the oil prices would simply go up, pulling Russian oil prices higher too.

Today, Russian Urals crude oil prices don’t depend on the ceiling, Associate Professor at the Russian Government’s Financial University Valery Andrianov said. They are determined by demand in the Asia-Pacific region, which tends to grow, and oil tanker freight rates. However, lowering the price cap can indeed result in a rise in benchmark crude rates because a too low level will make the market’s "gray zone" unprofitable, putting an end to Europe’s dream to get Russian oil disguised as commodities from other countries and at a low price, the expert noted. In other words, the global oil market will become increasingly fragmented with Asia-Pacific countries receiving Russian oil at low prices and Europe having to pay through the nose.

The very introduction of the price ceiling was a difficult and resolute step, which triggered a series of measures aimed at the adaptation of buyers to the cap and response actions from Russia and Russian suppliers, Deputy Dean of Moscow State University's Economic Department Alexander Kurdin pointed out. Not all the effects of this new landscape are clear yet so many are unwilling to make further sharp moves.


Izvestia: Will China’s yuan replace US dollar

For a long time, America’s greenback was the benchmark for determining the exchange rate of Russia’s ruble but the Chinese yuan has gradually been taking the dollar’s place over the past months. Yuan trading volumes have been growing on the Moscow Exchange, approaching those of the dollar, Izvestia writes.

The yuan is gaining more clout in global trade and its share in Russian-Chinese trade is rapidly increasing. There also are other reasons for rising interest in the Chinese currency. "The currencies that were traditionally used for transactions and savings, including the dollar, the euro and the British pound, are becoming toxic in banks for Russian companies and individuals. There are restrictions in terms of their use and transfers, which mean high fees and there is the risk of being blocked. In this regard, the yuan carries fewer risks of this sort," Chief Analyst at TeleTrade Mark Goikhman emphasized.

"The savings that the Finance Ministry will probably start making after closing the deficit are planned to be made in yuan. Clearly, it will have a positive impact on the ruble’s rate because freezing yuan savings or banning yuan conversion will be quite difficult," financial analyst Artyom Zvezdin added.

On the one hand, the rise in yuan trading and the share of yuan in payments helps stabilize the Russian currency’s exchange rate and create better conditions for investment in the Russian economy. However, as the national currency of a developing country, the yuan is quite volatile and also subject to sectoral risks.

According to experts, as more countries start to use the yuan, and trade between Russia and China grows, ruble/yuan trading will exceed that of the dollar. However, it’s too early to talk about the yuan replacing the greenback in terms of exchange rate formation and Russia’s external economic relations. The yuan’s share in international payments needs to rise multiple times and a vast majority of countries need to recognize and start using the yuan in order for the Chinese currency to at least be able to equal the dollar.

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