MOSCOW, April 18. /TASS/. Russia conducts snap large-scale Pacific Fleet maneuvers in the Far East amid escalation around Taiwan; Beijing may retaliate against US and EU sanctions, while US sanctions regulator OFAC published an alert on possible evasion of the Russian oil price cap. These stories topped Tuesday’s newspaper headlines across Russia.
Izvestia: Russia’s maneuvers in Far East come amid escalation around Taiwan
On Monday, Russian President Vladimir Putin praised the first stage of the Pacific Fleet maneuvers that began on April 14 and said that the Navy could be used "for the resolution of conflicts anywhere." Russian defense chief Sergey Shoigu told the president that the Pacific Fleet’s snap inspection exercise involved 25,000 military personnel.
Chinese Defense Minister Li Shangfu arrived in Moscow during the exercise, which comes amid the latest escalation around Taiwan. Earlier this month, a series of Chinese drills, designated Joint Sword, were conducted in the region, and on their heels, major maneuvers involving 12,200 US troops kicked off in the Philippines. In addition, reports emerged on Monday that the United States has sent 200 military advisers to Taiwan. Experts interviewed by Izvestia say that an axis against Russia, China and North Korea is currently being formed in the region, and therefore strengthening defense cooperation is necessary.
According to military expert Yury Lyamin, such inspections and enhanced training for the Pacific Fleet and troops deployed in the Far East are extremely important. "Things have escalated across the region - around Taiwan and the Korean Peninsula; Japan has taken the path toward increasing militarization and a sharp increase in its defense budget. They have three major adversaries: China, North Korea and Russia. Given the unsettled territorial disputes, Japan has a claim on our southern Kuril Islands. Against this backdrop, it is necessary to hold such inspections. And it is equally necessary to improve the readiness of our forces in the Far East," he told the newspaper.
Also, Russia should further boost its cooperation with the People’s Republic of China in these circumstances, Lyamin insisted. "Actually, an axis is being formed against Russia, North Korea and China between the United States, Japan, South Korea and Taiwan, and it is making inroads toward Australia," the expert added. "Great Britain is trying to play an active part, sending its warships to the Pacific Ocean. All of this should be taken into account while interacting with China and North Korea, which, in this case, appear to be our natural allies," he concluded.
Vedomosti: China preparing countermeasures in response to US, EU sanctions
Beijing is starting to target the United States, which has imposed multiple trade and technology restrictions on China in the past five years, particularly in the critical area of semiconductors. But, China has many sensitive levers it can pull in response, the Financial Times reported on Monday. Beijing is now considering curbing Western access to materials and technologies critical to the global auto industry, the FT writes. Among other measures, China may restrict exports of rare earth metals and LiDAR (light detection and ranging) technology, used in mapping for driverless cars, to the United States and Europe, the FT said.
Vasily Kashin, head of the Center for Comprehensive European and International Studies at the Higher School of Economics (HSE University), believes that China will act with its trademark prudence amid worsening relations with the United States, as it will select those areas that would have minimal costs for its own economy, putting pressure on certain segments of the market. These could include the export of equipment or semi-finished products for the production of solar batteries or an embargo on rare earth metals for electronics manufacturers. China could retaliate against both repressive US [sanction] actions as well as any irksome moves by Washington with regard to Taiwan, the expert told Vedomosti. While Kashin is not certain if Beijing would be ready to take the initiative, it may pursue an increasingly tough line in response. In general, Chinese sanctions will target those [countries] that have been pursuing a policy of discrimination against Chinese players in their markets, the expert warned.
Although the US has been accelerating its sanctions against China, they are still of low intensity if compared to the anti-Russian restrictions, said Ivan Timofeyev, program director at the Russian International Affairs Council. China has its mechanisms ready, and it has already prepared a legal framework and legal mechanisms that will enable it to slap blocking sanctions on foreign individuals, and it may respond soon if the US continues to exert pressure on China, the expert said. China’s market is its key leverage, and certain US companies may be restricted in their operations. Or, it could target selected exports, specifically supplies of rare earth metals, which are important for the US. However, the Chinese economy is closely integrated into the global economy and any severing of ties between China and the US, especially in an uncontrolled manner, could trigger serious consequences, Timofeyev concluded.
Kommersant: US issues alert to warn against possible evasion of Russian oil cap
On Monday, the US Treasury Department’s Office of Foreign Assets Control (OFAC) alerted US persons about possible cases of evasion of the price cap on Russian crude. The US Treasury Department has for the first time acknowledged the possible existence of what it said were "deceptive practices" under which Russia’s ESPO (Eastern Siberia-Pacific Ocean pipeline) oil exports via Far Eastern ports may be trading above the price cap. Although the relevant OFAC document does not mention specific instances of price cap violations or the sanctions that such cases of evasion could trigger, the US sanctions regulator said it was aware of reports that Russian crude may be trading above the oil price ceiling and that they may be using covered services provided by US persons (US citizens or permanent residents - TASS).
According to OFAC, some tankers may be manipulating their Automatic Identification Systems (AIS) to mask their calling at ports in the Russian Far East, or may be using ship-to-ship transfers to disguise the origin of Russian oil. OFAC recommended that US persons view AIS manipulation masking a tanker’s port of call in Russia as evidence of possible evasion of the oil price cap.
What this OFAC warning boils down to, in fact, is an instruction to US companies that they can refer to for ensuring their compliance and preventing their involvement in transactions aimed at circumventing the sanctions and, thereby, avoid subsequent prosecution for violating sanctions, Kristina Ikayeva, a commercial lawyer at the Kosenkov and Suvorov law firm, told Kommersant. According to Yekaterina Makeyeva, a partner at another law firm, A-PRO, "OFAC will likely pay more attention to whistleblowing practices, as it encourages those in the supply chain to record information about locations or delivery details and then looks for ways to get access to that information."
It is unclear to what extent potential US sanctions on participants in Russian oil trading may affect ESPO oil flows, given that China is the main market for both seaborne and pipeline crude deliveries. Maritime shipments remain the most exposed to sanctions, with the overwhelming bulk of tankers insured under insurance and re-insurance contracts underwritten by Western companies. Industry officials told Kommersant that, in theory, the sanctions pressure could widen the ESPO discount to Brent, but it would hardly affect supply volumes.
Izvestia: Why Musk canceled launch of most powerful rocket ever
On April 17, Elon Musk’s SpaceX scrubbed the scheduled test launch of the Starship rocket system, delaying the vehicle’s historic first launch attempt, because of a technical issue. Starship, which is designed for transporting people to Mars and the Moon in the future, as well as the Super Heavy booster rocket, should get off the ground by the end of 2023, experts interviewed by Izvestia said.
Musk is developing a new rocket, unseen in the history of space exploration, so one should not expect that it could be launched right away, industry expert Alexander Zheleznyakov said. That is a very complex system, and there are many details to be considered ahead of test flights. To him, the fact that the launch did not take place on Monday was entirely to be expected.
While Musk himself doubted his rocket would be launched successfully and the launch was delayed, the project could, in principle, be implemented, say, by a private company. This is a good project for luring investors into the industry, Alpha Robotics Venture CEO Vladimir Bely said. Russia should also develop heavy rockets that could deliver a large amount of cargo into orbit and to the Moon, he argued. It is worth taking part in the race for who will occupy the Earth’s satellite because the winner will obtain a launching pad for deeper space exploration, the expert emphasized.
For Andrey Ionin, corresponding member of the Russian Academy of Cosmonautics, Musk’s Starship is the next step in rocket engineering. Musk designed his Raptor rocket engine so that it can be switched off and back on and it can also be accelerated from zero to 100% power, which is unprecedented. Since the Soviet N1 rocket, the simultaneous use of multiple engines has been a taboo in the space industry, while Musk is planning to make a breakthrough here, using digital control devices. And he has been developing this rocket for a potential flight to Mars. Exploring the Red Plant is a common task for all humankind, so such projects can only be international, the expert maintained.
Nezavisimaya Gazeta: Sinking demand for diesel may signal recession
A recession or slowdown in major world economies remains the key economic risk currently, including for Russia. Diesel consumption has shrunk in recent days in the United States, Europe and China. This comes at a time when fuel prices are clearly going down in the US. Experts warn that demand for diesel fuel is a bellwether for economic activity, indicating household spending. And the expected decline in demand for diesel fuel primarily signals the growing risk of a recession in the economy, experts say.
"The key risk of falling oil prices globally now is the growing likelihood of a recession in the United States and Europe amid the banking crisis. If that happens, OPEC, led by Russia and Saudi Arabia, will likely cut oil production again," Artyom Akderli, a senior broker at BCS World of Investments, told Nezavisimaya Gazeta.
Vladimir Chernov, an analyst at Freedom Finance Global, agrees. "However, we can see that OPEC+ has been stabilizing the global oil market, as it reduces oil production, when necessary," he said, doubting that global oil prices will fall. The expected recovery of the Chinese economy in the second half of this year should prop up demand for oil and petroleum products, he said.
"Had not OPEC+ decided to cut oil production, we would have seen oil trading well below $70 [per barrel]," TeleTrade Analyst Alexey Fyodorov argues. The drop in oil prices in March was driven by falling confidence in US banks and partially in European lenders, he said, while oil demand has been falling since the fall of 2022. The expert doubts the recessionary decline in oil prices would be reversed later in 2023, but OPEC+ is capable of mitigating that or lessening its scale, he stated with confidence.
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