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Press review: Doubtful future for expiring grain deal and Russia to control foreign assets

Top stories from the Russian press on Monday, July 17th

MOSCOW, July 17. /TASS/. Black Sea grain deal and Moscow-Ankara ties facing murky future; Russia takes control over Danone and Carlsberg assets; and Russian companies exploring new export markets. These stories topped Monday’s newspaper headlines across Russia.

 

Izvestia: Future fate of grain deal and Russia-Turkey relations hanging in the balance

The prospects for further implementation of the Black Sea Grain Initiative, known as the grain deal, remain foggy. In its current iteration, the grain deal expires on July 17, but it is still unclear whether Russia is ready to sign on for another extension in order to keep it going. Russian President Vladimir Putin said that Moscow would approve its renewal only if the promises made to Russia at the start of the process are fulfilled. Moscow has repeatedly stressed that, thus far, only the West and Ukraine have been profiting from this deal. Expert opinions vary. While some think that Russia will again give the nod to another extension of the deal to avoid worsening its relations with Turkey, others are certain that, this time, Moscow fully intends to walk away from the agreement.

Andrey Koshkin, head of the political science department at the Plekhanov Russian University of Economics, thinks that, most likely, Russia will reject another extension of the deal. "President Putin clearly said that there is no need for us to extend the deal. And, naturally, if the situation does not change, all things considered, we can suspend our participation in this four-party agreement. The probability of non-extension is high because the president has never put it like this before," the expert told Izvestia.

He added that Turkey has shifted the orientation of its foreign policy somewhat following the NATO summit in Vilnius. "Erdogan met with Joe Biden. He said that a new stage had begun in the development of bilateral [US-Turkish] relations. [Ankara’s steering of a]n independent course - distancing itself from Washington, Moscow, Brussels and London - has at times given each of the key decision-making centers cause for anxiety," Koshkin noted.

In contrast, Turkish political analyst Kerim Has thinks that, if no agreement is reached to extend the grain deal, NATO will have a pretext to dispatch warships through the Turkish straits and into the Black Sea. According to him, behind-the-scenes haggling will continue right up until the very last minute. In his view, there is just a 51% probability that the grain deal will ultimately be extended, but Russia will approve another extension for purely geopolitical reasons and not because it stands to profit economically from an extension. Additionally, he told Izvestia that Russia’s withdrawal from the grain deal would hurt its relations with Turkey, which is currently Moscow’s most important trading partner due to Ankara’s facilitation of parallel imports for the Russian economy.

 

Izvestia: Russian state property manager gains control over Danone, Carlsberg assets

Russia’s Federal State Property Management Agency (Rosimushchestvo) has assumed temporary stewardship over the Russian assets of Danone and Carlsberg, under a relevant decree signed by Russian President Vladimir Putin. In effect, this means the two European companies’ foreign shareholders can no longer execute transactions with their holdings because their assets are now frozen in Russia, lawyers surveyed by Izvestia said. Russia is effectively reciprocating the actions of Western governments with regard to Russian companies’ foreign assets, e.g. in summer 2022, Germany placed Gazprom Germania GmbH under external management with the German government obtaining control over structures and underground storage facilities that had belonged to Gazprom.

Danone and Carlsberg’s Russian assets are now blocked and the shareholders cannot sell, liquidate or reorganize their holdings, Timur Akhundov, advisor with the Birch Legal law firm, emphasized in a conversation with Izvestia. "Both companies, Danone and Carlsberg, were close to selling their shares in Russia; they had potentially already filed applications for approval by the relevant [Russian] government commission, but it is now not possible to execute any such [exit-related] transactions. Most likely, this is precisely what the Russian government hopes to achieve," the lawyer surmised.

Vyacheslav Kosakov, managing partner at Novator Legal Group, concurred, saying that the shareholders do not cease being the companies’ owners but cannot carry out transactions with their holdings. The companies will continue to operate, he noted.

Both companies are seen as vital core enterprises for their respective sectors and, thus, the government cannot simply allow non-residents to sell assets to any third parties, Georgiy Ostapkovich, director of the Center for Business Trends Research at the Higher School of Economics (HSE University), added, noting that this is standard practice in all Western countries. Many things can happen after Western investors exit a company, up to and including the complete halt of operations, because foreign contractors may, for example, stop supplying imported parts. Thus, it is critical for the government to take action in order to preserve and stabilize the operations of those enterprises that physically produce large volumes of goods, especially now, the expert concluded.

 

Kommersant: Russian exporters entering new, previously overlooked markets despite distance

Russian companies have become more active in exploring the available opportunities for entering the markets of "friendly" countries, including those that are rather distant geographically and were not previously seen as attractive investment targets, Russian trade representatives told Kommersant last week after meeting with foreign companies within the framework of events hosted by the Russian Industry and Trade Ministry and the Delovaya Rossiya (Business Russia) trade association. The exporters no longer fear the distance or problems with logistics and transactions; some companies have to work with new intermediaries while others are seeking direct buyers and local partners.

Interest in Southeast Asian markets is on the rise. It "has always been a ‘B-list’ market for Russian companies; it was less familiar, there have been by far fewer Russian companies, while, for these countries, the market presence is critical - the availability of employees, service centers, a local address are important," noted Alexander Svinin, Russian trade representative in Indonesia. There is also interest on the part of Indonesian companies, he added, saying that "they’ve gotten the impression that it is possible to compete in the Russian market." Interactions are eased by the fact that domestic companies that are less [sensitive to Western] sanctions occupy numerous market niches in many sectors in both countries.

Artyom Tsinamdzgvrishvili, Russian trade representative in the Philippines, said that the country has only begun to open up after COVID-related restrictions, but there has always been interest in the Philippine market among Russian metals, transport, agricultural and food products companies, as well as in the IT and financial services sectors.

In China and the United Arab Emirates (UAE), both markets of traditional interest for Russian businesses, it is recommended that Russian companies seek out intermediaries and local partners. Alexey Dakhnovsky, Russian trade representative in China, noted growing interest among agricultural, food products and forest industry suppliers, cautioning that marketing is important in the Chinese market and specialists with knowledge of Chinese are needed. Maxim Zagornov, Business Russia’s trade envoy to the UAE, notes that IT companies are the first to enter the market because it is easier for them to localize and there is high demand, for instance, for banking automation solutions.

 

Kommersant: Russia close to fulfilling targeted reduction in oil exports

According to Kommersant, in August Russia’s seaborne oil exports may drop to an annual low of 2.9-3 mln barrels per day (bpd), mostly due to Baltic ports. Thus, the Russian government will fulfill its commitment to reduce oil exports by 500,000 bpd. The export schedule for 3Q served as a baseline for the decrease, but Russian companies almost reached the required levels as early as July. They will not have to reduce production while the freed-up volumes will be directed to oil refineries.

According to one of Kommersant’s oil industry sources, oil companies will increase their fuel supplies in time for fall maintenance work at refineries to avoid deficits. Additionally, August is the last month when refineries can receive the full volume of buffer subsidies for supplying oil to the domestic market because such subsidies will drop by half in September.

Viktor Katona of the Kpler analytical agency forecasted that seaborne exports will fall to approximately 3 mln bpd in August or even lower, with ports in northwestern Russia accounting for the bulk of this decrease. That said, oil companies will continue to increase oil refining in August in order to satisfy growing fuel demand, the expert noted.

 

Nezavisimaya Gazeta: EU steps up mediation of Armenian-Azerbaijani dialogue

In Brussels, a meeting between Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan, mediated by European Council President Charles Michel, was held amid a nationwide rally in Stepanakert demanding an end to the blockade of the Lachin Corridor, which threatens to push the humanitarian crisis in Nagorno-Karabakh into a full-blown catastrophe. On the same day, June 15, the Russian Foreign Ministry made a statement that urged Baku to provide security guarantees to Armenians in Nagorno-Karabakh and launch the border delimitation process. In turn, the Azerbaijani Foreign Ministry accused Russia of violating an allied declaration.

Michel assured the press that he had "emphasized the need to open the Lachin road," as well as noted Baku’s "willingness to provide humanitarian supplies via Aghdam," that is, not from the Armenian side but via Azerbaijani territory.

According to Armenian political scientist Armen Khanbabyan, such an offer on the part of the Azerbaijani president means that Aliyev has acknowledged the humanitarian crisis in Karabakh triggered by the blockade of the Lachin Corridor. "It is also important to understand who will deliver cargos to Karabakh if this proposal is implemented - Russian peacekeepers or the Azerbaijani side. It is quite clear that if an Azerbaijani ‘humanitarian convoy’ enters Stepanakert, it will never leave," the expert contended.

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