MOSCOW, September 15. /TASS/. The West is girding for a lengthy military conflict in Ukraine, extending into 2024; all major Russian automakers are hit by the latest round of US sanctions; and Tokyo’s new foreign minister is attempting to rekindle talks on a potential peace treaty with Moscow. These stories topped Friday’s newspaper headlines across Russia.
Having failed to achieve any tangible results in its much-hyped counteroffensive, Kiev is preparing new reserves to launch a fresh offensive next year. In parallel with their attempts to break through to the Sea of Azov, Ukrainian forces have intensified attacks on major targets deep inside Russia. According to Western media reports, Kiev has increased the production of unmanned aerial vehicles (UAVs) as it expects the United States and Germany to send high-precision long-range ATACMS and TAURUS missiles, respectively, and is getting ready to deploy US and Swedish fighter jets.
So far, homemade Ukrainian UAVs and Western-supplied weapons have not helped Ukraine’s armed forces to achieve any major results. Reports from the line of engagement show that intense positional battles are ongoing there, while Kiev is running out of reserves. Social networks and legacy media report that the total mobilization currently underway in Ukraine and additional supplies of armored vehicles are meant to form at least one more Ukrainian army corps to be comprised of five separate mechanized brigades and four separate infantry units. The latter are scheduled to be formed by the end of October. "And four infantry units, judging by reconnaissance, are almost ready, and we will soon see them on the battlefield," the Rybar Telegram channel reported, saying that, in addition, Ukraine also expects to commission the fifth tank brigade by year-end.
"The Ukrainian Army Corps may number 30,000 to 40,000 troops," retired Lieutenant General Yury Netkachev, a military expert, told Nezavisimaya Gazeta. "That’s not much, compared to the reserves being formed by the Russian Army. As many as 270,000 new recruits have signed a contract with the Russian Armed Forces. They are currently being trained and will soon join the special military operation," he said.
Meanwhile, the Czech general staff chief, Lieutenant General Karel Rehka, told Reuters that the West must prepare for a lengthy military operation in Ukraine. "In the overall picture, I think there is currently no capacity on either side to reach their ultimate declared objectives any time soon," Rehka said. "It won’t last a few weeks, it will last for long, probably. And it's important that we keep supporting Ukrainians for a long time." Rehka, who served in Afghanistan and speaks English and Russian, predicts that Moscow would act less predictably and pose a more serious threat to the West even after the Ukraine conflict ends, Reuters said.
On Thursday, the US Treasury Department’s Office of Foreign Assets Control (OFAC), which administers sanctions, added AvtoVAZ, Sollers and Moskvich (formerly Renault Russia) to its sanctions list, declaring all three major Russian automakers to be so-called Specially Designated Nationals (SDN), the toughest level of US sanctions.
AvtoVAZ, Moskvich and Transmashholding, a leading Russian locomotive and railway equipment manufacturer, declined to comment to Vedomosti. A Sollers official, however, said his company does not expect any consequences from the latest sanctions as, over the past year, the group has completely reconfigured its business so that it uses "sanctions-proof components supply chains and settlement mechanisms, and is now seeking to cut its technological dependence on foreign partners."
A source at a major Russian automaker told Vedomosti that it is impossible to immediately assess the potential business impact on his company after it was added to the SDN list. According to him, since the launch of the special military operation, all major automakers have set a course toward import substitution, replacing imported components with their Russian analogues, which does much to ease the situation vis-a-vis sanctions.
AvtoVAZ, Sollers and Moskvich may have foreign suppliers that could face certain risks from the imposition of sanctions, Ilya Zharsky, managing partner at Veta, told Vedomosti. "It is hard to predict how Moskvich’s Chinese partners will react to this news, as they, too, will face sanctions risks, even though China has not joined the sanctions. Perhaps, there will be some changes in supply logistics and payments in order to reduce these risks," Zharsky said.
The latest restrictions will have little effect on these businesses, argued Sergey Glandin, head of compliance and sanctions law at BGP Litigation. All of them have reduced their presence in foreign jurisdictions and settlements in US dollars, or have prepared for the situation in a different way, he explained. True, he said, the latest sanctions are an unpleasant step that will cut their access to dollar payments altogether and scare off their foreign counterparties, but no more than that, he added. Operations within the domestic Russian parameters will continue uninterrupted, the lawyer believes.
Signing a peace agreement with Russia is back on Japan’s agenda after new Japanese Foreign Minister Yoko Kamikawa vowed on September 14 that her country would continue striving to achieve a peace treaty. However, it is quite difficult to discuss any prospects for peace now since the two countries halted dialogue on the issue last year. "We are currently not in a position to discuss the prospects for a peace treaty, but the Japanese government is set to pursue a course toward concluding a peace agreement by means of resolving the territorial dispute," the Japanese embassy in Moscow told Izvestia.
The possibility of signing a peace agreement has been an ongoing story over the past few decades, said Grigory Karasin, chair of the Committee on Foreign Affairs in the Federation Council (upper house of parliament, or senate), but for the two countries to be able to resume discussions here, Tokyo should revisit its policy toward Moscow. "For a start, I’d like to call on the new Japanese foreign minister to be a realist and carefully reconsider the sanctions that Japan has so far imposed on Russia," he told Izvestia. "Discussions on bilateral relations could be restored after they [Tokyo] get a clear idea of how things stand globally and realize that the rules of good manners in relations between the two neighbors should outweigh the general vision of the collective West," he added.
At the same time, discussing the ownership of the Kuril Islands is no longer relevant, as the Russian leadership has repeatedly stated, as the islands are a Russian territory, the senator emphasized. Meanwhile, Moscow and Tokyo could resume peace talks as soon as Japan distances itself from the West, he continued.
However, one should not expect this to happen any time soon: Japan’s top diplomat gave her assurances that, as the current G7 chair, her country would maintain pressure through harsh sanctions against Russia, while Tokyo would address issues regarding economic interactions between the two neighbors in accordance with Japan’s national interests.
Kirill Kotkov, director of the Center for the Study of Far Eastern Countries in St. Petersburg, argues that Russia, in effect, does not need to sign any peace agreement, as Japan announced its unconditional surrender in World War II in 1945. Nor was any peace deal ever signed with defeated Germany, the expert said. "Russia does not need any peace treaty as it is not at war with Japan," he concluded.
The collapse of US investment bank Lehman Brothers in 2008, precisely on this date 15 years ago, was the largest such financial crash in history as it reverberated across global financial markets and triggered the so-called Great Recession of 2008-2009. Fifteen years on, many argue that the global economy has still not recovered from it yet. Moreover, new shocks may await it soon, analysts warn.
According to Denis Perepelitsa of the Plekhanov Russian University of Economics, the 2008 crisis was caused by a number of major factors, including a price spike in the US housing market, which led to a rise in unsecured mortgage lending. Second, complex financial derivatives products became widespread, which made risk assessment more difficult and triggered market volatility. Finally, the leading global rating agencies used inappropriate models to assess the default risks of market players, thus giving a skewed picture of the real risks.
"The global economy recovered over time, but the recovery was not uniform or spread evenly across all countries and industries. Developing regulatory measures and improving financial stability made the economy more stable, but some countries can still feel the consequences of the financial crisis, and balanced growth may be not enough for everybody," Perepelitsa maintains.
Yevgeny Smirnov, acting head of the Department of World Economy and International Economic Relations at the State University of Management, agrees. "One cannot say that the global economy has completely recovered. In 2020, the world economy experienced the devastating consequences of the pandemic, and in 2022, it suffered from the Ukraine conflict. In fact, there was not a single year in the period between 2010 and 2022 when the global economy did not feel negative shocks," he noted.
According to Smirnov, even if another recession is not in the cards for the global economy, global growth will be below the average for the 2010s in the 2020s. He cited rising geopolitical tensions and the ongoing sanctions regimes, the deficit in the global commodities market and related price volatility, emerging problems with China’s economic growth and slowing economic integration globally, as well as the irreversible gap between supply chains and commerce, among the reasons for the below-average growth.
While, Perepelitsa noted, a replay of the 2008 crisis is possible, its scope and nature would be driven by a new set of risks. According to him, the dollar-based global financial system is currently being dismantled, and increasingly more countries are using alternative currencies and gold as their reserves. In addition, US Federal Reserve interest rates are at a 22-year high, which severely slows the economy down and makes corporate and sovereign default risks higher in the United States, the analyst added.
On Thursday, Russian Foreign Minister Sergey Lavrov met in Moscow with his Burmese counterpart, Than Swe, as the two countries’ senior officials have met regularly since 2021. In the latter half of 2023, trade between Russia and Myanmar stood at some $200 mln, with Russia exporting mostly equipment, tools and transport vehicles to Myanmar, and the latter country exporting textiles, shoes and agriculture to Russia.
According to Yekaterina Koldunova, director of the ASEAN Center and associate professor in the Department of Asian Studies at Moscow State Institute of International Relations (MGIMO University), although Myanmar’s major trade partners are China and India, Naypyidaw is looking to diversify its trade partners by boosting ties with Moscow. And, although the two countries’ top diplomats did not mention defense cooperation following their talks, it is precisely the defense sphere that is a key factor in the relationship between Russia and Myanmar. Ilya Kramnik, research fellow with the Russian Academy of Sciences’ Primakov Institute of World Economy and International Relations (IMEMO Institute), believes that the two countries are mostly focused on deliveries of Su-30M fighter jets and Yak-130 trainer and light combat jets, and maintenance of the Mig-29 fighters that were supplied earlier as well as Mi-24, Mi-17 and Mi-35 helicopters and air defense systems.
Lavrov added that he had discussed with Than Swe "special prospects for interaction" in energy, the peaceful use of nuclear power, telecoms and IT, as well as space exploration, including remote sensing of the Earth. Russia may be interested in developing projects "orphaned" by the exit of Western investors, say, the Shweli-3 hydropower project, a joint venture of Swedish-Finnish engineering company AFRY and France’s EDF. However, no decision has yet been made, and Russian companies are extremely cautious here. But the people of Myanmar, who are facing a major power supply crisis, are ready to pay for energy projects, in particular, for example, a Rosatom project to build low-power nuclear power plants, Asia specialist Pyotr Kozma told Vedomosti.
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