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Press review: Gaza facing scorched earth or surgical strikes and US debt hits record high

Top stories from the Russian press on Thursday, October 12th

MOSCOW, October 12. /TASS/. Experts mull scenarios of how the conflict between Israel and Palestine may unfold; the US national debt hits a new record high; and the purported blast near a Baltic Sea gas pipeline raises suspicions of a false narrative concocted for pushing further anti-Russian sanctions. These stories topped Thursday’s newspaper headlines across Russia.


Izvestia: Experts weigh in on scenarios of how Israeli-Palestinian conflict may play out

Israel has formed an emergency coalition government led by Prime Minister Benjamin Netanyahu, opposition leader Beni Gantz and Defense Minister Yoav Gallant, with two observers. Amid the Israeli blockade, the Gaza Strip is facing a humanitarian crisis. While the intensity of fighting shows no sign of subsiding, experts expect that Israel will back up its tough rhetoric with action by launching a ground operation against Hamas’ Gaza stronghold, potentially resulting in a large number of casualties.

In Israel to date up to 1,500 people have lost their lives and almost 4,000 have been wounded in clashes. In Gaza, more than 1,000 Palestinians have been killed since the renewed outbreak of violence, while over 5,500 others have suffered wounds. Four Russian nationals were reported killed, with another six said to be missing. However, Russian Ambassador to Israel Anatoly Viktorov said at a meeting of the Valdai Discussion Club that the actual number of those killed and missing may be higher.

Although the confrontation may be unfolding in an updated format, its fundamental essence remains unchanged since the inception of the Israeli-Palestinian conflict with the creation of the State of Israel in 1948, Sergey Demidenko, department head at the Institute of Social Sciences of the Russian Presidential Academy of National Economy and Public Administration (RANEPA), told Izvestia. In that vein, he said the perennial debate over the need to establish a Palestinian state has re-emerged. "And by the same token we now have an answer to this question: No Palestinian state will be established," the expert said.

"I think that Israel may launch a large-scale ground operation later this week or early next week. The Israelis cannot delay things, as time is working against them. For economic reasons, Israel cannot keep a large number of people mobilized, as 300,000 reservists is a huge number for Israel. According to all estimates, the Israeli economy would simply collapse if the country continues to fight for several months," political analyst Alexander Kargin forecasts.

According to him, Israel could either completely mop up the Gaza Strip and destroy Hamas or inflict serious damage on the Palestinian militant group. The latter scenario would likely seriously curtail the radical group’s ability to maintain the intensity of the conflict, which would then pave the way for negotiating a ceasefire, he added. Kargin views the former scenario of a scorched earth-type campaign against Gaza as unlikely, given the potentially enormous number of civilian casualties it would bring in its wake, and thus the expert is inclined to believe that the situation will follow the second path of specifically targeting Hamas to cripple its martial capabilities.


Rossiyskaya Gazeta: US national debt hits record high of $33 trln

The national debt of the United States has increased by $500 bln in less than a month to reach $33.5 trln, according to the US Treasury Department. Experts interviewed by Rossiyskaya Gazeta say this marks a historic milestone.

"The increase in the cost of US government debt is linked to attempts by the Federal Reserve to bring down the surge in inflation affecting consumer prices that resulted from the huge dollar emission over the past three years in an effort to support the economy," Denis Perepelitsa of the Plekhanov Russian University of Economics said.

The US national debt is a long-term problem that may become acute for the country by 2050, Oksana Kholodenko, chief analyst at BCS World of Investments, told the newspaper. According to her, geopolitical tensions, a rush to sell US Treasury notes by foreign debt holders, and other negative drivers could trigger such a crisis.

To Perepelitsa, the US debt market rapidly collapsing amid rising Fed rates is very alarming, for it could force investors to flee from the dollar to alternative "safe harbor" currencies, thus ruining the US economy altogether. Unless debt holders react, they will actually lose their money in the near future, the expert warns. With the US being the world’s largest economy, a collapse of the US dollar would naturally affect commodity and financial markets as it would most likely tip the global economy into a protracted recession.

"The United States can default on its liabilities, but that would hardly help the world economy; more likely, the opposite could happen," the expert said. "For such a decision would provoke an unprecedented recession. Or else the US could accelerate inflation domestically and globally and reduce budget spending sharply as a solution," he concluded.


Izvestia: Purported damage to Balticconnector gas pipeline explained

On October 8, gas supplies through the Balticconnector pipeline running between Estonia and Finland were halted over a drop in pressure. Norwegian seismic research foundation Norsar detected an explosive signal near Balticconnector on the Baltic Sea bed on the night of October 7. While the local magnitude of the event has been estimated at 1.0, or two times less than what was recorded during the Nord Stream sabotage in September 2022, the data could potentially suggest an explosion.

Finland has been importing natural gas via Balticconnector since it ceased buying Russian pipeline gas, but the workload on the gas pipeline dropped somewhat in early 2023 when the country launched the Exemplar floating LNG terminal in Inkoo. It is worth mentioning that the Nordic country receives tankers with Russian liquified natural gas (LNG) via this terminal as well. For this reason, the pipeline was recently used for pumping natural gas to the Baltic states, mostly Latvia.

The narrative that an explosion caused damage to the Balticconnector pipeline appears to be an attempt to lay the informational groundwork for future political decisions, said Igor Yushkov, expert at the Financial University under the Government of the Russian Federation and the National Energy Security Foundation. "When the Nord Stream [gas pipelines] were blown up, a video from the scene appeared a few hours after the incident, and the scenario of ‘damage from the anchor of a passing ship’ was also discussed. Now, all we can hear or see is mere rhetoric, with no visual evidence of any damage at all having been presented," said Yushkov. A lot of factors suggest a deliberate false flag operation with the aim of imposing more sanctions on Russian LNG, an initiative that was weighed earlier by some Polish politicians, he opined. "They need a pretext to authorize such a decision, and a [concocted] story of ‘sabotage on the Balticconnector’ would nicely serve that purpose," the expert concluded.

Estonian economist Leonid Tsingisser told Izvestia that Tallinn is presenting the alleged Balticconnector incident as an unfriendly act on the part of Russia.

Although most analysts doubt the halt in Balticconnector operations would cause large-scale economic consequences in the region in the longer term, natural gas prices spiked on exchanges after the incident was reported. However, it is the latest escalation in the Middle East, rather than the developments in the Baltic Sea, that are affecting gas prices, Yushkov explained.


Rossiyskaya Gazeta: EU may target diamond exports in its next sanctions package

Europe has been working on its 12th package of anti-Russian sanctions for several months already, and officials in Brussels may come up with the latest set by mid-fall. According to Western media, the latest restrictions could trigger the appropriation of the Central Bank of Russia’s frozen assets toward supporting Ukraine. Experts interviewed by Rossiyskaya Gazeta expect that the latest sanctions may be announced at the upcoming EU-US summit in Washington on October 20.

Restrictions on Russian diamond imports have been extensively discussed as a potential new measure, Anastasia Prikladova, associate professor at the Plekhanov Russian University of Economics, explained. Or else, the EU may place the emphasis on finance, as the 12th set of sanctions may target those Central Bank of Russia assets that were frozen in European bank accounts, or ways for utilizing them, for example. But such a decision could give rise to major risks, mostly reputational ones, and would therefore require intensive discussions, the expert said. Any other restrictions, be it on the diamond sector or the market for nuclear energy, would also necessitate serious debates, she added.

This, perhaps, may be why the bloc had been discussing these issues before it imposed the 11th package. However, with the work of discussing and agreeing upon further restrictions on Russia becoming increasingly difficult, any new sanctions are unlikely to be announced later this month, Prikladova believes.

However, Nikita Maslennikov, head of the Finance and Economics Department at the Institute of Contemporary Development, contends that the new package could well be announced at the EU-US summit on October 20.

Yulia Yeliseyeva, a compliance lawyer and managing partner at Compliance Rus, says the fresh restrictions may affect nuclear energy, the diamond trade or LNG. While further sanctions on Russian nuclear energy or diamond supplies have long been discussed, the likelihood of them being imposed is low as not all EU countries support such restrictions. The 12th package may also include measures calling for the use of frozen Central Bank of Russia assets, but such measures would most likely be finalized in subsequent sanctions packages, as coordinating them may require more time, the expert concluded.


Vedomosti: Bank Saint Petersburg wins Belgian lawsuit against Euroclear

In 2022, Bank Saint Petersburg filed a lawsuit in Belgium after Belgian clearing house Euroclear had blocked its assets. As a result, money in euros were paid to the Russian lender which, however, failed to reclaim its dollar assets, as it was blacklisted by the United States while the case was being considered, Alexey Panich, a partner with the Nikolskaya Consulting law firm, told the judges in the case. He is representing the interests of the Belgian clearing house in the Russian courts.

This is the first known case where a Russian legal entity or individual has sued Euroclear abroad. Vedomosti has sent a request for information to Bank Saint Petersburg.

Panich revealed the lender’s success in the Belgian courts to support the idea that class action litigation against Euroclear should be considered in the Belgian legal system, not in the Russian, courts. Moreover, not all sanctions-related disputes can be considered in Russia, but only those that affect sanctioned individuals, the lawyer then clarified. And there are no such people among the participants in the class action suit against the Belgian clearing house, he said. Therefore, nothing prevents them from filing suit in a Belgian court, which should then hear the case in accordance with the general rules of jurisdiction. Given the success of Bank Saint Petersburg, there is no reason to assume that they would have no chance of winning there, Panich said then.

Russian individuals and businesses can indeed sue in Belgian courts, but they will face a number of difficulties there, said Sergey Glandin, a partner with BGP Litigation. Belgian judges would use local legal norms, which partially include the EU sanctions legislation, Aram Grigoryan, a partner with NSP, added. Glandin suspects that Belgian judges would be more restrained in their conclusions but that their positions would effectively be politically driven in any ambiguous "gray" situations in the law.

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