MOSCOW, January 18. /TASS/. Europe is seeking to stoke the embers of the Ukraine conflict as individual countries scramble to scrape together standalone aid packages to keep Kiev on fiscal life support; the recent Iranian airstrike on a Pakistani border region risks an escalation on the other side of the Middle East; and the European Parliament is looking to punish Hungary for its independent stance on Ukraine aid by revoking its voting rights in EU bodies. These stories topped Thursday’s newspaper headlines across Russia.

 

Media: Europe seeks own means to keep Ukraine conflict burning, fund Kiev’s civilian needs

On Wednesday, NATO defense chiefs met in Brussels to discuss, among other things, the situation in Ukraine. NATO candidate Sweden was also invited to join the discussions, which are set to continue on Thursday. While the European Union and the United States have been unable to coordinate more funding for Ukraine, several European countries have stepped up to announce their own individual aid packages, with Germany and France recently following Great Britain’s lead.

Experts see a correlation between the current Republican roadblock in the US Congress to non-stop financial assistance to Kiev and increased activity among individual European countries aimed at rolling out standalone aid packages, which has been the West’s sole strategy for resolving the Ukraine crisis. The problem here, however, is that there is still absolutely no substantive discussion in Europe about even contemplating the need to initiate negotiations on a peaceful resolution to the conflict. "Europe believes that if the two [conflicting] parties have roughly similar military capabilities, this will give them more incentives to make concessions," thus requiring that they bring Kiev’s tattered, badly mauled NATO-supplied forces up to a par with Russia’s formidable homegrown force capabilities, Nikolay Topornin, director of the Center for European Information, told Izvestia.

Meanwhile, providing regular funding to cover Ukraine’s non-military expenses is proving to be a tougher task for its donors than just shipping off weapons from their military stockpiles. Neither the EU nor the US is willing to take on the heavy fiscal burden of regularly subsidizing the Ukrainian budget, and therefore Kiev’s sponsors are ready to discuss only setting up a potential special fund or reconstruction bank.

A Ukraine reconstruction bank being established by Kiev jointly with private equity giant BlackRock and investment bank JPMorgan Chase could be up and running in the next five to six months, Reuters reported. "We have at least $500 mln in commitments. I think it will be close to [$]1 bln in commitments in stimulus capital," Reuters quoted Ukrainian Presidential Office Deputy Head Rostyslav Shurma as saying at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday.

While Kiev is still hopeful that Berlin and Paris will foot the bill to take care of Ukraine’s pensioners and low-income citizens, increasingly more and more ordinary Europeans are saying that they are tired of the conflict and are no longer willing to see their tax euros go toward supporting Ukraine, political analyst Oleg Maltsev told Nezavisimaya Gazeta. "Europe does not have unlimited resources, and it will hardly be able to prop up Ukraine [indefinitely]," he argues.

 

Vedomosti: Potential upshot unclear from Iranian attacks on Pakistani border region

On January 17, Pakistan recalled its ambassador from Iran in the wake of an Iranian airstrike inside its borders the night before. Islamabad also asked the Iranian envoy who was in Tehran at the time of the attack "not to return." In addition, Pakistan decided to suspend any high-level visits. The responsibility for the consequences "will lie squarely with Iran," the Pakistani Foreign Ministry said. On Tuesday, Iraqi Ambassador to Tehran Nassir Abdel Mohsen was also recalled for consultations in the wake of a recent Iranian attack on Iraqi Kurdistan.

Iran struck two strongholds of the Sunni militant group Jaish al-Adl in Baluchistan in southwestern Pakistan with the use of ballistic missiles and drones. The airstrike was delivered by the Islamic Revolutionary Guard Corps (IRGC), Iran’s Press TV specified.

The Iranian military’s attack on a densely populated area of Baluchistan, across the border in Pakistan, may have been initiated by the Iranian political elite’s conservative wing with a view toward distracting Iranian society away from domestic problems and refocusing it on external threats, believes Anastasia Bogachyova, a junior research fellow. According to her, Tehran either did not have time to notify Islamabad of the upcoming strikes, or deliberately refused to do so in order to enhance the effect of its demonstration of the pre-emptive use of force.

While Iran and Pakistan cooperate closely in fighting separatist trends, both nations are unhappy with insurgent attacks emanating from each other’s territories, Gleb Makarevich, junior researcher at the Center for the Indian Ocean Region at the Russian Academy of Sciences’ Primakov Institute of World Economy and International Relations (IMEMO RAS), said.

Meanwhile, only Israeli or Saudi air defense forces can counter Iranian intermediate-range ballistic missiles (IRBM) in the region, Alexander Yermakov, a research fellow at IMEMO RAS, explained. "On the whole, air defense forces must be on alert to intercept similar IRBMs," he added.

 

Izvestia: Strasbourg looks to punish recalcitrant Hungary by revoking its voting rights

On Thursday, the European Parliament, which sits in Strasbourg, France, will vote on a resolution calling for initiating the process of revoking Budapest’s voting rights in European Union bodies. Earlier, as many as 120 (out of 705) members of the European Parliament (MEPs) signed a petition put forward by Finnish MEP Petri Sarvamaa, who argues that Hungary has hindered consensus building inside the European Union.

Stripping Hungary of its voting rights in the EU Council over Budapest’s insistence on blocking 50 bln euros in EU aid to Ukraine may pave the way for a mechanism that would make it possible to simply ignore the positions of the smaller countries within the EU. Slovak Prime Minister Robert Fico said he would oppose the decision, while the Hungarian parliament said it would retaliate by cancelling payment of Budapest’s annual contributions to the EU budget. The bloc is gradually moving from consensus-based voting to making decisions based on the will of a simple majority.

According to Yekaterina Entina, head of the Center for Black Sea and Mediterranean Studies at the Russian Academy of Sciences’ Institute of Europe, changing such a fundamental principle does not necessarily signal that the EU would be switching from democracy to autocracy. While the European Commission (EC) and a number of large member states have been lobbying for a transition to the "majority rule" principle, that does not mean that such decisions will edge out the interests of smaller countries entirely. On the one hand, the key EU members do have significant levers of pressure on their smaller fellow member states. But, on the other hand, any dividends, primarily material ones, that may be negotiated in a bid to sweeten the deal for weaker EU economies would still be extremely high or even higher, Entina concluded.

However, the EU may not benefit from transitioning to the simple majority in voting. It is primarily the large EU members that will want to tread softly here, as they would not wish to be outmaneuvered somehow should the smaller member states decide to gang up on them. "If everybody else votes 'yea' [on some EU matter], while, say, Germany, for example, votes ‘nay’ and the decision is made, this would have an impact on the budget, to which Germany is the biggest contributor," Oleg Barabanov, professor in the World Economy and International Affairs Department at the Higher School of Economics (HSE University), said. In addition, the procedure is very complicated in legal terms, as it would require numerous voting processes or even referendums, which could trigger a wave of Euro-skepticism or debates about whether there is any need for the EU at all, the expert warns.

 

Kommersant: Global investors prefer safe haven of cash amid mounting geopolitical risks

A quarter of portfolio investors surveyed by Bank of America (BofA) described geopolitical turmoil, mostly driven by the latest escalation in the Middle East, as their top concern.

"Any [further] escalation of the conflict [in the Middle East] may destabilize supply chains, trigger an energy price hike or fuel global inflation, which risks hampering the expected lowering of interest rates across jurisdictions. This would put the brakes on global growth," Sergey Suverov, an investment strategist at Arikapital, told Kommersant. In addition, the recent presidential vote in Taiwan, or the upcoming November 5 presidential election in the United States, could trigger further worsening of relations between the US and China, Mikhail Vasilyev, chief analyst at Sovcombank, argues.

At the same time, a mere 17% of respondents in BofA’s January survey, or the lowest number in the past nine months, said they were awaiting a major recession in 2024, while 79% of those surveyed expect a soft landing of the global economy or even a zero decline. "Global investor sentiment has improved as both the US and the global economy defy last year’s pessimistic forecasts as they continue to grow at a strong pace, despite the highest interest rates in two decades," Vasilyev added.

As a result, portfolio investors are diversifying the geographical footprint of their investments: in January, investment in the US stock market grew at the highest pace in two years, and wealth managers also increased the amount of cash in their portfolios, by 0.3. percentage points up to 4.8%, according to BofA.

The Russian market may be among the beneficiaries of ebbing fears about the global economy. "A less significant slowdown suggests continued demand for Russian exports," Natalia Pyryeva, an analyst at the Tsyfra Broker investment company, explained.

 

Izvestia: Cold fish treatment for London as Russia to nix UK’s Barents Sea fishing rights

Russia will ban Great Britain from harvesting fish in the Barents Sea, according to a draft bill submitted by the Russian agriculture and foreign ministries. Moscow is preparing to denounce the 1956 fishing agreement with London, which would mark the first revocation of an international food agreement. And the Russian government has already greenlighted the bill, Izvestia has learned.

"Pulling out of the agreement will not cause any major foreign policy or economic consequences for Russia," the government said in its documents, which also stated that the move comes after the UK denied Russia access to Most Favored Nation status in March 2023. In particular, London introduced additional duties of 35% on copper, vodka and some other goods originating in Russia.

The bilateral agreement to be denounced has been essentially a one-way street as there are no similar or commensurate benefits in it for Russia, German Zverev, president of the All-Russian Association of Fisheries Industry (VARPE), told Izvestia. Only the counterparty to the agreement, Great Britain, will be affected, as its vessels will be barred from fishing in the Barents Sea, he added.

Russia is facing no risks from the denouncement of the agreement, as it will simply be exercising its right to terminate it, Nikolay Titov, a co-founder of a.t.Legal, agrees.

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