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Press review: West's gameplan for iced Russian assets and Germany goes to bat for Ukraine

Top stories from the Russian press on Wednesday, May 22nd

MOSCOW, May 22. /TASS/. What the West’s decision to use profits from Russia’s frozen assets for Ukraine means; Western allies scramble to bolster Ukraine’s military capabilities; ICC’s arrest warrants for Israeli leaders cause mixed reactions within NATO. These stories topped Wednesday’s newspaper headlines across Russia.


Izvestia: How the West plans to spend profits from stolen Russian assets

The EU Council approved on May 21 the transfer of revenues from Russia’s frozen assets as military aid to Kiev. This unprecedented decision from the European Union will have ramifications for both the EU and US financial systems, experts interviewed by Izvestia believe. At the same time, they doubt that all that money will be used to help Ukraine - part of it may end up in transnational arms corporations in the United States, as well as in the pockets of European officials.

According to the decision, 90% of the money that the depositories provide to the EU budget twice a year will go to the European Peace Fund, which funds military supplies for the Ukrainian army. Only 10% of the money will be dedicated to EU programs aimed at restoring the country. This allocation will be reviewed annually, with the first review occurring before January 1, 2025. According to Czech Foreign Minister Jan Lipavsky, Ukraine is set to receive up to 3 bln euro this year. His Belgian counterpart Hadja Lahbib said that the funds will be available to Kiev by July.

The EU Council stressed that this refers to the net profit accumulated by depositories holding Russian sovereign assets and reserves totaling more than 1 mln euro from February 15, 2024.

The worst aspect of the EU’s decision is that it means the direct confiscation of profits, acting head of the Department of World Economy and International Economic Relations at the State University of Management Evgeniy Smirnov told Izvestia. "That is, the Europeans want to make this process regular, since profits from frozen assets are constantly generated," he said. The expert noted that this establishes a "colossal precedent" in the current global financial order, which violates the integrity of international law.

In an interview with Izvestia, French European Parliament member Herve Juvin described the EU’s actions as an alarming signal of the West’s self-isolation from the rest of the world. He added that freezing or confiscating interest on these assets will not put an end to the turmoil in Ukraine and only contribute to undermining property rights norms.

Ivan Timofeev, Director General of the Russian International Affairs Council, shared a similar point of view with Izvestia. He explained that the EU’s policies provide "food for thought" for investors from China, Saudi Arabia, and a number of other countries. "These countries will recognize that their sovereign assets may suffer the same fate in the event of political problems. This does not mean that the EU’s reputation or appeal to investors will suffer. No, that will not happen. However, the precedent will be taken into account," he explained.


Izvestia: Baerbock’s surprise visit to Kiev stirs debate over Germany’s role in Ukraine conflict

German Foreign Minister Annalena Baerbock has arrived in Kiev on an unexpected visit. Her statements concerning air defense systems, as well as prior hints about supplies of Taurus missiles, look to many like a strong message to German Chancellor Olaf Scholz. However, experts told Izvestia they believe this is more her way of testing the waters over the limitations of "red lines" and greater US influence over Germany. Washington has taken more aggressive efforts to aid the Kiev administration, and it is urging its Western partners to do the same in light of Russian actions near Kharkov.

Baerbock, like Blinken, arrived in Kiev without a concrete reason. That said, the visit comes against the backdrop of a meeting held last week on the sidelines of a conference of European foreign ministers in Strasbourg, where Baerbock described the situation in eastern Ukraine as dire and convinced her colleagues that it was critical to give Kiev weaponry that could be used over medium and long distances, Izvestia writes. Many interpreted these comments as an attempt to increase pressure on German Chancellor Olaf Scholz to approve sending Taurus missiles to Ukraine, something the German leader has repeatedly said he will not do. However, such underhanded tactics may be interpreted as a kind of feeling-out process rather than putting pressure on, or even causing a rift among, the German governing class on the issue of Ukraine, according to experts.

"The supplies of F-16 fighters are already being discussed. So, these meetings are not discussing putting the squeeze on Scholz, but rather pressure from the United States on Germany to supply more of everything. The West will undoubtedly continue to test Russia’s strength, attempting to cross a variety of ‘red lines’," senior researcher at the Russian Academy of Sciences’ Center for Security Studies at the Russian Academy of Sciences Konstantin Blokhin told the newspaper.

"Europe cannot simply pull out of this conflict, and now it finds itself in an uncomfortable position. When sanctions were imposed, they were expected to be temporary, although the restrictions had already been in place for some time. However, there is no ‘plan B’ for how the European economy will thrive without access to Russian resources. That is why Brussels is now very interested in ensuring that Ukraine does not lose and that ideally some scenario of Russia’s loss is accomplished," leading researcher at the Russian Institute for Strategic Studies Oleg Nemensky told Izvestia.


Vedomosti: Request for arrest warrant against Israeli leadership sparks controversy within NATO

The French and Belgian governments supported the International Criminal Court (ICC) as an institution but avoided giving an assessment of ICC prosecutor Karim Khan’s decision to seek an arrest warrant for Israeli Prime Minister Benjamin Netanyahu and Defense Minister Yoav Galant. Both countries’ foreign ministries issued relevant statements. Meanwhile, the US threatened to sanction the ICC, Vedomosti writes.

According to Head of the Sector for Regional Problems and Conflicts at the Institute of World Economy and International Relations Pavel Timofeev, France follows a balanced policy toward Palestine and continuously defends the principle of two states for two peoples. On the one hand, the flow of migration from Arab states to France continues, with a significant Arab diaspora already existing in the country, forcing French authorities to consider the sentiment of this part of its population. On the other hand, the expert noted that Paris has significant commercial interests in Middle Eastern countries rich in hydrocarbons.

At the same time, US President Joe Biden criticized the ICC prosecutor’s judgment. US House of Representatives Speaker Mike Johnson in turn stated that if an arrest warrant is issued for Israeli leaders, the US Congress will consider implementing sanctions against the ICC.

Israel and the United States, like Russia and China, have not signed the Rome Statute and do not recognize the ICC’s jurisdiction. However, the arrest order would limit Netanyahu’s ability to travel to the 124 ICC member countries, doctor of legal sciences Alexey Ispolinov told Vedomosti.

According to the expert, US sanctions on the ICC would not paralyze the organization since all its accounts are in Europe, and Washington is unlikely to get its hands on them.


Kommersant: Russia chipping in to create new UN resolution on AI

Russia is actively involved in forming a new UN General Assembly resolution on artificial intelligence (AI) put forward by China. The UN had already adopted a resolution on AI proposed by the United States in March, but it did not include Russia as a co-author. The US document focuses mostly on AI’s safety and security. Experts told Kommersant they expect the Russian-Chinese resolution to focus on expanding access to the technology and regulation, areas where China already has the most experience in the world.

Russian Foreign Ministry spokeswoman Maria Zakharova told the newspaper Russia was one of the primary developers of the China-initiated draft resolution of the UN General Assembly on international cooperation in the field of AI.

Collaborating on the resolution "means that Russia and China look at the problem from similar positions," expert on China Leonid Kovachich told Kommersant. According to him, Beijing is "taking its first significant steps both in the field of generative AI and its regulation." "All countries are dealing with this last issue, but China is at the forefront in this area," the expert said.

Kovachich further stated that "the regulation of the Russian segment of the Internet largely mirrors the regulation of the Chinese one" and that, based on this same logic, a similar harmonization in the sphere of AI should be expected in the future.


Vedomosti: Bank of Russia to hold key rate firm in foreseeable future

Since the last meeting of the Bank of Russia’s Board of Directors on April 26, new data has emerged that supports the arguments for extending restrictive monetary policy, according to the regulator’s Deputy Governor Alexey Zabotkin. He stated that alternative measures, such as raising the key rate rather than keeping it at its current level, will also be seriously considered at the Bank of Russia’s upcoming June meeting. Experts interviewed by Vedomosti believe that monetary policy will remain tight longer than expected.

"Inflation is above the forecasted range (4.3-4.8% at the end of the year - Vedomosti). We will discuss how this affects the forecast range [for the key rate in 2024] at the meeting," Zabotkin said.

He noted that the economy is still overheated, with a positive output gap (demand exceeding supply) creating stable inflationary pressures, which will halt only when the economy’s potential and production capacities match the level of demand.

Experts forecast that the high key rate will remain in place for some time longer. According to analysts at Promsvyazbank (PSB) who updated their projection on May 21, the rate reduction will not begin until 2025. A mild rate cut to 15-15.5% in Q4 2024 remains extremely likely, unless there is a significant slowdown in inflation, for example, amid a significant strengthening of the ruble exchange rate.

The clampdown in monetary policy is here to stay for now, with a rate decrease possible no earlier than the Bank of Russia’s September meeting, Gazprombank economist Pavel Biryukov told Vedomosti.

According to Rodion Latypov, chief economist at VTB, in the base scenario the Bank of Russia will be able to begin gradually lowering interest rates from the beginning of next year. "We did not expect and do not expect a reduction in the key rate in 2024, so the regulator’s signal does not change our expectations," he noted.

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