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Press review: Impact of latest Russia sanctions and Hungary exempted from Ukraine aid club

Top stories from the Russian press on Thursday, June 13th
US Department of the Treasury AP Photo/ Patrick Semansky
US Department of the Treasury
© AP Photo/ Patrick Semansky

MOSCOW, June 13. /TASS/. Impact of latest Russia sanctions; Hungary strikes deal with NATO exempting it from Ukraine aid; and will Armenia leave CSTO? These stories topped Thursday’s newspaper headlines across Russia.


Media: US Treasury adds Moscow Exchange, Russian LNG companies to its sanctions list

On Wednesday, the US Treasury’s Office of Foreign Assets Control (OFAC) added the Moscow Exchange (MOEX) and its affiliate, the National Settlement Depository (NSD), to its Specially Designated Nationals List (SDN). The Arctic LNG 2 and 3 projects, Gazprom Invest, the Sogaz insurance company, the all-Russian Movement of the First as well as seven Russian LNG carriers and the National Clearing Center (NCC) were also blacklisted.

The latest US sanctions will hit MOEX and the NCC hardest. The latter operates as a clearing organization and the central counterparty on the Russian financial market. MOEX has already announced that it will stop trading in dollars and euros starting on June 13. It will run all other operations as normal.

Over-the-counter transactions with the dollar and the euro will continue, the Central Bank of Russia said. The regulator will use banks’ reporting and data from digital OTC platforms to set the official dollar and euro exchange rates.

Investors’ FX assets with the NCC will be frozen, Anton Imennov, a senior partner with Pen & Paper, told Izvestia.

For the time being, brokers will no longer be able to trade the currencies of unfriendly economies, Dmitry Lesnov, the head of client services at Finam, explained. Nor will the euro be available for trading, he said. He couldn’t say how the situation will affect brokerages.

While the move poses no threat to the liquidity of securities issued by Russian companies, the FX market turbulence will lead to higher import costs in the long term, spurring inflation, independent expert Andrey Barkhota said.

As regards the Russian oil and gas sector, all of Novatek’s future projects as well as tankers being built at the Zvezda shipyard for LNG shipments under the Arctic LNG 2 project as well as the Koulstar group and the Elga Coal Complex were designated.

Independent expert Alexander Sobko told Kommersant that now any Russian LNG project risks being sanctioned, too. And the Arctic LNG 2 project will serve as a "role model" for the entire Russian LNG industry, he added, as the future of other projects will depend on how the situation around it unfolds.

An official in the coal industry told Kommersant that Russian coal producers have diversified to Asian markets and that "settlement issues will be solved 'on a rolling basis.'"


Vedomosti: NATO allows Hungary to sit out Ukraine aid plans

Budapest has been given the North Atlantic Alliance’s guarantee that it will be exempt from taking part in efforts to establish a coordination mechanism for further military aid to Ukraine. Nor will it have to take part in voting to approve longer-term financial commitments. In exchange, as a NATO member country, Hungary will not hamper the bloc’s initiatives to support Kiev, NATO Secretary General Jens Stoltenberg said at a news briefing in Budapest following his meeting with Hungarian Prime Minister Viktor Orban.

The refusal on the part of Hungary to participate in NATO’s efforts on Ukraine, conveyed by Orban to Stoltenberg, does not run counter to the alliance’s charter, Yulia Semke, a leading expert of the Center for Comprehensive European and International Studies at the Higher School of Economics, told Vedomosti. Under it, any NATO ally’s participation in operations outside the bloc’s boundaries is voluntary. "It is exactly this that laid the groundwork for Budapest’s 'non-alliance,'" Semke explained. Approving the mechanism itself would require the approval of everybody in the alliance though, she added.

Hungary has stayed away from NATO and EU weapons supplies to Ukraine for the second consecutive year. In addition, Budapest has blocked the EU’s proposal to provide Kiev with 500 mln euro worth of financial assistance, including funds for weapons purchases, under the bloc’s Peace Facility.

As regards major decisions on Russia, Hungary has still found itself on the side of the European and NATO majority, senior researcher at IMEMO RAS Dmitry Ofitserov-Belsky told the newspaper. True, Budapest has repeatedly had its say on the developments, as it demanded that Kiev honor minority rights and called on the EU not to tighten its anti-Russian sanctions. "However, such rhetoric does not necessarily mean that Hungary is ready to see this policy through," the expert said. Therefore, Budapest taking a fully pro-Russian position is unlikely, as it is simply taking a more balanced approach toward Moscow.


Izvestia: Will Armenia quit CSTO?

Armenia’s withdrawal from the Collective Security Treaty Organization (CSTO) is only a matter of time. Experts interviewed by Izvestia no longer doubt that Nikol Pashinyan’s government will do this after the Armenian premier said during a dispute at a parliament meeting on June 12 that Yerevan will leave the CSTO "when it sees fit."

Soon after Pashinyan’s announcement, Armenian Foreign Minister Ararat Mirzoyan raced to clarify things: "The prime minister did not say we are leaving the CSTO, but the Armenian PM did say that we will not go back if we decide to leave."

Yerevan de facto suspended its activity within the Russian-led bloc in February when it said it had frozen its participation in it. And Armenia stopped making financial contributions to the alliance in early May. Despite this, CSTO Secretary General Imangali Tasmagambetov said, the organization fully sticks to its commitments to Yerevan.

Moscow sees Western pressure behind the harsh rhetoric toward the CSTO and Russia. The West is trying its best to integrate Armenia into its confrontation with Russia, without any regard for Armenia’s security or the interests of the Armenian people, Russian Deputy Foreign Minister Mikhail Galuzin told Izvestia recently.

Armenia will undoubtedly quit the CSTO, as the republic has clearly shifted toward the West and pro-Western agencies politically, experts say. The only question now is when this will happen. "Everybody has already taken the scenario of Armenia’s exit into account and everybody is preparing for that. And that will be Armenia’s, not the CSTO’s, initiative. The CSTO, for one, did everything to take Yerevan’s interests into account," Senior Research Fellow at the Center for Studies of Caucasus at MGIMO University Nikolay Silayev, concurs.

It seems the Pashinyan administration will have the final say on this. Negotiations continue, and the Prime Minister is trying to score a political victory, says Silaev. Still, getting out of the CSTO may not be easy for Yerevan.

However, at present, Armenia cannot make the jump to another organization due to the country hosting a Russian military base and Russian border guards, as well as Armenians having certain visa advantages, head of the Caucasus sector of IMEMO RAS Vadim Mukhanov told Izvestia.


Izvestia: Taliban-led Afghanistan pushes for inclusion in SCO, BRICS, EAEU

The Taliban movement (outlawed in Russia) is seeking permanent membership in the Shanghai Cooperation Organization (SCO) for Afghanistan, Afghanistan's Charge d'Affaires in Moscow Jamal Nasir Garwal told Izvestia. The Taliban government is also pushing for Afghanistan’s accession to BRICS and the EAEU. The Russian Foreign Ministry said earlier that Moscow would be ready to support Kabul if the Taliban is recognized. While China, Kyrgyzstan, Pakistan and Uzbekistan may approve Afghanistan’s SCO membership, India, Iran and Tajikistan could oppose it.

To become a full-fledged member of the SCO, the Afghan government must be legally recognized by all permanent members of the organization, says Nikita Mendkovich, head of the Eurasian Analytical Club. "The Taliban government must at least have diplomatic recognition for Afghanistan to join the SCO. That is, official diplomatic relations must be established with it," the expert told Izvestia. To him, the prospects for this are good as long as Afghanistan shows success in combating terrorism, developing economic cooperation with Russia and ensuring the security of Russian projects in the region.

So far, not a single country has recognized the Taliban as Afghanistan’s legitimate government. On May 27, Russian Special Presidential Representative for Afghanistan Zamir Kabulov said that the Russian foreign and justice ministries had reported to President Vladimir Putin that the Taliban movement can be removed from the country’s list of extremists and terrorists. This is because Moscow views the Taliban as the real government of Afghanistan, Russia’s top diplomat Sergey Lavrov explained. While the Taliban has been under UN sanctions since 1999, the United Nations Security Council has never designated the movement as a terrorist organization.

Omar Nessar, a researcher at the Russian Academy of Sciences’ Institute of Oriental Studies, told Izvestia that removing the Taliban from the blacklist would pave the way for recognizing the new Afghan authorities. "They are actually not [a banned group] any longer as they do not conduct any violence. They have evolved into a government," he said. "I think the negotiations are underway now, and Russia, Kazakhstan and other external players are laying the groundwork for recognition among their allies," he added.


Kommersant: Fed policy continues to cast shadow on Russian market amid sanctions

On Wednesday, the Federal Reserve kept its key rates on hold at 5.25-5.5% again as the regulator acknowledged that it saw some progress on inflation. Market players are now penciling in the Fed’s first rate cut for September as they differ on where things will go from here. Russian experts insist that, despite the latest US sanctions, the Fed policy will continue to affect the Russian market through the global economy, commodity prices and the yuan exchange rate.

Now that the United States has blocked exchange trading in the US dollar and the euro Russia may have less incentive to monitor the Fed’s monetary policy. In May, the ruble found support from increased currency sales, and households, too, bought more foreign currency, while the share of yuan trading set new records.

And yet it is still important to monitor Fed moves, chief macroeconomist at Ingosstrakh Investments Anton Prokudin told Kommersant, as he refers to their influence through the yuan exchange rate and expects the market to adapt to working in new circumstances. Chief economist at Renaissance Capital Oleg Kuzmin said: "In purely technical terms, the Fed policy has an impact on all economies and markets with which Russia trades and conducts financial transactions, as well as global commodity markets." "Russia is a part of the global economy, despite the deglobalization shocks, while the Fed is the key central bank for global financial markets," Kuzmin added. He also expects an increase in yuan transactions and believes that the official ruble-dollar rate in the future will most likely be calculated through the official ruble-yuan exchange rate and the yuan-dollar cross rate.

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