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Press review: Trump to hash over Donbass and Financial markets await Russia's move

Top stories in the Russian press on Friday, June 16

Nezavisimaya Gazeta: Trump to meet Ukrainian leader ahead of talks with Putin

US President Donald Trump is set to meet his Ukrainian counterpart Pyotr Poroshenko within days in Washington, Nezavisimaya Gazeta writes on Friday. A source told the newspaper that Poroshenko will fly to Washington on June 18 and meet with Trump two days later, on June 20. However, Kiev expects the results of the talks to be obvious only a month later after Trump meets with Russian President Vladimir Putin. Nezavisimaya’s source said the Trump-Poroshenko talks had been in the works for quite a while but the meeting has been postponed since the US failed to hammer out a clear trajectory on the Ukrainian crisis.

Kiev hopes Poroshenko will succeed in convincing his American colleague that the Donbass issue may only be solved in two steps: first, through implementing all items of the Minsk accords related to security enforcement, including the OSCE’s control over the Russia-Ukrainian border in Donbass, and second, through compliance with all of Ukraine’s political obligations, including local elections in Donbass. Kiev insists the elections should be carried out under Ukrainian legislation, with the participation of Ukraine-registered parties and controlled by the OSCE.

Kiev’s stance is based on the idea that the Minsk agreements are aimed at resolving the conflict by liquidating the Donetsk and Lugansk People's Republics (DPR and LPR), and fully restoring Ukrainian authority in the region. Obviously, the republics oppose this approach, and are pushing for a special status for DPR and LPR. “What the heads of the separate regions of Donetsk and Lugansk want makes no difference,” a source told Nezavisimaya Gazeta, adding that “the quandary of what Russia’s role is has  handicapped all formats of the Donbass settlement.” “Moscow says it is a mediator, though we think it is one of the warring sides. Until recently, the west has neither talked tough on Russia nor has it labeled Moscow an aggressor, though sanctions were slapped on Russia,” the source explained.

Kiev has been eager to organize Poroshenko’s meeting with Trump ahead of the talks between the US and Russian presidents. Ukrainian political scientist, Head of the International Institute for Democracy Sergey Taran told Nezavisimaya Gazeta that the chain of meetings is hardly crucial here. "This is not what the result depends on, though of course the sequence has a symbolic political meaning since it may hint at the direction of Trump’s foreign policy," he said. Alyona Getmanchuk, Director of the Kiev-based Institute of World Policy, does not rule out that "US attempts to organize at least some kind of mini-reset with Russia" may follow. Nezavisimaya source admits the potential reset may focus on a tradeoff regarding Ukraine, saying that the US joining the negotiations is a way towards this.


Izvestia: MEP says Russia, EU need genuine intelligence sharing

Russia and Germany have the ability to tackle terrorism together, Member of the European Parliament Knut Fleckenstein said in an interview with Izvestia daily. "This is really important for both sides, and the issue here is not only about Germany and Russia, but the whole European Union. The US should also be involved in the fight against terror. Tackling terrorism will be more efficient if we pool our interests," he said. According to the politician, there are quite a few ways to cooperate. "We need a comprehensive intelligence sharing strategy, for example, as well as coordination with Russia," he said, adding that "this is particularly in place now, but it is always possible to enhance it."

Fleckenstein thinks relations between Moscow and Berlin can be improved as well. "I think we should do our best, particularly regarding the so-called dialogue on civil society. Also, international youth exchange programs should be expanded. We need mutual interest on such issues as visas," the politician said, adding that he expects "the visa regime to be liberalized in the future." "I think that both Germany and the European Union should take on more efforts to make sure such projects open up for us, because we have much in common with Russia, those being trade relations, our common quest for peace, and it is important that our countries have a well-established constructive dialogue," the MP added.

When asked whether his party will promote the initiative to lift anti-Russia sanctions, he said that "no one benefits from sanctions, neither Russia, nor Germany." "But one aspect of the Minsk accords exists that should be implemented at least partially by both parties involved, and I hope that we will manage to reach the goal of lifting the restrictions in the near future," he noted.


Izvestia: Russia, US at odds on Iran’s role in Syrian settlement

Moscow and Washington have been grappling over Tehran’s role in the Syrian settlement, particularly regarding the de-escalation zones initiated by Russia, Iran and Turkey, Izvestia reports citing a source in Russia’s foreign ministry. Washington’s unbending stance and reluctance to cooperate and communicate with the Islamic Republic bogs down the Syrian peace process, the sources said. "It would be possible to reach an agreement regarding Syria. In contrast, Turkey, Qatar and many others with a rigid attitude at first glance, are ready for a compromise. But as soon as the issue gets to the role of the Islamic Republic, the Americans go in reverse and shut out any cooperation with Tehran whatsoever. Moreover, Saudi Arabia automatically follows them," one of the sources said, adding that this particularly concerns a detailed discussion of the de-escalation zones.

Experts interviewed by Izvestia hardly expect any breakthrough on settling the Syrian conflict as Trump’s administration is likely to stick to an anti-Iranian line and remain adamant in its stance. Boris Dolgov of the Oriental Studies Institute under the Russian Academy of Science told the publication that the main reason is that the US "considers the Islamic Republic if not an enemy, but at least an opponent of American interests globally and particularly in the Syrian conflict." "Also we should bear in mind that the key ally of the US in the region is Israel that views Tehran as its main threat. The reluctance to hammer out agreements with Russia on Iran is the result of existing realities," he said, adding that he does not think "it is possible to find a way out of the Syrian conflict by omitting the Islamic Republic."


Vedomosti: US Congress weighing sanctions on Russia’s sovereign debt

The recent expansion of the US sanctions against Moscow implies a potential widening of restrictions on Russia’s sovereign debt. If enacted, the move may seriously escalate the rift between Moscow and Washington, Vedomosti writes quoting ING’s chief economist Dmitry Polevoy. The expert said that the United States has not imposed any limitations on Russian government bonds until now. "Non-residents purchased a great deal of OFZs (Russian planned foreign borrowings), which means that the implications for the market, the ruble and the deficit may be substantial," he said, adding that foreign investors will also be deprived of the possibility to provide financing for the Russian government, for example, regarding participation in Eurobond, OFZ purchases, or privatization deals.

As of April 1, 2017, the share of non-residents in OFZ purchases amounted to 30.1%, the newspaper says citing the Central Bank’s data. Previously, the Finance Ministry intended to focus on non-residents in future foreign issuances. Seventy-five percent of the 10-year Eurobond placement last May was acquired by British, French, Swiss, Asian and American investors. Russian securities issued last September were fully placed among foreigners, with the share of US investors amounting to 53%.

According to Polevoy, the new restrictions may cover not only American, but also European investors. "Any violation of the US sanctions regime by an American bank may be followed by a penalty placed by the US regulator. I think there will also be an attempt to gain a consensus from European authorities," he said.


Rossiyskaya Gazeta: Market awaits Central Bank’s key rate decision

Russia’s national currency may weaken without speculative capital if the Bank of Russia slashes its key rate later on Friday, Rossiyskaya Gazeta writes. Until recently, the regulator had been trying to minimize the influence of its decisions on the country’s economy, which has brought the real rate to a record high, Head of the Department of Financial Management at Plekhanov Russian University of Economics Konstantin Ordov says, adding that he considers it necessary to cut the key rate by at least 0.5 percentage points. In this case, Sergei Korolev at Alor Brokerage expects a positive response from the market. The lower the Central Bank’s rate is, the cheaper loans are, which provides greater opportunities for businesses, which in turn will add tax revenues to the state’s coffers and new jobs for the public, Korolev says.

However, Stanislav Novikov, managing director at BCS Ultima expects the regulator to be more cautious later in the day. "We expect a reduction of 0.25 percentage points, taking into account higher inflationary risks due to tariff growth in the near future, an inferior harvest outlook for this year, fruit and vegetable inflation, as well as the suspension of the ruble’s strengthening," he said. Also, Novikov added, "a narrower gap between rates in Russia and the United States will weaken the attractiveness of carry trade operations based on the interest rate difference."


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