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Press review: Moscow's tit-for-tat plans for the US and Russian arms supplies to Saudis

Top stories in the Russian press on Tuesday, July 11

Izvestia: Russia gearing up for tit-for-tat measures against US diplomats

Moscow is looking into some extensive tit-for-tat measures in response to its seized diplomatic properties in the United States. A source in the Russian Foreign Ministry told Izvestia, about 30 US diplomats might be sent home as reciprocal measures and American property in Russia could be seized.

According to the newspaper, Moscow was driven to take such measures by Washington's decision not to return the Russian embassy’s property, which was confiscated in December 2016. This matter was not resolved during the Putin-Trump talks in Hamburg. The US decision, according to the source, forces Russia to take a tit-for-tat response.

"There is a preliminary agreement to hold a meeting in St. Petersburg between Deputy Foreign Minister Sergey Ryabkov and US State Department’s Under Secretary for Political Affairs Thomas Shannon. If there is no compromise after that, we will have to take these measures," the source told Izvestia.

Earlier, the newspaper’s other source in Russian diplomatic circles noted that the US dacha in Serebryany Bor and a storage room in Moscow could be seized as part of the measures, whereas Spaso House, the residence of the US ambassador to Moscow, and the ambassador's Anglo-American school in St. Petersburg will not be affected.

"However, unfortunately, for half a year Trump either could not, or did not consider it important to correct the situation. Now we have to draw a line and answer in a reciprocal manner. This is in no way our demonstration of any negative attitude towards the Trump administration, it is just a testament to the fact that Russia is an esteemed power, to which one must show respect. At the same time, it is necessary to observe protocol, etiquette and international norms - there cannot be any other way of communicating with Russia," Klimov said.


Kommersant: Russia, Saudi Arabia talk weapons supplies to the tune of $3.5 bln

Rostec CEO Sergey Chemezov said that Russia and Saudi Arabia had signed a preliminary agreement for the supply of arms and equipment at a price tag of $3.5 bln. Earlier, Moscow had repeatedly tried to enter Riyadh’s arms market - contract packages for up to $20 bln were discussed - but unlike Washington, Russia has never clinched solid contracts with Saudi Arabia. According to Kommersant, the intentions of the Saudi leadership in Moscow will be understood once King Salman al-Saud wraps up his anticipated visit, which could take place by the end of the year.

Two top managers in the defense industry enterprises told the newspaper, even initialing such an impressive package of contracts does not guarantee concluding any solid agreements. Over the past decade, Riyadh has already shown interest in a wide range of Russian military products. Chemezov told Kommersant that the Saudis constantly asked about the Iskander-E operational and tactical complex. Several times, both parties managed to agree on the range of weapons, but Riyadh did not hurry to ink any legally binding documents

According Kommersant’s source in military-diplomatic circles, Russian negotiators have no illusions about entering Saudi Arabia's arms market, but they will not be able to switch off the dialogue. Some of Moscow’s partners (Egypt in particular) are taking money to buy Russian weapons from Riyadh. Any refusal to negotiate might also lead to complications in other, much more promising areas, so Russia is forced to "save face" while discussing lesser projects like military-technical cooperation, the source told the newspaper.

According to the source, it will be possible to clarify the seriousness of Riyadh's intentions after the first meeting between Russian President Vladimir Putin and King of Saudi Arabia Salman al-Saud.


Izvestia: Western investors pour money into Russia through offshores

According to the Russian Central Bank, the Bahamas and Bermuda provided 25% of direct investment to Russia last year, which is more than the United Kingdom, the United States, France, Germany, Japan and China invested in total. A source close to the Ministry of Finance told Izvestia that offshores are used by residents of Western countries who are prohibited from investing in Russia because of the current sanctions, but want to cash in on Russia’s high returns.

With the introduction of sanctions in 2014, offshores have dominated the financial flows. Over the past three years, inflows from the Bahamas and Bermuda have surged from $5.4 bln to $8.2 bln. "This trend has a fairly simple explanation, residents of Western countries who had been investing in Russia earlier, now do it through offshores for political reasons," a source close to the Finance Ministry told Izvestia.

"I know for sure that offshore money does indeed come from those non-residents who cannot afford to invest directly into the Russian economy, because of the economic sanctions imposed on Russia among other reasons," Senior Partner at Yukov and Partners Irina Adamova told Izvestia.

According to Head of department of tax practice and international projects at KSK group Dmitry Vodchits, the Bahamian and Bermudian jurisdictions are mainly used by American financial corporations. However, with the transition of the Bahamas to the automatic exchange of tax information next year, cash flow from this country might significantly decrease.


Nezavisimaya Gazeta: Moscow and Brussels need regular dialogue

On July 11 and 12, Russian Foreign Minister Sergey Lavrov will be paying a working visit to Belgium. The agenda includes a meeting within the framework of the Russia-EU political dialogue with EU High Representative for Foreign Affairs and Security Policy Federica Mogherini, as well as negotiations with Belgian Foreign and European Affairs Minister Didier Reynders. According to Nezavisimaya Gazeta, during the talks, the parties will try to find ways to pull their bilateral relations out of a rut.

"Because of the Ukrainian crisis and the tight sanctions by Brussels, Russia and the EU are experiencing the most difficult period in their relationship. Meanwhile, Moscow continues to focus on restoring full-scale cooperation with the European Union, its largest trade and economic partner, which accounts for more than half of exports and over 40% of Russia's imports," the newspaper said.

A source in the Russian Foreign Ministry told Nezavisimaya Gazeta, that the upcoming meeting will be a continuation of the contacts that Lavrov and Mogherini had in Moscow. "The visit to Brussels will be an opportunity for a more in-depth discussion of the entire complex of relations between Russia and the EU and those international problems that are of mutual interest. At the same time, on a number of important problems, such as international terrorism, the Middle East settlement or the Libyan crisis, our positions are very close," the source said.

Although there is still no systemic relationship between Russia and the EU, the Foreign Ministry wants all artificial barriers to a mutually respectful dialogue based on facts, rather than ideological preferences, to be eliminated, the newspaper said.

Meanwhile, European Union ambassador to the Russian Federation Vygaudas Usackas told Nezavisimaya Gazeta, Brussels and Moscow were able to promote cross-border cooperation, to which the EU allocated 183 mln euro. Russian teachers and students are the most active participants in the European program of educational exchanges. More than 4,000 students and university staff from Russia will receive EU grants for training, internships or teaching until the middle of next year. In addition, according to the ambassador, the largest number of Schengen visas are issued in Russia.


Vedomosti: US sanctions might put an end to Gazprom's projects

The construction of Nord Stream 2 and Turkish Stream could be in jeopardy, Gazprom said in a document on the prospects for Eurobonds issue, available to Vedomosti. If the current version of the bill on new US sanctions against Russia comes into force, it can delay and even "prevent the completion of the projects by the group," the document said.

The draft for a fresh round of sanctions was initiated by American senators. On June 15, the bill was approved by the US Senate and sent to the House of Representatives that will review the document after July 10. The bill gives the US president the right to impose sanctions on individuals and companies that have invested in the construction of export pipelines by Russia $1 mln once or more than $5 mln during the year. It would be also forbidden to provide equipment, technologies and services for such projects.

Foreign companies decide on participating in the expansion of Nord Stream 2 and the construction of the gas pipeline to Turkey, keeping in mind any possibility of additional sanctions, Raiffeisenbank analyst Andrey Polishchuk told Vedomosti. "But even if sanctions discourage potential investors, Gazprom has enough resources to complete the construction of the pipelines on its own. In my opinion, the risk of political decisions that interfere with the implementation of the projects is not great," Polishchuk noted.

According to RusEnergy partner Mikhail Krutikhin, if American sanctions are expanded, the Allseas company that is engaged in laying the pipes, may refuse to continue working on the project. "If Allseas leaves Turkish Stream, other contractors are unlikely to agree to replace it. So far, there is no solution, Gazprom will continue building the pipeline," Krutikhin told the newspaper.

"Adopting sanctions in their current form might significantly slow the implementation of Nord Stream 2 and Turkish Stream, or even make them impossible," Fitch Ratings Director for Corporate Affairs Dmitry Marinchenko told Vedomosti. However, strangely enough, the refusal to build pipelines can even boost the company’s credit quality, the expert pointed out. At the same time, the benefit from carrying out the Nord Stream - 2 project is not obvious. "Construction will increase gas exports to Europe, but by how much Europe is ready to increase gas exports from Russia remains an open question," Marinchenko stressed.


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