Press review: Moscow goes on lockdown and Russian economy headed towards recession / News / News agency Inforos
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Press review: Moscow goes on lockdown and Russian economy headed towards recession

Press review: Moscow goes on lockdown and Russian economy headed towards recession

Top stories in the Russian press on Monday, March 30, prepared by TASS

Kommersant: Moscow goes under citywide lockdown

Starting from Monday, March 30, Moscow and the surrounding suburbs began to transition to a hard quarantine to curb the spread of the coronavirus infection. All residents of the region, except those employed in key industries, are prohibited from leaving their homes expect for emergencies, food and medicine. According to Kommersant, the rules will become even stricter in the future. Right now, people still can exit and enter Moscow, but all other movement within the city will soon require special permits.

A source told Kommersant, that the decision was coordinated with the Russian government and the presidential administration. The Kremlin considers Moscow’s measures "justified," Presidential Spokesman Dmitry Peskov said.

Moscow Mayor Sergey Sobyanin emphasized that the restrictions do not prohibit anyone from entering or leaving Moscow. However, a source close to the mayor’s office told Kommersant that the procedure for issuing special passes for moving inside the city is in the works. First of all, "for delivery services, employees of logistics companies that provide grocery chains with products, as well as for employees of such chains". In the coming week, a "smart system" will be deployed to monitor compliance with the quarantine regime.

The question of punishing those who violate the quarantine measures remains open for both Moscow and the region. Partner at YUST law firm Alexander Bolomatov told the newspaper that there was no responsibility for non-compliance with the decree at the federal level, so the document is more of a recommendation at the moment. Until a control mechanism and specific sanctions are adopted at the federal level, the police will be able to issue warnings, but not fines.

On the other hand, experts told Kommersant that "individual restrictions on rights and freedoms" can be established "in a state of emergency," and at the moment, no emergency was officially announced. Chair of the Federation Council Committee on Constitutional Legislation and State Building Andrey Klishas said that, "The introduction of such restrictions is the exclusive competence of the Federal Assembly and the President."

Nezavisimaya Gazeta: Economic recession in Russia inevitable, say experts

The onset of a recession in the Russian economy this year is unavoidable. International rating agency Standard & Poor’s (S&P) forecasts a 0.8% decline in domestic GDP. The Russian economy may fall by 7% this year, and quarantine measures will accelerate the decline, independent economists believe.

Meanwhile, the Russian government believes that, despite the fall in oil prices and the uncertainty associated with the pandemic, the Russian economy is developing "within the framework of the planned trends", Nezavisimaya Gazeta wrote.

According to the study, facing the decline in external demand and falling investment, economic growth is likely to reach 3.8% in 2021. Analysts also expect a federal budget deficit of 2.8% of GDP in 2020 and 0.4% in the next. In real terms, exports will decrease by 2%, investments will slump by 6%, per capita GDP will dive from $11,500 to $9,500.

Russian analysts generally agree with the forecast. VEB’s chief economist Andrey Klepach believes that, at best, the country can expect stagnation this year. "Due to a clash with oil prices and a reduction in demand due to the onset of the pandemic, our growth will be somewhere around 0.1%," he said.

In contrast to independent economists, Russian officials seem very upbeat about the Russian economy, the newspaper reported. Governor of the Russian Central Bank Elvira Nabiullina said that so far she does believe a recession in the country is possible. Russia’s finance chief Anton Siluanov pointed out that Russia's GDP growth in January-February amounted to 2.3%, and that the national economy is still developing within the planned parameters.

Unlike government officials, experts interviewed by Nezavismaya Gazeta are confident that a recession in Russia is virtually inevitable. "An acceleration of inflation due to the devaluation of the ruble will undermine consumer demand, investments will fall due to increased uncertainty, many will lose their jobs or face lower wages," BCS Premier Senior Analyst Sergey Suverov told the newspaper.

This year the Russian economy got off to an unfavorable start, and the worst part is that it is impossible to predict the further impact of the pandemic on the economy, analyst at Alor Broker Alexey Antonov told the newspaper.

Vedomosti: US curbs military activity overseas due to coronavirus

The United States continues to curtail its bases and to remove troops from Iraq. On March 29, the US-led international coalition in Iraq announced the transfer of a military airbase located in the north of the country to the Iraqi army. On March 26, a foreign contingent was evacuated from the base located near the Iraqi city of Mosul. According to Vedomosti, American troops could be leaving due to the coronavirus epidemic, and the situation might not have immediate consequences, but potentially long-lasting ones.

The impact of the pandemic on the overseas activity of the US armed forces is significant, the newspaper wrote. Secretary of Defense Mark Esper ordered a 60-day freeze of troop movements abroad, a number of exercises and their components were canceled, including major changes in the scale of the Defender 2020 exercise in Europe. Michael Kofman from the Center for Naval Analyses believes that the impact on the exercises and operations of the US armed forces abroad this year will be temporary, but significant.

Despite the pandemic, two US brigades remain in Poland. One deployed earlier and constantly rotated, the second within the framework of the Defender 2020 exercises, a source close to the Russian Ministry of Defense told Vedomosti. However, a number of units that were supposed to provide these exercises did indeed return to the United States, the source added. As for Russian foreign military bases, nobody is going to withdraw them from Syria, or for that matter from Tajikistan, Armenia, Abkhazia and South Ossetia, the source went on to say. At the same time, in Syria and Tajikistan, contacts not only with the local population, but also almost all contacts with the military were stopped.

Alexander Yermakov from the Russian Council on International Affairs told Vedomosti that in the coming months, all of the West’s military activity is likely to be focused on combating the pandemic, which could aggravate relations with the Taliban.

Vedomosti: Rosneft unexpectedly sells assets in Venezuela to Russian government

Russia’s oil major Rosneft signed an agreement to cease operations in Venezuela and sold its assets in the country to the Russian government, represented by an unnamed company. The move could try to curb US sanctions amid escalating tensions between Russia, Washington and Venezuela, and the ongoing global economic crisis.

The company's decision to cease operations in Venezuela was expected, Rosneft spokesman Mikhail Leontyev told Vedomosti, "We, as a public international company, must protect our shareholders. We did it in their interests," he said.

Rosneftegaz may be the buyer or one of the parties to the deal, experts interviewed by Vedomosti stated. The company is 100% owned by the Russian government, and this is the only state-owned company that can pay with Rosneft shares. However, the risk of sanctions remains in this case, since Rosneft CEO Igor Sechin is also Chairman of the Board of Directors of Rosneftegaz, Senior Analyst at BCS Prime Sergey Suverov told the newspaper. Therefore, the buyer could be another state-owned company, not affiliated with Rosneft.

Venezuela has the largest hydrocarbon resource base in the world and Rosneft was greatly interested in the projects in this country, Suverov added. "However, under sanctions pressure, possible risks for the company that is listed in London and has about 50% the equity owned by foreign investors outweigh potential benefits of doing business in the region," he told Vedomosti.

Rosneft’s main business is located in Russia, assets in Venezuela don’t have a great value right now due to the political and economic crisis and US sanctions, Fitch analyst Dmitry Marinchenko told the newspaper. He believes that due to a sharp drop in oil prices, the situation in Venezuela will only worsen, and production there will continue to fall.

Izvestia: Sberbank expands its business in Europe

Russia’s state-owned Sberbank plans to expand its presence in Europe. In 2021, the bank will begin to provide services to individuals in Austria, representative of the bank’s Austrian branch told Izvestia. The bank is currently present in eight countries of Central and Eastern Europe and intends to further expand the range of services. Experts interviewed by Izvestia believe that Sberbank is stronger than most of its competitors in the European Union, and a developed ecosystem gives it an advantage during the coronavirus outbreak and against the backdrop of an impending recession.

Sberbank Europe is formerly Austria’s Volksbank International (VBI) and its group of banks in several countries. Sberbank bought it in 2011 for 500 mln euro. VBI's head office is located in Vienna, and at the time of the purchase, the group also had subsidiaries in Hungary, the Czech Republic, Slovakia, Slovenia, Croatia, Bosnia and Herzegovina. In total, Sberbank has five foreign subsidiaries.

Sberbank is much larger than its competitors from the EU. Its capitalization on the London Stock Exchange comes to 46.77 bln euro. By comparison, the German banking giant, Deutsche Bank is at 10.75 bln euro.

Sberbank has the most developed ecosystem in Russia, Finam analyst Natalya Malykh told Izvestia, so it’s quite possible to compete with its technologies in Europe. The spread of coronavirus will strengthen the consolidation of the banking industry in Russia and abroad, and strong players who have access to financing are likely to increase their share, she explained.

The bank is very strong when compared with any global bank. The level of profitability is high, and the group is actively developing its businesses in different directions, BCS Premier investment strategist Alexander Bakhtin told the newspaper. But only time will tell, if building up a presence in the European region can be considered the right move, he added.

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