Press review: Putin’s May decree adjusted and clashes erupt between Armenia, Azerbaijan / News / News agency Inforos
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Press review: Putin’s May decree adjusted and clashes erupt between Armenia, Azerbaijan

Press review: Putin’s May decree adjusted and clashes erupt between Armenia, Azerbaijan

Top stories in the Russian press on Tuesday, July 14, prepared by TASS

Kommersant: Putin’s May decree to be adjusted for new government and constitution

The targets for socio-economic development laid out in the May 2018 decrees for September 2020 will be recalibrated. The Mishustin government will de facto receive its own medium-term plan of action until 2024, and part of the national development goals set out by President Vladimir Putin’s decree will be determined until 2030. According to Kommersant, there are several reasons to adjust the basic documents for the state’s economic policy, followed by a partial revision of the National Projects, and the coronavirus pandemic is hardly the main one. Rather, it is about a future attempt by the government to implement the amendments to the Russian Constitution together with the digitalization of the public sector of the economy.

The newspaper reported that these changes were very important. The entire system of state administration in Russia, all KPIs in the corridors of power, and all National Projects in recent years have consistently been aligned with national goals. The decline in GDP in 2020 due to COVID-19, the plunge in oil prices and the changing conditions of foreign trade are also the reasons for these changes. Finally, amendments to the 2020-2021 budget policy, the upcoming budget consolidation and a shift to a hefty deficit make a number of goals set for 2024 unattainable. Therefore, according to Kommersant, some of the goals in the new decree will be planned for 2024, and some for 2030. Finally, the digitalization trajectory is essentially the central part of the strategy of the new government.

It is still unknown exactly which figures of the national goals will change. The government and the presidential administration will hammer out a draft presidential decree in September 2020, the newspaper wrote.

By October 30, 2020, according to Kommersant’s source in the government, a new plan for achieving these goals is going to be laid out.

Izvestia: Armenia-Azerbaijan border clash unlikely to boil over into full-blown armed conflict

Armed clashes have broken out on the border of Armenia and Azerbaijan, with the two countries engaging in battles. Both sides are blaming each other for starting the confrontation. Baku acknowledged that five people were injured as a result, and three servicemen were killed, while Yerevan reported no casualties. According to experts interviewed by Izvestia, the main reason for the incident due to mounting discord that amassed within Armenian and Azerbaijani societies.

The coronavirus pandemic caused significant damage to the economies of both countries. Armenia estimated its damages at $1.5 bln. Moreover, a state of emergency has been in effect since March, and recently it was extended until mid-August. Azerbaijan is in a similar bind, as the country is facing an uphill battle with coronavirus. Another factor in Armenia’s mix is its struggle with political opponents. It is also important that negotiations on the status of Nagorno-Karabakh have reached an impasse.

"Both sides benefit from an armed confrontation. This way, the authorities can alleviate tension in society, distract [their citizens] from internal problems, and consolidate the public," expert Nurlan Gasimov told Izvestia.

Experts believe that clashes are unlikely to boil over into a full-blown conflict. "There are still no fundamental prerequisites for war. But the amount of shelling, and battles may increase. International observers should actively encourage the parties to negotiate," Stanislav Pritchin from the Center for post-Soviet Studies at IMEMO told the newspaper.

Chairman of the Federation Council’s Committee on Foreign Affairs Konstantin Kosachev in an interview with Izvestia promised that Russia will contribute to reconciling the parties. "We promote rapprochement, but do not impose our own position. It is necessary to establish how it all began, how it developed, and what it led to it. It is necessary to return the situation to the status quo, where the use of military force is excluded," Kosachev said.

Nezavisimaya Gazeta: Russian SMEs emerge from crisis ahead of schedule, but rough times are on the horizon

Small and medium-sized businesses (SMEs) in Russia might have come out of the crisis ahead of schedule, Nezavisimaya Gazeta wrote. However, entrepreneurs believe that collapse of businesses is yet to come, and the growth observed today is only due to a pent-up demand. State support allowed SMEs to stay afloat, but now it needs to not only be maintained, but increased further, the business community and experts told the newspaper.

The total revenue of SMEs returned to the level of March 2020 "even in the sectors most affected by the coronavirus," according to a study by Tochka bank for entrepreneurs. The report noted that in industries affected by the pandemic to a lesser extent, revenue in the last week of June exceeded the pre-lockdown level by 23%. The pandemic also did not lead to the massive closure of SMEs, analysts pointed out.

However, experts warn - small and medium-sized businesses almost always operate in the sphere of services, and they are not yet being revived. As for the optimistic conclusions of bankers, they are premature, experts told Nezavisimaya Gazeta. Member of the General Council of Delovaya Rossiya Alim Bishenov noted that SME's revenue growth can easily be explained by the low base effect of April-May, when the vast majority of enterprises did not function at all or worked under extremely low demand. In his opinion, without deferred demand and a low base effect, the situation will not look as impressive.

"Exiting the crisis and reaching previous financial indicators, the end of problems on the labor market, the restoration of lost counterparty ties - all this will take a very long time," Advisor to the Presidential Commissioner for Entrepreneurs' Rights Anton Sviridenko told the newspaper. "If SMEs lost appropriate assistance right now, many of the companies may simply not survive," the expert added.

Izvestia: Finance ministry to hit oil and gas sector with tax hikes

The Russian Ministry of Finance has decided to turn up the head on the oil industry. The main point of its looming reform is to compensate for budget losses from the poorly introduced excess-profits tax arrangement. Previously, the ministry estimated them at 213 bln rubles ($3 bln). The federal agency plans to impose hikes on the mineral extraction tax on a number of fields temporarily - until the end of 2023, Izvestia wrote with reference to the document. Another point of the reform is updating the reserves of oil majors.

A source close to the government explained to Izvestia, the hike is being primarily imposed on those companies that, prior to transferring to the excess-profits tax, enjoyed mineral extraction tax relief and received additional benefits after transferring the deposits to the new regime.

Earlier, Russia’s Deputy Finance Minister Alexey Sazanov in an interview with Reuters excoriated the excess-profits tax as the biggest mistake during his time at the federal agency. Due to the introduction of the tax, the federal budget in 2019 saw a shortfall of profits to the tune of 213 bln rubles ($3 bln), which is comparable to the cost of tax breaks for a small and medium businesses affected by a pandemic for two quarters, Sazanov noted. In turn, the Ministry of Energy considers the introduction of the tax a successful solution and advocates its expansion.

If the excess-profits tax is substantially adjusted, and oil and gas companies lose their benefits, then a number of projects may simply be closed, KPMG partner Victoria Turgeneva told Izvestia. These are deposits that were actually launched thanks to the new tax regime. With its zeroing, their profitability will dry up, and in that case it will not make sense to continue their development.

Kommersant: Silver prices hit new high amid pandemic

The price of silver has reached a ten-month high, surpassing the level of $19 per ounce. The rise in prices is associated with a weakening US dollar, rising inflation expectations, as well as industrial demand, in particular from the green energy sector. According to Kommersant, under such conditions, investors are actively pumping up investments into index funds, whose assets have soared a multi-year maximum of 25,400 tonnes.

"The value of these metals is based not only on industrial applications, but also on the collective belief of investors in unconditional intrinsic value. Hence, the historically high positive correlation of these metals with each other and a negative correlation with the dynamics of the dollar," Head of BCS Broker information and analytical content Vasily Karpunin told Kommersant.

Under such conditions, investors are steadily buying silver. According to Chief Economist at Sovcombank Kirill Sokolov, the high demand for silver, as well as for gold, is promoted by low yields on government bonds of developed countries. "Gold has already increased excessively in price, as a result, demand is shifting to other precious metals," Karpunin noted.

Additional support for silver may come from the recovery in demand from real sectors of the economy, as well as from green energy. "Silver is used in the production of solar panels. ... The green trend in the energy industry has only recently been gaining momentum," Karpunin said. According to Sokolov, gold prices can reach $2,000 per ounce within a year, and the price of silver can reach $25 per ounce.

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