The Russian media s reaction to EU/US sanctions 21-26 March 2014 The previous week saw two waves of sanctions imposed by the USA and EU against Russian and Ukrainian politicians and businessmen and a Russian bank. In spite of international sanctions Russia has embarked on the swift integration of Crimea into Russian legal and economic structures (see section below on the Crimea). There is an overall positive tone in the Russian media towards the impact of the sanctions. Russian politicians do not appear to be overly-concerned by the sanctions. Expressions of patriotism are on the rise. Economic commentary is expressed in a more balanced way. The content of economic opinion suggests that business will not be affected adversely by the sanctions. This summary focuses on the economic impact of the sanctions as reported in the Russian media. Main events G8 reorganisation into G7 Extract (1) Travel ban against 13 Canadian state officials by Russia Extract (3) Response of Russian politicians and state officials Deputy Minister of Economic Development Andrei Klepach (4) First Deputy Prime Minister Igor Shuvalov Extract 0 The Head of the Federal Drug Control Service of the Russian Federation (FSKN) Viktor Ivanov on sanctions against him Extract 0 MP Robert Schlegel introduces a draft law on the cinema industry Extract (5) MP Oleg Nilov introduces a draft law on state monopoly on tobacco and alcohol Extract (6) Commentary by Russian academics and political analysts Director of the International Institute for Humanitarian and Political Studies Vyacheslav Igrunov Extract (7) Political analyst Alexei Mukhin Extract (8) Commentary by economists and business Economists of Renaissance Capital on the recession of Russian economy Extract (9) Portfolio manager of Allianz Investments Oleg Popov on the effect of sanctions Extract (10) General Director of NOVATEK Leonid Mikhelson Extract (11) Chief Executive Officer of the Metro Group Extract (12) Business Events Russian-Japanese Investment Forum on 19 March Extract (13) Situation with Russian Rouble Kommersant journalist VItaliy Gaidayev on the decrease of tensions in currency market Extract (14) Commentary on the Russian Rouble by economists Extract (15)(16)(17) Russian integration of Crimea Extract (18)00(19)(20)(21)(22)
EXTRACTS Main events: (1) The State news agency ITAR-TASS reported that all the other countries of G8 apart from Russia announced their exit from G8 and intended not to participate in the summer summit in Sochi until Russia changes its course and political climate, when Russia s return to the G8 would possible. ITAR-TASS, 25 March, 01:58 (2) Other media outlets report that the dissolution of the G8 is the lightest sanction imposed by the West. The Minister of Foreign Affairs Sergei Lavrov commented that there is no big great upset in the G8 ceasing its activities. Political commentators said that the dissolution of the G8 represents nothing more than a loss to Russia s reputation. They also note that apart from the announcement of further sanctions, no further details had been offered by G7. Dissolution of the G8 was expected. Russian commentators state that this is a continuation of the developments started in 2008. Kommersant Ru, 25 March 12:25 (3) Russia has imposed a travel ban against 13 Canadian state officials. Many political commentators did not agree with efficacy of this step and noted the negative effect of sanctions on Russian-Canadian cooperation. The Ministry of Foreign Affairs, however, emphasized that Russia is still open for the cooperation with Canada, especially in the Arctic. Kommersant Ru, 25 March 14:05 Response of Russian politicians and state officials: (4) In spite of the negative prognosis by the World Bank on Russian economy, Deputy Minister of Economic Development Andrei Klepach stated that there is no recession and there will be no recession of the Russian economy. Vedomosti, March 26 First Deputy Prime Minister Igor Shuvalov stated that the worst-case scenario for the Russian economy is not connected with formal sanctions, but with the way major investors would act as a result of the sanctions. Nevertheless, Russia will not abandon its traditional export markets, and intends to seek new partners. Vedomosti, March 26 The Head of the Federal Drug Control Service of the Russian Federation (FSKN) Viktor Ivanov commented that the US travel ban against him is a very strange decision. He stated that he is prepared to continue to co-operate with his US colleagues on the fight against drugs. Kommersant Ru, 25 March, 13:01 (5) The State Duma member (MP) Robert Schlegel prepared a draft law on the cinema industry. He suggests limiting the amount of Western films shown in cinemas to 50%. Thus, half of all Western films should be removed from cinemas.
President of the Russian Television Academy and the company "Amedia" Alexander Akopov criticised the initiative and said when subtracting one dollar from the American film industry, we will automatically deduct one dollar out of our economy. Kommersant Ru, 25 March, 12:02 (6) In the light of the sanctions against Russia, a State Duma member, member of the social-democratic party Spravedlivaya Rossiya (Fair Russia), Oleg Nilov has registered a draft law on introducing state monopoly on tobacco and alcohol. He said that such a monopoly would allow Russians not to depend on foreign manufacturers and would bring substantial sums to the state budget. Kommersant Ru, 25 March, 18:02 Commentaries by Russian academics and political analysts: (7) Director of the International Institute for Humanitarian and Political Studies Vyacheslav Igrunov commented that the sanctions are a positive stimulus for Russian national economic development, decreasing dependence on the West. Russian government would be forced to strengthen the economic system from within. Perhaps this would lead to a change in attitudes to education, science and investment in the Russian economy. Kommersant Ru, 25 March 14:05 (8) Political analyst Alexei Mukhin said the position of the USA against Russia is not really attractive for the EU. He stated that European countries have already realized that they will suffer more from joining the sanctions than the USA, and possibly even Russia. The true aim of the USA is to push Russia out and take its place in the European energy market. Mr Mukhin comments that sanctions are not effective, because the Russians are not afraid of them. Ordinary Russians laugh a lot at the joke: Have any sanctions been imposed against you? Kommersant Ru, 25 March, 09:44 Commentaries by economists and businessmen (9) Forecasts given by economists of Renaissance Capital stated that the Russian economy would probably shrink by 0.6% in the first quarter, and by 0.1% in the second. However, in case of de-escalation of the conflict with Ukraine decline in economy would be limited to two quarters and a small increase is possible throughout the year. Renaissance Capital Economist Oleg Kuzmin indicated that the main reason for recession is the decline in investment activity. Vedomosti, March 26 Vedomosti, March 24 (10) Portfolio manager of Allianz Investments Oleg Popov commented that there is a certain negativity today when the second wave of sanctions were introduced by the USA. However, he assured that there will be no repetition of the situation of 3 rd March 2014 when investors were exiting Russian assets in a panic. There might be a more pessimistic reaction were the US to introduce systematic sanctions against the Russian economy, such as blocking Russian bank accounts.
Vedomosti, 21 March (11) General Director of the Russian largest independent natural gas producer NOVATEK Leonid Mikhelson stated that he believes that the sanctions against NOVATEK s co-owner Gennady Timchenko will not affect the progress of the company project " Yamal SPG ". Vedomosti, 26 March (12) Chief Executive Officer of the Metro Group Olaf Koch stated that the company will continue to invest in its business in Russia, despite the situation in Ukraine until such time as the sanctions threaten the flow of trade. Vedomosti, 26 March Business Events Russian-Japanese Investment Forum took place on 19 March. (13) Participants to the Russian-Japanese Investment Forum agreed that political sanctions will not be an obstacle for business cooperation and investments in spite of the fact that a couple hours before the Forum Japan introduced sanctions similar to those of the USA. The Minister of Foreign Affairs of Japan called on Russia not to recognize the independence of Crimea. The Ministry informed that it will cease preparation of a bilateral agreement with Russia on investments and refuses to ease visa regime for Russian citizens. Russian ministers were expecting Japan to join the sanctions and although they were included in its programme they did not participate in the Forum. A Japanese official from the Department of Trade Policy on Russia, Central Asia and Caucasus of the Ministry of Economics of Japan commented that sanctions will not influence business. The representative of the business association Rotobo Kunio Okada stated that sanctions mean that only some projects at the implementation stage might be put on hold temporarily. The co-chair of the Russian association of business representatives working in the economic sectors ( Business Russia Alexey Repik stated that sanctions are political, but not economic in character. Neither he nor his business partners have encountered any problems with visas. The Deputy Minister of Economics of the Russian Federation Alexey Likhachev confirmed that Russia had received assurances in the necessity of business cooperation development between two countries. Ministry of Economic Development of Russia plans to increase bilateral trade with Japan to $50 billion by 2020. Vedomisti, 19 March Situation with the Russian Rouble (14) Kommersant journalist VItaliy Gaidayev reports that due to the light sanctions of the West and internal support to Russian companies, the tension on the currency markets has decreased substantially. Kommersant Ru, 26 March 16:22
(15) Andrey Bogun, trader at the bank Globex : The Russian currency has been resilient to external shocks. In the last week the Russian Rouble has been growing steadily and this may continue. The acute phase of the crisis due to the actions of Russia and the threat of sanctions has passed and pressure on the Russian Rouble has subsided. Kommersant Ru, 25 March 10:20 (16) Michael Berulava, Treasury chief specialist of the Bank "Vozrozhdenie": There have been no unpleasant surprises for the Rouble over the weekend. The news about foreign payment systems renewing their service for some Russian banks is really positive. In the absence of sharp negative influences on the Russian market, we expect a further gradual strengthening of the Ruble.. in the coming days. Kommersant Ru, 25 March 10:20 (17) Dmitry Savchenko, Chief Analyst of the Nordea Bank: Sanctions still remain the main issue that impacts the Russian currency market. However, it is clear now that It will be difficult for the Western community to impose tougher sanctions. On the other hand, the Rouble has the in-country support of exporters. On Monday, the growth of the Rouble was clearly supported by exporters. It is for the first time, after the escalation of the crisis in Ukraine that internal factors may counterbalance external sales Results of the G7 Summit certainly deserve attention, but they may not have a significant impact on the market. Kommersant Ru, 25 March 10:20 Developments in Crimea (18) Deputy Prime Minister Dmitry Kozak, who was responsible for the Winter Olympics, was appointed to coordinate the process of integration in Crimea. The first projects on the agenda are formation of the Russian model of state bodies on the peninsula, subsidisation of airline connections between Russia and Crimea, enhancement of connections from Crimea across the Black sea, construction of a new bridge to connect mainland Russia and the peninsula, and financial and administrative support of tourism in Crimea. The Federal Service for Supervision of Communications, Information Technology, and Media (Roskomnadzor) agreed on regulations for Crimean mobile phone operators. In order to continue their activity all non-russian operators are required to apply for a Russian licence. The Russian company Rostelekom was instructed by the Prime Minister Dimitriy Medvedev to start providing communications in the Crimean Federal District. However, the Ukrainian-based company MTC informed that it will continue to adhere to Ukrainian law. Kommersant Ru, 25 March 12:45 The government of the Russian Federation is considering exchanging foreign airplanes that fly to the Crimea from mainland Russia to locally manufactured aeroplanes. The government of Ulyanovsk region has suggested state support measures for local plane manufacturing. Kommersant Ru, 26 March 00:00 (19) The Civic Chamber of the Russian Federation, a state institution that analyses draft legislation, and consults and monitors the activities of state bodies, is planning to open branches in Crimea, with the aim of consolidating civil society.
(20) New elections to the Legislative Assembly are to be held in September 2015. Preparations will start soon. (21) The process of shoring up the border with Ukraine and implementing better migration control has commenced. (22) The First Deputy Head of the Parliamentary Group "Yedinaya Rossiya" (pro- presidential and pro-governmental party United Russia ) in the State Duma Nikolai Bulaev said that he initiated a series of lessons "We Are Together" at schools and universities. These lessons aim at explaining the position of the President of Russia in Crimea. He plans to give the first lesson to pupils at a High School in Ryasan himself on 25 March 2014. For further information and analysis, please contact Nataliya Petlevych, Media Analyst n.petlevych@cyrillica.co.uk. Cyrillica is politically neutral and does not have any political affiliations in Russia or Ukraine.