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PRESS REVIEW: EU split over Russia relations and analysts forecast 2021 oil, ruble price

Nezavisimaya Gazeta: Europe split in two when it comes to dialogue with Russia

During the June 24-25 summit, EU heads of leaders refused to support the offer by France and Germany to invite Russian President Vladimir Putin to an EU summit. Austria expressed support for the meeting, however, the Baltic States, Poland, Romania and Netherlands were openly against the proposal. Nadezhda Arbatova, head of the Department for European Political Studies of the Institute of World Economy and International Relations (IMEMO) analyzed the situation in her op-ed written for Nezavisimaya Gazeta.

Germany and France presented this initiative right before the summit without any previous discussion with other EU states. In the run-up to the summit, the Financial Times newspaper reported citing diplomatic sources that German Chancellor Angela Merkel, supported by French President Emmanuel Macron, offered to invite Putin to an EU summit. However, this plan was not supported, with Merkel expressing her disappointment over the lack of support for her initiative to establish direct contact with Russia and the Russian leader.

Arbatova raises the question of whether the failure of this initiative is related to political uncertainty due to Merkel leaving her post and the upcoming election in France, or whether it reflects the objective changes in the EU’s expanded format, namely the reformatting of the existing hierarchy of relations. The expert pointed out that this issue will become clearer in the near future after the elections in Germany and France.

It seems that a split between EU leaders at the recent summit will trigger a reform of the decision-making mechanism in the foreign policy sphere, the analyst said. Experience shows that EU states closer to Russia geographically tend to take a harsher stance on Russia due to the constant concern over their vulnerability, she added.

There is an opinion that tough statements on Russia were initially included in the summit’s agenda to balance out Germany and France’s offer to hold a summit with Russia, however, while Merkel and Macron’s initiative fell through the tough statements remained, the expert noted.

The summit ended with a customary statement on readiness for cooperation with Russia and an assignment for the European Commission and EU High Representative of the European Union for Foreign Affairs and Security Policy Josep Borrell to provide options for additional measures, including economic sanctions against Russia if necessary. The expert pointed out that any additional sanctions would not bring anything new to the EU-Russia relations, adding that once again, principles will prevail over real results.

Nezavisimaya Gazeta: Trump looking to ‘save America’ from Biden and Russia

Former US President Donald Trump has embarked on a tour of US states resembling an election campaign, however, it is unclear so far which political office the Republican politician has set his sights on: perhaps, he is trying to help his supporters achieve success at local elections or the Congress elections planned for next year, Nezavisimaya Gazeta writes. Trump may also be hoping that US President Joe Biden will leave the White House before the end of his term. Meanwhile, Trump has become Russia’s main critic in the US.

During his tour, Trump has mentioned Biden’s immigration policy, which led to an unprecedented influx of illegal migrants, among his mistakes. He also criticized the incumbent president’s policy on China and Russia. In his speech at one of the rallies, Trump accused Biden of suspending the sanctions on Nord Stream 2, at the same time freezing the Keystone XL pipeline project connecting Canada and the US. In Trump’s view, the current White House team is destroying the US energy sphere, encouraging the development of its competitor instead.

Vladimir Vasiliev, Senior Research Fellow at the Institute for US and Canadian Studies at the Russian Academy of Sciences, told Nezavisimaya Gazeta that Trump’s tour is not just “an attempt at trolling.” In his opinion, the former president is starting to deal blows to his opponents. “Trump is advancing on three fronts right now. He is influencing the leadership of the Republican Party, the local government bodies, and what the US sometimes calls the deep state – the Washington bureaucracy, law enforcement, the military,” the expert said.

The researcher noted that with his tour, Trump wishes to demonstrate that there is a “dual power” system in the US, showing that there is a nominal and a real president, considered the head of state by half the country. Meanwhile, other potential candidates for the 2024 presidential election are being cut off: “The establishment of the party and its regular members are notified of the fact that there is Trump and then there are the rest of them,” Vasiliev said.

However, the expert noted that the former president’s closest goal is likely to be the Congress, not the White House. Trump aims to get elected to the Congress in the 2022 midterms and fight for the position of speaker, which will be a good foundation for his return to the presidential office.

Vedomosti: What awaits oil and the Russian rouble in 2021

On Friday June 25, Brent oil reached a price of $76 per barrel, the highest figure since the fall of 2018. Vedomosti presented a consensus forecast of oil prices and the rouble exchange rate until the end of the year based on the estimations of leading Russian analysts.

Global oil prices are volatile, so anything can happen: for example, in 2008 and 2011, oil prices were higher than now, and at the peak in June 2008, Brent reached $145 per barrel, VTB Capital chief economist Alexander Isakov told Vedomosti.

The consensus forecast of economists quizzed by Vedomosti on potential oil prices for 2021 is $68 per barrel. Analysts of MTS Bank made the lowest prediction, expecting oil to sell at $60 per barrel, while Bank Saint Petersburg aimed the highest with $85 per barrel.

However, practically all analysts, except the ones with SberCIB Investment Research, agreed that their predictions may turn out to be higher in real life.

Statistically speaking, if high volatility is maintained, a serious increase cannot be ruled out, Isakov said. “The probability of surpassing $100 per barrel by the end of 2021 is about 10%, and 20-25% by the end of 2022,” he said.

The ruble exchange rate is likely to lag behind the oil prices, even if they show a confident growth, analysts interviewed by Vedomosti agreed. According to their estimations, the Russian rouble will strengthen by 15-20% against the dollar if oil prices soar to $100 per barrel (that is, by 40% compared to the current level of $76).

The consensus forecast of experts quizzed by Vedomosti on the ruble exchange rate by the end of 2021 is 72.4 rubles per dollar. Sovkombank and Tinkoff Bank aimed higher, predicting that the exchange rate will reach 76 rubles per dollar.

Kommersant: Bank of Russia may toughen its monetary policy as inflation expectations rise

Russian citizens and companies have shown record-high inflation expectations in June, the Bank of Russia’s research notes. In early June, inflation surpassed 6%, and the growing private demand allows enterprises to shift the rising incoming prices to the end consumer. The effect of inflationary factors is rather significant, and may cause the Bank of Russia to raise the key rate to over 6%, Kommersant writes.

According to the June report of the Bank of Russia, inflation expectations are on the rise among consumers and companies. Consumer expectations for the year have reached the April high of 11.9%, compared to 11.3% a month ago, which is higher than the local surges of 2019-2020. Although the current inflation estimation is considered stable, growing by just 0.1 percentage points in May, the share of respondents who think that by the end of the year, consumer prices will rise by over 4% has gone up 3 percentage points, reaching 61%, which is the highest share since February 2017.

The rise of inflation in the US and Europe is likely to be temporary, however, the transition period may be longer and more unstable than earlier predicted, ING Germany’s chief economist Carsten Brzeski said, adding that there is a range of factors affecting inflation, which is likely to last until next year. Brzeski noted that there is no need to worry, and that global regulators are keeping the situation under control. The Bank of Russia expects inflation to return to its target figure of about 4% in the second half of 2022, and that it will remain at this level in the future, which may cause the regulator to raise the key rate to over 6% if inflation does not begin to go down by the fourth quarter.

A 6-6.5% key rate and a 4-4.5% inflation rate with a maintained level of economic growth is seen as a nearly perfect scenario in the current conditions. However, the inflation surge in early 2021 in Russia and in the world caught analysts by surprise, who instead expected low inflation or even deflation due to a deficit in demand, so it is hard to make any definite predictions for the future, Kommersant notes. The main result of the current situation is the further rise in uncertainty, which does not bode well for investment, the newspaper concluded.

Izvestia: COVID-19 infection rate in Russia may stabilize in mid-July

The daily COVID-19 case count in Russia may stabilize at about 22,500 new cases over the coming days, researchers with the Saint Petersburg State University note in their forecasts. If their predictions are correct, by July 15, the number of active COVID-19 cases will reach 500,000, and then begin to fall. Currently, Russia’s volume of infections is similar to the second coronavirus wave, and the lethality rate is not much lower than the record-high figures. Some regions, like Moscow, have beaten the record-high mortality rate figures already, and the death rate is likely to grow, experts warn. Many specialists blame the Indian strain, also known as the Delta variant, for the current situation, Izvestia reports.

“The daily case rate surpassing 21,000 new cases by late June, which was generated by our model a week ago, was confirmed,” Viktor Zakharov, head of the Saint Petersburg State University’s Department of Mathematical Modeling of Energetic Systems, told Izvestia.

After analyzing the information gathered in the past week, the number of new cases has not fluctuated significantly since June 24, which means that it may stabilize at about 22,500 cases in the following days, the expert pointed out.

“A week or two ago, we witnessed an active increase in cases tied to the circulation of new strains, namely the Indian one,” Ivan Konovalov, a medical expert working at Clinical Hospital № 1 named after N.I. Pirogov, informed. “The death rate lags behind the infection rate by about two weeks, so this is why we are witnessing record-high death figures now.”

For his part, Pavel Volchkov, lab head at the Moscow Institute of Physics and Technology, noted that the new Delta Plus variant can make the antibodies developed against previous versions of the novel coronavirus less effective both among people who recovered from it and vaccinated people. “Besides, the proportions have shifted to a more difficult course of the disease. We have every ground to think that the lethality rate caused by Delta Plus is higher than with other strains,” he told Izvestia.

TASS is not responsible for the material quoted in these press reviews

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