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Press review: Putin launches operation to denazify Ukraine and its economic implications

Top stories from the Russian press on Friday, February 25th

MEDIA: Russia launches ‘special military operation’ in Ukraine

On the morning of February 24, Russia officially launched a "special military operation" against Ukraine, designed, as Russian President Vladimir Putin explained, to "demilitarize" and "denazify" the neighboring state. The goal of the operation is to protect the people of the Donetsk and Lugansk People’s Republics (DPR and LPR), he said. The Ukrainian authorities subsequently severed diplomatic ties with Russia, urging its partners to create an "anti-Putin" coalition against the Russian troops entering Donbass and shelling military infrastructure facilities throughout the country. The United States, members of NATO and the European Union, as well as many other countries, strongly condemned Moscow's actions, while few countries supported Russia unambiguously. Unprecedentedly tough sanctions will be imposed on Russia.

On the evening of February 24, the press service of the Ministry of Defense reported that DPR and LPR troops advanced 6-8 km from the front line with the Armed Forces of Ukraine, and the Russian armed forces completed all the tasks assigned for that day. Also, two Su-27 and two Su-24 aircraft, as well as one helicopter and four Bayraktar TB-2 UCAV belonging to Ukraine were shot down, and 83 ground military infrastructure facilities of Ukraine were incapacitated, Vedomosti writes. In addition, the press services added that the Russian Armed Forces unblocked the North Crimean Canal and restored water supply to the Crimean peninsula.

Experts interviewed by Izvestia believe that the Russian military can complete the operation in five days. "This is the baseline. This is how long the main activities outside the major cities should take. Judging by what is happening now, [Ukraine’s] Eastern, Central, Southern areas can be liberated," President of the Center for Strategic Communications Dmitry Abzalov told the newspaper. Meanwhile, the Kremlin did not provide any dates, saying that this would be determined by the head of state, taking into account the current situation.

So far, the question of when the DPR and LPR will liberate their territories within the borders of the Donetsk and Lugansk regions, as written in their Constitutions, remains open, Nezavisimaya Gazeta writes. "For Russia, it is extremely important to liberate not only Donbass from the occupying forces of the Kiev regime, but also the entire left bank of Ukraine, as well as its Black Sea regions. Dnepr, Zaporozhye, Mariupol, Odessa, Ochakov, Nikolaev, Kherson, and other cities that have industrial and defense enterprises essential to the Russian Federation. If they are controlled by Moscow, this means that Russia has defeated the West and taken its Slavic partner out of the sphere of influence of the United States and NATO," retired military expert Colonel Nikolay Shulgin told Nezavisimaya Gazeta.


MEDIA: Russia’s stock market pummelled amid military operation and slew of Western sanctions

The West responded to Russia’s military operation in Ukraine with a chorus of condemnation, reacting to it with a new package of sanctions, impacting the nation’s biggest state-owned banks and a number of private credit organizations. The United States, the United Kingdom, Canada, and other countries also still weighing other options, ranging from terminating Schengen visas for Russians to disconnecting the country from the SWIFT system. According to analysts, extreme measures are still unlikely. For now, the restrictions will focus on the energy and banking sectors. Meanwhile, politicians and experts assured that Russia is well-prepared for these possible restrictive measures and has a certain safety cushion.

US President Joe Biden announced sanctions against several large Russian banks, namely, VTB, Otkritie, Novikombank, and one private bank, Sovcombank. All US financial institutions have been ordered to close their correspondent accounts in Sberbank within 30 days, the US Treasury Department said. At the same time, 11 state-owned companies (several state-owned banks, Gazprom, Gazprom Neft, Transneft, Rostelecom, and others) were restricted from entering the US capital market. This list also includes private Alfa-Bank and Credit Bank of Moscow.

The UK has also imposed sanctions against VTB, which include freezing assets in the country. Biden said the sanctions also aim to limit Russia's ability to settle in dollars, euros, pounds sterling, and yen.

None of the experts previously interviewed by Vedomosti expected a military scenario, considered it as unlikely, so it is still difficult for analysts to furnish specific forecasts. No one expected such events, "given the response of Western countries in the form of severe economic sanctions and thus significant damage to possible measures for the Russian financial sector," Raiffeisenbank analysts write.

The current developments will also affect Western markets, analyst at Tinkoff Investments Kirill Komarov told Vedomosti. The sanctions against Russia could boomerang on European economies and could also lead to higher commodity prices. More supply chain failures are possible, which will lead to further inflation and risks to GDP growth, Komarov concluded. The Russian economy will suffer serious damage resulting in high inflation, chief economist at Alfa Bank Natalia Orlova told the newspaper. Also, according to her, economic growth will either slow down significantly, or it will not happen at all.

The Russian stock and currency market collapsed on February 24, with major indices falling within 45-50%, and the ruble devalued against the dollar and the euro, approaching 90 and 101 rubles, respectively. Experts interviewed by Izvestia admit that it is difficult to predict the behavior of markets and try to guess the "bottom". According to their estimates, a further drawdown of the MOEX index by 20-30% to 1,250-1,500 points is quite real. There is less panic on the foreign exchange market than on the stock market, but an additional weakening of the ruble is inevitable, analysts believe.

Meanwhile, the Federation Council told Izvestia that sanctions against Russia were expected, the country has a safety net that will help it cope with them. "We assumed that there would be measures, there is nothing unexpected for us there," First Deputy Chair of the Federation Council Committee on Foreign Affairs Vladimir Dzhabarov told the newspaper, "I believe our country, judging by the statements of officials, government, and financial structures, is prepared," he added.


Vedomosti: America won’t fight for Ukraine

Ukraine’s foreign supporters reacted to Russia’s operation to protect the people of the Donetsk and Lugansk People’s Republics (DPR and LPR) primarily with political comments and threats of sanctions, Vedomosti writes. On the evening of February 24, US President Joe Biden said that the American military would not be involved in the conflict with Russia. But the United States and its allies intend to impose sanctions against Russia, which will affect the restriction of imports of high-tech products and the banking sector.

European Council President Charles Michel and European Commission President Ursula von der Leyen demanded that Russia respect the territorial integrity of Ukraine. German Chancellor Olaf Scholz also expressed solidarity with Ukraine, French President Emmanuel Macron also condemned Russia. But not all international partners came forward condemning Russia’s actions. In particular, Foreign Ministry Spokesperson Hua Chunying refused to call the events in Ukraine a Russian "invasion" during a briefing.

The consequences of Russia's actions against Ukraine in terms of international politics will not last "forever, but be long-term", Research Fellow at the Center for International Security at the Institute of World Economy and International Relations Dmitry Stefanovich told Vedomosti. At the same time, the statements from international leaders show that NATO intervention is ruled out, the expert believes.

Russia needs to brace for a new package of sanctions, Director of Programs at the Russian International Affairs Council Ivan Timofeev believes. This will be a priority issue for the US Congress next week, he noted, and the European Union is likely to introduce restrictions similar to those of the United States.


Vedomosti: Germany freezes Nord Stream 2 gas project

New US sanctions against Nord Stream 2 have put the brakes on launching the much-talked-about gas pipeline, according to German Economy Minister Robert Habeck. He stressed that Berlin’s decision to terminate the certification of the pipeline was not connected with the sanctions. The project’s risks increased significantly after Russia recognized the independence of the Donetsk and Lugansk People’s Republics (DPR and LPR) on February 21, Vedomosti writes.

Research Director at Vygon Consulting Maria Belova noted that freezing large gas projects is extremely rare for Russia. In theory, Gazprom can challenge the decision, since it is related to the actions of the German authorities, Art de Lex attorney Marat Samarsky told the newspaper. "Another issue is the prospects for such a lawsuit and the arguments of the parties, as well as the question of which of the interests for the EU - political or economic - will prevail here," the lawyer said.

Samarsky noted that Gazprom, for its part, did everything possible to launch the project and complied with the requirements of the German regulators. Therefore, the project’s foreign partners - European energy majors Uniper, Wintershall Dea, Shell, OMV, and Engie, according to the lawyer, have no reason to demand any compensation from Gazprom itself.


Nezavisimaya Gazeta: China walks tightrope on Russia’s operation in Donbass

Permanent Representative of China to the United Nations Zhang Jun neither approved nor condemned Russia’s actions at a meeting of the Security Council, but called for a peaceful resolution to the conflict. Experts told the newspaper they believe that despite any resolution regarding Ukraine, Russia's dependence on China will only grow.

Director of the Institute of Asian and African Studies of Moscow State University Alexey Maslov told the newspaper, that "China has not changed its position on Ukraine. China will not participate in any military operations and it will not make any harsh statements condemning Ukraine. It is beneficial for China that Russia will widen its market further to Chinese products. Taking into account the events around Ukraine, China is also calculating its economic strategy. It is extremely important for them not to harm good relations with Europe - after all, trade with it in 2021 amounted to almost $800 bln."

China can expand investment cooperation with Russia. "However, Russia will have to give guarantees against non-payment of debts in the form of shares of the largest Russian enterprises. China can lucratively increase the supply of mobile communications and high technologies to Russia and may also increase purchases of oil and gas. But Moscow's negotiating position on prices for supplies is declining," the expert added.

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