Russian media roundup: While Russian media largely backed the decision to mothball South Stream, they also rushed to analyze Putin’s annual address for clues that the ruble’s decline might stabilize.

A display screen advertising currency exchange rates, on a street in Moscow, Russia, Wednesday, Dec. 3, 2014, with the Moscow's City in the background. The Russian ruble scrambled off a record low on Wednesday. Photo: AP

This week the Russian media focused on the termination of the South Stream project to supply gas to Europe, Vladimir Putin’s annual year-end address, and the meteoric fall of the ruble.

South Stream is now not even a gurgle

This week saw a significant announcement for the Russian economy: the cancellation of the South Stream pipeline project. The threat of sanctions to major energy projects had been debated for some time, but only now have the media begun to ponder the actual consequences.

The pro-government media (Rossiyskaya Gazeta, Vzglyad, online portal Aktualniye Kommentarii) blame the Europeans for failing to stand up to the United States, and do not consider the decision to be in any way catastrophic. For Russia, they say, it was always more about politics than economics. Perhaps surprisingly, opposition sources (Slon, Echo of Moscow) also expressed support for Russia’s decision to wind down the project, noting that its prospects had always been somewhat dubious.

Ira Solomonova of Slon analyzed the Stratfor report on the termination of South Stream, and argued in support of Russia’s decision, noting the economic and political gains. As noted in the article, Putin’s wording “theoretically leaves the door open to construction if the EU eventually comes to its senses, and thus some of the responsibility has shifted to the Europeans, which could become a catalyst for further divisions within the bloc.”

“As things stand, with falling oil prices and sanctions, it would be a huge expenditure for Moscow,” writes Solomonova. “By winding up the project and blaming the European Commission, the Kremlin can save face and cash without appearing weak.”

Nikolai Zhulin in his blog on Echo of Moscow’s website writes that the EU stands to lose far more than Russia, since the latter has already found an avenue to recoup its costs.

“Russia has already found an alternative to South Stream,” he writes. “The EU’s rejection of Russian gas is forcing Russia to seek out new markets and new partners. Turkey and China have already stepped in.”

Igor Zubkov of Rossiyskaya Gazeta remarked that Russia’s decision to terminate the project marks a logical next step, and cited Ivan Kapitonov, Associate Professor of the Institute of Public Administration and Management under the Russian Presidential Academy of National Economy and Public Administration: “Given the intransigence of the European Commission and project member countries’ dependence on it, the decision to scrap South Stream was necessary and logical.”

Kapitonov also tallied up the losses to EU countries. Besides the direct losses from the wasted investments and the enormous political and organizational energies spent, he believes that the EU has squandered the opportunity to build a proper European gas supply chain.

“The Ukrainian transit risks remain and are probably multiplying. Not only that, but also over the long term, the EU faces the growing influence of Turkey on European affairs,” said Kapitonov. “At the same time it has lost leverage over Russia in the form of a large infrastructure project that was dependent on Brussels.”

Aktualniye Kommentarii quoted leading Russian expert Fyodor Lukyanov, who also noted that “for Russia the project was always more political than economic.”

“The project is very costly, and there is no money for it,” he said. “The pivot towards Asia also negates the need to break into the European market, which is doing all it can to push Russia away. Everyone concurs and everyone will, in some sense, be satisfied, except for Serbia and a handful of other countries. They are the victims of circumstance, but c'est la vie.”

Artur Priymak and Maria Trubina of online newspaper Vzglyad stress that Bulgaria, the chief culprit for deep-sixing the project, is not altogether happy about the outcome. The journalists cite the opinion of the head of the Center for National Energy Security, Konstantin Simonov, who believes that the Bulgarians too readily succumbed to U.S. pressure.

“Who was it who stymied Bulgaria from allowing Russia to lay pipelines on its territory? U.S. Senator [John] McCain, who persuaded the Bulgarian president not to go ahead with it.”

Russia's cancellation of the South Stream project came as a surprise for European partners. Photo: AP

What Vladimir Putin’s address means for Russian business

The Russian president’s most important speech of the year provoked a lot of discussion in the Russian press. Opposition media (Echo of Moscow, Slon) rushed to criticize Putin, while pro-government media (Channel One, Rossiyskaya Gazeta) saw some signs of positive change to come.

Echo of Moscow’s radio station gives the voice  to Boris Nemtsov, one of the most prominent opposition leaders in Russia. Summing up the president’s address as a list of points, he writes: “1. Cold War relations are the new reality as long as Putin is in power. 2. The aggression and arms race are set to continue. ...” He concluded his piece with the words “God, save Russia.”

Tatiana Stanovaya of Slon gave a detailed analysis of Putin’s message, concluding that his response to Russia’s new predicament was inadequate. In her opinion, he also seems incapable of exerting change at the level of domestic policy.

“The address exposed Putin’s unwillingness to properly assess the scale of the challenges facing the country,” writes Stanovaya, adding that, “The inability to appreciate or even recognize the qualitative change in the situation precludes the framing of any satisfactory solutions.”

Mikhail Akinchenko, a correspondent of Channel One, expressed confidence in the positives for Russian business, highlighting the relaxed fiscal policy proposed in the speech.

Rossiyskaya Gazeta’s Kira Latukhina analyzed the text of the address and presented the views of Russian officials and businessmen, in particular Putin’s press secretary, Dmitry Peskov, who said that no one should expect the speech to deliver a “silver bullet for all economic ills.”

In addition, the newspaper quoted LDPR leader Vladimir Zhirinovsky, who described the address as “magnificent,” and the head of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin, who stated that, “The president not only listens, but hears business.”

The falling ruble

This Wednesday, the ruble smashed all historical records: one U.S. dollar now costs 54 rubles and one euro 67 rubles. For comparison, in June of this year, the dollar was worth 34 rubles and the euro 46, while in August the numbers were 36 and 48, respectively. Even in September the situation was not so alarming: the dollar stood at 38 rubles and the euro at 49.

The pro-government press (RG, Aktualniye Kommentarii) called for calm and looked for pluses in the cheaper ruble, while the opposition media (Echo of Moscow, Slon, Novaya Gazeta) criticized the government for failing to stabilize the economy.

Bloggers for Echo of Moscow imply that the Russian authorities, unwilling to admit the failure of their own policies, were busy sowing conspiracy theories. Alexei Nosov noted some budget planning errors.

“Why was the most important forecast for the Russian economy so far from reality?” he asks. “Where did these highly competent professionals appear from? Were they implanted by the perfidious U.S. State Department?" he continues sarcastically. "Or are they aliens? Unlikely, since the makeup of the government was proposed by a mate of Putin’s and approved by the State Duma.”

“But the president found an even simpler and more time-tested explanation,” snipes fellow Echo blogger Anton Orekh. “Saboteurs and internal enemies! It turns out that the ruble, whose exchange rate is becoming like the Chelyabinsk meteorite, has been hijacked by speculators!”

Novaya Gazeta columnist Boris Vishnevsky believes that the depreciation of the ruble and the rise in prices are linked to the sanctions against Russia.

“Prices are rising not only because of cheaper oil and the falling ruble,” he writes. “They are rising because sanctions have made Western loans for Russian producers harder (or more expensive) to get, while the ‘anti-sanctions’ banning the import of various foreign products have reduced competition, cutting supply at the same demand level, i.e. raising prices.”

Alexei Mikhailov of Slon also believes that the double whammy of lower oil prices and sanctions is causing the ruble to fall.

“The sharp drop in foreign currency coming into the country has hit the balance of payments,” he observes. “The Russian government tried to plug the hole with counter sanctions, which, among other things, were supposed to restrict imports and, hence, the outflow of foreign currency. But they seem to have had the opposite effect: capital is leaving the country faster than ever before.”

Meanwhile, Olga Bondarenko, a journalist for Rossiyskaya Gazeta, wrote about how the cheapening ruble is stimulating domestic tourism. “Tourism inside Russia is up 30 percent on the back of sanctions and the dollar surge. Demand for foreign tours has fallen, as has the number of visitors from abroad,” she reported.

Aktualniye Kommentarii interviewed State Duma MP Alexei Didenko, who gave his opinion about the ruble:

“Most important of all is to be patient and understand that economics is cyclical,” he notes. “We are currently in a negative spiral, and the crisis is very serious, comparable to 2009, only back then it was worldwide. That was a global downturn, which Russia as part of an integrated economy weathered better than most, it has to be said. This time around the crisis is internal and linked to Russia’s international policy.”