Posted: Dec 12, 2016

Author: Anastasia Borik

Russian media roundup: OPEC struck an agreement to cut oil production, the WADA released a new report on doping in Russia and Rosneft revealed new plans on its privatization.

The primary focus of the Russian media last week was the agreement of OPEC and non-OPEC countries to cut oil output by 1.8 million barrels per day. In addition, the Russian media covered the second part of the World Anti-Doping Agency (WADA) report on alleged drug use in Russian sports. Finally, on the economic front, the media took a closer look at the partial privatization of Russian oil giant Rosneft.

Oil exporting countries agreed to cut production in 2017

On Dec. 10 OPEC countries and other oil exporting countries agreed to cut oil production in 2017. In addition to the announced reduction of 1.2 million barrels per day (bpd) in the first quarter of 2017, 11 countries will reduce production by 558,000 bpd more. The overall reduction will be 1.7-1.8 million barrels. The parties hope that this agreement will stabilize prices in the global oil market.

The pro-government newspaper Rossiyskaya Gazeta argues that this is a crucial agreement for the global oil market. Quoting Russian experts, the paper says that reducing production levels is an effective instrument to stabilize global oil prices, especially given that it has been signed by a majority of important players on the market. Yet, experts interviewed by the paper note that there might be problems with countries fulfilling their pledges. If this happens, the agreement will have limited results.

According to the business publication RBC, the agreement could potentially stabilize the market by pushing the oil price to $60 per barrel over the course of next year. On the other hand, not all signatories will be able to reduce production without losses. And, moreover, any kind of reduction might be compensated by a sudden increase if the agreement is violated. So, Russia will closely follow the actions of other signatories and act accordingly.

The business daily Kommersant thinks that one should not expect a sudden rise in energy prices as a result of the agreement reached in Vienna. Prices are unlikely to reach higher than $55 by the middle of next year. The success of the agreement also depends on the ability of signatories to fulfill their obligations and this, as practice shows, might be a problem. Everyone will be watching Saudi Arabia, a key player in OPEC: “If it acts according to its pledges then it will be an important signal for the whole market.”

The latest report on doping in Russia

On Dec. 9 the World Anti-Doping Agency (WADA) presented the second part of the report on alleged drug use in Russian sports. WADA has found evidence that more than 1,000 Russian athletes were involved in or benefited from manipulations of their positive drug tests. The report does not provide anything significantly new, but features an email history of the head of Russia’s anti-doping agency (RUSADA) communicating with various Russian government officials. This information allegedly provides evidence for the existence of a large-scale doping falsification system in Russia.

According to the information portal, Moscow still thinks that the large part of doping accusations does not include any real evidence and, instead, are based on the statements of one person – namely Grigory Rodchenkov, head of the RUSADA. The media outlet believes that WADA accusations will bring problems to Russian athletes, even those who were never caught up in the doping scandal. As a result of the previous report, some members of the Russian team could not participate in the Rio Summer Olympics, so Russian sportsmen might face new problems with the new report being released.

The pro-government newspaper Izvestia gave voice to member of the Russian State Duma and Olympic champion Svetlana Zhurova. While she argues that the report provides no evidence for the mass use of doping, she also does not deny that there could have been individual cases of doping use. Such cases always put a shadow on all athletes and, in the current situation, lead to deterioration in international relations, notwithstanding the fact that doping is not only a Russian “disease.”

The opposition newspaper Novaya Gazeta calls the current situation with doping in Russia a “dead end.” The publication believes the arguments presented by WADA. They see no contradictions in the history of Rodchenkov’s personal conversations with state officials: The style and tone of these interactions are very natural for the political establishment in Russia. The report also argues that the doping problem in Russia does not only concern adults, but also younger sportsmen. This points to a very significant problem in the sports industry.

Rosneft deal

Russian state holding company Rosneftegaz on Dec. 10 signed a deal with the Qatar Investment Authority (QIA) and commodities trader Glencore to sell a 19.5 percent stake in state-owned oil giant Rosneft. The Russian state budget would receive 710.8 billion rubles ($11.37 billion) from the sale, including 18.4 billion rubles in additional dividends from Rosneftegaz. The news received controversial assessments in the Russian media, with some outlets discussing potential “secret” motives behind the sale.

The Russian edition of Forbes is not too positive about the deal: It might be possible that the deal was not primarily aimed to “attract foreign buyers” but in reality was aimed to buy Rosneft’s shares with Russian money. Large foreign investors (perhaps from Asia or the Middle East) were not interested in this deal, as it does not give an opportunity to manage the company and basically does not give them access to the Russian oil deposits. The Russian state banned Rosneft from reacquiring its own shares and found suitable investors who won’t be eager to get involved in the company’s business. In the long run, this deal can have negative PR and financial consequences for Rosneft.

In contrast, pro-government publication Izvestia characterizes the deal as a success. Not only did Rosneft find a respectable foreign investor and substantially augment the Russian budget, it almost “broke the sanctions blockade.” Foreign companies were not afraid to participate in a Russian project despite numerous complexities and limits that come with the sanctions. From this perspective, it makes the Russian market more stable and predictable and improves the image of Rosneft.

The opposition publication Novaya Gazeta asked different experts who mostly view the deal quite positively, although noting that there are some controversies and in the agreement reached with Glencore and Qatar. Rosneft, which improved its image, demonstrated that foreign investors are still interested in the Russian market. The only apprehension the experts have is that such large-scale deal can negatively affect the Russian ruble.

South Korean president impeached

On Dec. 9, the South Korean parliament voted to start the impeachment procedure for President Park Geun-hye. She is accused of corruption and abuse of power, in particular, because of the activity of her close friend, Choi Soon-sil, who enriched herself as the result of her close relations with the president. Until the decision of the country’s Constitutional Court, the interim head of state is going to be South Korea Prime Minister Hwang Kyo-ahn. The investigation of the impeached leader activities will have to be completed in 180 days.

Citing Russian experts in the region, the tabloid Moskovsky Komsomolets suggests that President Park’s departure might have a negative impact on the regional situation. Turbulence in such an important regional actor produces unpredictability in its relations with its neighbors and allies, including North Korea and the U.S.

The business daily Kommersant forecasts a change in Korea’s foreign policy after the new leader will be elected. The left-leaning politician Moon Jae-in can already be considered among the frontrunners of the future presidential campaign. Kommersant suggests that he can radically change the current foreign policy of the country, especially in the areas dealing with North Korea, Russia and the U.S.

That might well put into question the U.S. plans to deploy its anti-missile system (known as THAAD) in South Korea. Park struck the deal to deploy American missiles in the country with Washington several months prior to the scandal. Thus, in general, worsening of the relations between South Korea and the U.S. might well be expected if Seoul gets a new president who tries to rebuild relations with Pyongyang.

The pro-government Rossiyskaya Gazeta writes about the striking unity of Korean society with regard to the impeached president. Both opposition and pro-government forces united behind the demand to impeach the president. The publication believes that it is directly connected with the country’s biggest protests ever, which vividly demonstrates the people’s ability to affect the political process.

Expert commentary

Sergey Veselovsky, assistant professor at MGIMO University, on the OPEC agreement to cut oil output:

Today, this decision is important and beneficial for the producer countries in the first place as it gives more predictability in their budget planning. The planned cut is going to be around 1.7-1.8 million barrels per day (bpd), which will most likely keep the oil price at the comfortable level of $55-60 a barrel, according to the Russian Energy Minister Alexander Novak. As the agreement has a voluntary nature for the oil companies, it seems plausible to assume that it might well be violated. Oil companies already said that the cut requires certain expenses as well, which needs to be compensated for most likely by the state.

In general, the market reacted positively to the mere fact that the countries inside and outside OPEC reached such an agreement. In fact, we are witnessing the formation of a totally new regime of trading energy resources.

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