Putin declares war on media, Moody's cuts Russia's ratings, firms keep pausing ops
Key developments on Monday:
- Germany does not want embargo on Russian oil and gas
- This is a speculative attack against the forint - Márton Nagy
- Turnaround on the forint market
- Hungary central bank may resort to extraordinary rate hike to prop up HUF
- Hungary on Russia's list of "unfriendlies"
- Hungary's Orbán signs decree allowing deployment of NATO troops in western Hungary
- Three of the Big Four accounting firms to exit Russia
- Orbán adamant no arms shipments to Ukraine will pass through Hungary
- Ukraine's Zelenksy reveals shocking details about Putin's potential plans
- Hungary forint keeps weakening, one step from 400 versus euro
- Intelligence report: Russia targeting Ukraine's communications infrastructure
- OMV drops Russia as core region in Upstream portfolio
- Accounting firms KPMG, PwC to exit Russia
Key developments over the weekend (scroll down for details):
- Putin comes up with rouble 'work-around' to stave off default
- Moody's downgrades Russia by two notches, country a single notch from default
- Israeli PM meets Putin in Moscow, Scholz in Berlin, relays key info to Macron, Zelensky
- Russia's Defense Ministry makes alarming remark about the use of airfields
- NATO chief, Putin address Ukraine's plea for no-fly zone
- Putin to Macron: Russia will reach its objectives in Ukraine, "either through negotiation or through war"
- Macron urges securing nuclear plants in call with Putin
- Putin implements "fake news" law, journalists could be jailed for up to 15 years
- Thousands of protesters arrested in Russia
- Companies keep pulling the plug on Russia
Putin aims to avert defaults with rouble payment to creditors
Russia and Russian companies will be allowed to pay foreign creditors in roubles, according to a decree signed by President Vladimir Putin on Saturday, as a way to stave off defaults while capital controls remain in place, Bloombeg reported.
The decree establishes temporary rules for sovereign and corporate debtors to make payments to creditors from "countries that engage in hostile activities" against Russia, its companies and citizens. The government will prepare a list of such countries within two days.
In a separate announcement on Sunday, the Central Bank of Russia said it will temporarily ease reporting requirements for Russian lenders in an effort to shield them from the pressure of sanctions. Commercial banks will no longer have to publish their monthly accounts on their websites, though they will still have to submit them to the central bank and then can disclose them to counterparties, the regulator said.
Moody's downgrades Russia's ratings to Ca from B3; outlook negative
Moody's Investors Service has on Sunday downgraded Russia's long-term issuer (local- and foreign-currency) and senior unsecured (local- and foreign-currency) debt ratings to Ca from B3. The outlook is negative. This concludes the review for downgrade initiated on 25 February 2022. The local-currency Other Short-Term rating has remained unchanged at Not Prime (NP).
After the two-notch cut RUSSIA'S RATING IS ONE NOTCH ABOVE default. I.E. A SINGLE DOWNGRADE MEANS default.
"The downgrade of Russia's ratings was triggered by Moody's expectation that capital controls by the Central Bank of Russia (CBR) will restrict cross border payments including for debt service on government bonds. Moody's view is supported by a reported statement from the National Settlement Depository (NSD) that coupon payments on OFZ government bonds due on Wednesday 2 March have only been paid to local holders of the papers, citing the CBR order prohibiting payments to non-residents."
The downgrade to Ca is hence driven by
severe concerns around Russia's willingness and ability to pay its debt obligations.
Moody's view is that
the risk of a default occurring has significantly increased
and that the likely recovery for investors will be in line with the historical average, commensurate with a Ca rating. At the Ca rating level, the recovery expectations are at 35 to 65%. Moody's considers willingness to service debt a Governance consideration under its ESG framework.
"The negative outlook reflects the significant risks to macro-economic stability posed by the imposition of severe and co-ordinated sanctions following Russia's invasion of Ukraine (Caa2 review for downgrade) and the financial ramifications from delays to sovereign debt repayments and banking and corporate sector stress that are likely to have negative feedback loops for macro stability.
Concerns around the government's willingness to pay and the unpredictability of government actions could result in larger than historical average losses for investors.
"The high degree of coordination among Western countries to impose wide-ranging sanctions on Russia in response to the invasion of Ukraine has materially impaired Russia's ability to ensure timely repayment of its sovereign debt obligations.
"Restrictions on some Russian banks' access to the financial messaging system SWIFT coupled with the direct sanctioning of large state-owned banks and the CBR will effectively block these institutions from participating in the global financial system and make it exceptionally difficult for them to engage in international transactions.
"Given compliance risks, non-Russian institutions will be very reluctant to deal with sanctioned and likely also non-sanctioned entities within Russia," said Moody's.
Bennett meets Putin in Moscow
Israeli Prime Minister Naftali Bennett returned to Israel on Sunday after a short trip in which he met with Russian President Vladimir Putin in the Kremlin and German Chancellor Olaf Scholz in Berlin in an attempt to mediate a cease-fire between Russia and Ukraine. Subsequently, Bennett phoned Ukrainian President Volodymyr Zelensky and French President Emmanuel Macron and informed them of his talks with Putin, Israeli official KAN news channel reported.
According to KAN, Bennett met with Putin for three hours and discussed with him the situation in Ukraine, as well as the ongoing talks between world powers, including Russia, and Iran about reviving a 2015 nuclear deal.
Russia said on Saturday that Western sanctions imposed on it over its invasion of Ukraine had become a stumbling block for the Iran nuclear deal. Israel opposes any revival of the deal, Reuters reminded.
Bennett, a religious Jew, flew to Moscow in violation of Sabbath law because Judaism permits this when the aim is to preserve human life, his spokesperson said.
He was accompanied by his Ukrainian-born housing minister, Zeev Elkin. Elkin had in the past accompanied former prime minister Benjamin Netanyahu as an interpreter in his talks with Putin.
Bennett told the regular Sunday meeting of the Israeli government on Saturday's mediation talks that his meeting with Putin had been fully coordinated with Washington. However, he did not elaborate on what happened during the one-on-one meeting in the Kremlin, where only Bennett, Elkin, and Putin and his interpreter were present.
We will keep trying, even if there is not much chance,
he said of his mediation efforts, which have included three phone calls to Ukrainian President Zelensky in the past 24 hours, three talks over the phone, and personal trips to Moscow and Berlin.
"Of course I went with the blessing and encouragement of all concerned," Bennett said of his trip to Moscow. "Even if there is not much chance, even if there is little chance, if we can reach all sides, I believe it is our moral duty to make every effort," added the Israeli prime minister, who was a businessman before becoming a politician and has extensive experience in conducting successful negotiations.
As part of Israel's mediation efforts, Foreign Minister Yair Lapid will travel to Latvia on Monday for a whirlwind visit to meet US Secretary of State Antony Blinken.
Russia's Ministry of Defense sends alarming message
Any country offering its air fields to Ukraine for attacks on Russia may be considered as having entered the conflict, a Russia defence ministry spokesman was quoted as saying on Sunday.
The use of the airfield networks of these countries to base Ukrainian military aircraft and their subsequent use against the Russian armed forces may be regarded as the involvement of these states in an armed conflict,
Interfax news agency quoted spokesman Igor Konashenkov as saying.
The Russian message is intended as a deterrent and to prevent countries that help Ukraine from offering their aircrafts to help Ukrainian air forces.
Previously, this had been ruled out by Western powers.
NATO Secretary General Jens Stoltenberg said on Tuesday that the Allies "expressed their solidarity and deep respect for the courage of the Ukrainian people and armed forces."
"NATO Allies provide different types of military support [...] Allies have provided anti-tank weapons, air defence missiles and other types of support [...]," he said.
NATO, Putin against no-fly zone
As regards repeated and desperate plead by Ukrainian President Zelensky and others to impose a no fly-zone over Ukraine, Stoltenberg stressed that the
Allies agree that we should not have NATO planes operating over Ukrainian airspace, or NATO troops on Ukrainian territory.
"[...] the only way to implement a no-fly zone is to send NATO planes, fighter planes into Ukrainian airspace, and then impose that no-fly zone by shooting down Russian planes. And our assessment is that we understand the desperation.
But we also believe that if we did that, we'll end up with something that could end in a full-fledged war in Europe, involving many more countries, and causing much more human suffering.
"So that's the reason why we make this painful decision to impose heavy sanctions, provide significant support, stepping up support. But at the same time not involving NATO forces directly in the conflict in Ukraine, neither on the ground, or in their airspace.
Putin warned on Saturday that that implementing a no-fly zone over Ukraine would be considered as a delcaration of war against Russia by the Kremlin.
Any move in this direction will be viewed by us as a participation in the armed conflict,
he said.
That very second, we will view them as participants … and it would not matter what members they are.
That risk is exactly why NATO has been adamantly opposed to implementing a no-fly zone over Ukraine.
Putin sends message to Macron
Russian President Vladimir Putin told French counterpart Emmanuel Macron on Sunday that Moscow planned to achieve its aims in Ukraine either through diplomacy or military means, the Elysee said.
Russia would reach its objectives in Ukraine
either through negotiation or through war,
Putin told Macron according to a French presidential official, adding the Russian president also pledged "it was not his intention" to attack Ukrainian nuclear sites, AFP reported.
Macron found Putin "very determined to achieve his objectives", including on "what the Russian president calls the 'de-Nazification' and the 'neutralisation' of Ukraine", added the official, who asked not to be named.
Russian President Vladimir Putin has told French counterpart Emmanuel Macron that Moscow planned to achieve its aims in either through diplomacy or military means, the Elysee says #UPDATE
— AFP (News) March 6, 2022
Putin also demanded recognition of the Ukrainian peninsula of Crimea -- annexed by Russia in 2014 -- as part of Russian territory as well as recognition as independent of two Ukrainian eastern breakaway regions already recognised by Russia.
These demands are "unacceptable for the Ukrainians", said the official.
Putin also denied that the Russian army is targeting civilians after Macron urged him not to endanger civilians, in line with international law.
The French president replied to him that "the army attacking is the Russian army" and said he had "no reason to believe that the Ukrainian army is putting civilians in danger", the official said.
Macron urges securing nuclear plants in call with Putin
French President Emmanuel Macron called on his Russian counterpart Vladimir Putin to ensure Ukrainian nuclear plants are secured amid Russia's invasion of Ukraine, a senior French official said Sunday, Politico reported.
"It is necessary that we obtain commitments ... under the International Atomic Energy Agency's auspices to ensure the safety of these plants and that they are excluded from the conflict," the official from the Elysée Palace told reporters after Macron and Putin spoke for an hour and 45 minutes.
The official said Putin told Macron it was
not in his intention to carry out attacks on these plants
and that "he was ready to comply with IAEA standards."
In a statement, the Kremlin confirmed it would agree to trilateral talks between the IAEA, Russia and Ukraine to agree on measures to secure Ukrainian nuclear facilities, as long as the meeting is either held via videoconference or in a third country.
The call between Macron and Putin comes only days after Russia's attack on the Zaporizhzhia nuclear power plant, the largest in Europe. Ukraine has the seventh-largest installed nuclear capacity in the world and the second in Europe, after France.
IAEA Director General Rafael Grossi said this week that the “ongoing military conflict taking place in a country that has a vast nuclear program” had put the organization on high alert. He is expected to give a press conference Monday.
Thousands of protesters arrested in Russia
More than 3,500 people were arrested on Sunday during an "unlawful" demonstration against Russia's invasion of Ukraine, the Russian Defence Ministry said on Sunday.
The ministry said the number of people arrested was 1,700 in Moscow, 750 in St. Petersburg and 1,061 in other cities. The interior ministry said that some 5,200 people took part in the demonstrations.
According to OVD-Info, an NGO for the protection of protesters, almost 2,700 protesters were arrested in 49 cities. The group said on Sunday evening that almost 13,000 people had been arrested since the start of the war on Ukraine on 24 February.
Putin clamps down on free speech
Free speech and reporting may be another casualty of the Russian invasion of Ukraine, as President Putin signed a law making the airing of what the government calls false information about the armed forces illegal, NPR reported.
Journalists could be jailed for up to 15 years for spreading "fake news".
Russian officials assert it's false to call their military operations in Ukraine a war or an invasion. Several Western news outlets say they've suspended reporting from Russia while they assess the law and the safety of their employees.
Britain's BBC said Friday it had temporarily halted reporting in Russia, and by the end of the day, the Canadian Broadcasting Company and Bloomberg News said their journalists were also stopping work. CNN and CBS News said they would stop broadcasting in Russia, and other outlets removed Russian-based journalists' bylines as they assessed the situation, Reuters reported.
Tim Davie, director general of the BBC, said this legislation appears to criminalize the process of independent journalism. Many independent Russian voices have shut down, including the Echo of Moscow radio station, which had over a million daily listeners, TV Rain and the Znak news outlet. Novaya Gazeta, which has seen six of its journalists killed over the past two decades and whose editor, Dmitry Muratov, shared last year's Nobel Peace Prize, said it was deleting its war coverage from its website. And even The Village, a digital lifestyle site, says it is editing its old posts to change any mention of war to special operation.
With Russia's attack on Ukraine drawing almost universal condemnation, Moscow has sought to hit back in the information war. Its communications regulator, Roskomnadzor, blocked Meta Platform Inc's Facebook, citing 26 cases of discrimination against Russian media. TASS news agency reported that Russia also restricted access to Twitter.
The change to the criminal code, which seems designed to turn any independent reporter into a criminal purely by association, makes it impossible to continue any semblance of normal journalism inside the country,
Bloomberg Editor-in-Chief John Micklethwait wrote in a message to his staff. "We will not do that to our reporters."
BBC Director General Tim Davie said the new legislation appeared to criminalise the process of independent journalism.
It leaves us no other option than to temporarily suspend the work of all BBC News journalists and their support staff within the Russian Federation while we assess the full implications of this unwelcome development,
he said in a statement.
He added that the BBC News Service in Russian would continue to operate from outside Russia.
The BBC said it would start broadcasting four hours of news a day in English on shortwave radio in Ukraine and parts of Russia, reviving an antiquated technology used in the Cold War to circumvent state censorship.
U.S. television newscaster ABC News said it would pause broadcasting from Russia as it assessed the situation. The Washington Post, Dow Jones and Reuters said they were evaluating the new media law and the situation.
Companies keep pulling the plug on Russia
U.S. streaming giant Netflix has decided to put the brakes on its services in Russia, amid international concern over Moscow's aggression in Ukraine, the company confirmed Sunday.
Given the circumstances on the ground, we have decided to suspend our service in Russia,
a Netflix spokesperson told Politico.
In practice, this means people in the country will no longer be able to sign up for a new subscription starting on Monday, March 7, and current Russian subscribers will have access to their accounts only until the end of their current billing cycle. After this time, accounts belonging to Russian users will be temporarily suspended, until the situation in Ukraine changes, and Netflix may consider restarting their services in Russia.
American credit card providers Mastercard and Visa announced late Saturday they will suspend their services in Russia following the country's invasion of Ukraine.
"We don’t take this decision lightly," said Mastercard in a statement, adding it has operated in Russia for 25 years and employs over 200 people in the country. "When it is appropriate, and if it is permissible under the law, we will use their passion and creativity to work to restore operations," it said.
"This war and the ongoing threat to peace and stability demand we respond in line with our values," Al Kelly, chairman and chief executive officer of Visa Inc., said in a statement.
Mastercard's cards issued by Russian banks will stop operating, and Mastercard cards issued elsewhere won't work at ATMs located in Russia. Visa is halting all transactions made with Visa cards issued in Russia outside of Russia, and any Visa cards issued by banks outside of Russia will no longer work within the country.
American Express is suspending suspending all operations in Russia. As a result, globally issued American Express cards will no longer work at merchants or ATMs in Russia. Additionally, cards issued locally in Russia by Russian banks will no longer work outside of the country on the American Express global network.
The company has announced late on Sunday that is also suspending all business operations in Belarus.
This is in addition to the previous steps we have taken, which include halting our relationships with banks in Russia impacted by the U.S. and international government sanctions.
While American Express does not employ anyone directly in Ukraine, it has hundreds of colleagues in the surrounding countries, and dozens of colleagues in Russia. Ameican Express has pledged USD 1,000,000 in aid to organizations "that are doing heroic work to provide critical immediate and long-term relief to people in Ukraine and neighboring countries impacted by this crisis."
The Spanish fashion retailer Inditex, which owns Zara, has halted trading in Russia, closing its 502 shops and stopping online sales, the company said, The Guardian reported.
“In the current circumstances Inditex cannot guarantee the continuity of the operations and commercial conditions in the Russian Federation and temporarily suspends its activity," Inditex said in a statement.
Russia accounts for about 8.5% of the group’s global earnings before interest and tax, and all the stores operate on a rental basis, Inditex said, adding: “The investment is not relevant from a financial point of view.”
The clothes store closures are expected to hit more than 9,000 of Inditex's employees who work in Russia. The group had said its 79 stores in Ukraine had already been temporarily closed.
Spain’s second-largest fashion retailer, Mango, said on Thursday it was temporarily closing its 120 Russian shops, and Tendam, the third-largest clothing group, said it had taken a similar decision on Saturday.
Payment giant Paypal cited "violent military aggression in Ukraine" as the reason to shut down its services.
Samsung - Russia's top supplier of smartphones - is suspending shipments over "geopolitical developments".
Adam Cochrane, an analyst at Deutsche Bank Research, told Reuters that logistical difficulties and the weakness in the rouble - resulting in large price increases for the Russian consumer - would make
operations difficult for all retailers importing into Russia.
TikTok has announced it is suspending live streaming and new content to its video service.
In light of Russia's new ‘fake news’ law, we have no choice but to suspend livestreaming and new content to our video service while we review the safety implications of this law.
"Our in-app messaging service will not be affected. We will continue to evaluate the evolving circumstances in Russia to determine when we might fully resume our services with safety as our top priority."
1/ TikTok is an outlet for creativity and entertainment that can provide a source of relief and human connection during a time of war when people are facing immense tragedy and isolation. However, the safety of our employees and our users remain our highest priority.
— TikTokComms (@TikTokComms) March 6, 2022
Cover photo: Shutterstock
