Russian President Vladimir Putin met his Syrian counterpart Bashar al-Assad this week, the Kremlin said, part of a Moscow-backed push to restore ties between Damascus and neighbouring Turkey.
The US for the first time tracked Russian and Chinese bombers flying together off the coast of Alaska, but it’s “not a surprise to us”, said Defense Secretary Lloyd Austin on Thursday.
Yemen’s Houthi militants have attacked more merchant ships hauling Russian commodities than products from anywhere else in the world, highlighting the limits of safe-passage assurances that the rebels gave Moscow earlier this year.
Putin meets Assad amid efforts to renew Syria-Turkey relations
Russian President Vladimir Putin met his Syrian counterpart Bashar al-Assad this week, the Kremlin said, part of a Moscow-backed push to restore ties between Damascus and neighbouring Turkey.
“I am very interested in your opinion on how the situation in the region as a whole is developing,” Putin told Assad in a video released by the Kremlin on Thursday. “Unfortunately, there is a tendency toward escalation, we can see that. This applies directly to Syria.”
The Syrian president, who met Putin on Wednesday evening, said their talks were “very important” considering the events taking place in the world and the Eurasian region. Assad last met the Russian leader in March 2023.
Any normalisation of ties between Turkey and Syria would mark a setback for the US in the region, and the push is part of broader efforts by Moscow and Beijing to challenge Washington in the Middle East. The US has about 900 troops in northeastern Syria in support of its Kurdish allies, a presence that Moscow and Damascus have long sought to end.
The meeting follows Assad’s reintegration into the Arab League in May last year, a triumph for a leader under heavy US and European penalties for atrocities committed during Syria’s civil war.
Last month, Turkish President Recep Tayyip Erdoğan echoed Assad in expressing a willingness to restore diplomatic relations, a policy shift that could help end the long-running conflict in Syria.
Read more: Turkey’s Erdoğan, Syria’s Assad signal readiness to restore ties
Erdoğan said that restoring friendly ties with Assad was not “impossible.” The two leaders, who once had a close relationship, fell out early in the Syrian civil war that started in 2011 due to Turkey’s support for the rebel group seeking to overthrow Assad.
The Syrian president said earlier that he was open to restoring ties based on respect for his country’s sovereignty.
An agreement could be reached as early as August and announced at a three-way summit with Putin, Assad and Erdoğan, said Elena Suponina, a Middle East expert based in Moscow.
A sticking point between Turkey and Syria over demands from Damascus for a pullout of Turkish forces in the north of the country could be resolved through a phased withdrawal, according to Suponina.
US tracks first Russia-China joint bomber flights off Alaska
The US for the first time tracked Russian and Chinese bombers flying together off the coast of Alaska, but it’s “not a surprise to us”, said Defense Secretary Lloyd Austin on Thursday.
The defence chief said that US Northern Command and the North American Aerospace Defense Command (Norad) followed the planes “very closely” but they stayed in international airspace, some 322km off the coast of Alaska.
Norad said in a statement on Wednesday that the bombers, two from Russia and two from China, were “not seen as a threat.”
Nonetheless, the US has expressed concern about China’s growing interest in the Arctic region and its expanding cooperation with Russia, including for its war in Ukraine.
In announcing a new Arctic strategy this week, the Defense Department said the US would expand its military readiness and surveillance in the Arctic given the Chinese and Russian interest coupled with new risks brought on by accelerating climate change.
Russian commodities aren’t safe in Red Sea as Houthis attack
Yemen’s Houthi militants have attacked more merchant ships hauling Russian commodities than products from anywhere else in the world, highlighting the limits of safe-passage assurances that the rebels gave Moscow earlier this year.
Back in January and March, the Houthis said that they would spare Russian shipping along with that of China as they targeted maritime trade in a bid to pressure Israel over the war in Gaza.
But of 83 vessels listed by the UK Navy as suffering incidents in the Red Sea and Gulf of Aden since November, 19% had Russia as their most recent port call. All were oil or commodity carriers. The next closest was Singapore, a routine stopover for many freighters sailing between Asia and Europe, which accounted for 11%.
To be clear, Russian-owned ships — and those sailing under the Russian flag — haven’t come under attack. But that will be little consolation to the merchant sailors on the international vessels moving the nation’s cargoes who must navigate the southern Red Sea under a barrage of drone and missile strikes.
The large numbers are partly a function of the huge flow of Russian oil and commodities still sailing through the area en route to Asia.
With swaths of global shipping avoiding the waterway, vessels carrying Russian oil and bulk commodities have largely continued to run the gauntlet, meaning there are more at risk of attack. Moscow needs to get its commodities to buyers as quickly and cheaply as possible to help finance its war in Ukraine.
Russian and Chinese merchant ships were told in January that they needn’t fear attack in the southern Red Sea, Mohammad al-Bukhaiti, spokesman for Yemen’s Houthi militants, said in an interview with Russian newspaper Izvestia. Two months later, the assurances were repeated after China and Russia reached an understanding following talks between their diplomats in Oman and Mohammed Abdel Salam, one of the Houthis’ top political figures.
Ukraine halts run of rate cuts as inflation accelerates
Ukraine halted a run of three interest-rate cuts as an acceleration in inflation prompted policymakers in the war-battered nation to signal that easing may only be resumed next year.
The National Bank of Ukraine held the key rate at 13% Thursday, as predicted by six out of nine economists in a Bloomberg survey. Three expected a reduction in borrowing costs of at least a quarter of a percentage point.
With Russia’s invasion in its third year, policymakers in Kyiv lowered the benchmark by a total of two percentage points at the last three meetings, with most signalling more room for easing last month. But price growth in June accelerated to the highest level since December, while a weakening of the hryvnia amid a surge in budget spending has increased costs for business and fueled inflation.
“The baseline scenario of the forecast assumes that the NBU will only return to a key policy rate easing cycle in early 2025,” the central bank said in a statement.
Russian firms face mounting payment issues as sanctions bite
Putin is bucking Western efforts to isolate him internationally, meeting with more than 20 world leaders just since May. Russian businesses aren’t so lucky.
New US restrictions imposed in June to stem support for the Kremlin’s war on Ukraine have put local banks in countries that trade with Russia at a higher risk of so-called secondary penalties, increasingly delaying or disrupting payments to and from places like China and Turkey. That’s making it difficult, and sometimes impossible, to execute transactions, particularly with China, arguably Russia’s most important economic partner since the start of the 2022 war.
While issues with transferring profits out of another key trading partner, India, have eased from the first years of the war, they haven’t been completely resolved because the rupee isn’t fully convertible and transacting through third countries is expensive, a person close to Russia’s government said, declining to be identified because the information isn’t public.
The difficulties threaten to disrupt Russia’s trade with economic partners it has relied on since the European Union and the US imposed unprecedented sanctions that significantly diminished business links following the invasion of Ukraine. Trade with China hit a record $240-billion in 2023.
In June, the US widened the parameters for determining whether to impose secondary sanctions by broadening the definition of Russia’s military-industrial base. Imports into Russia from China had started growing again after volumes collapsed when the US initially threatened overseas banks with penalties in December, but the latest move threatens to seriously complicate the situation.
In many cases, transactions with China are only possible through agents in former Soviet republics, said top executives at four commodities exporters, declining to be identified as the information is sensitive. For these deals, foreign currency, including yuan, doesn’t end up reaching Russia. While Chinese clients pay in yuan to agents in third countries, exporters often receive roubles in Moscow, people familiar said, noting many intermediary countries have their own restrictions on currency moves.
Banks in Kazakhstan, Uzbekistan and other Central Asian countries were taking longer to process settlements for logistics companies and were increasingly refusing them, the RBC news website reported on Thursday, citing a report prepared by several transportation firms.
While payments with China present the biggest problem for Moscow, Russians have faced similar difficulties in Turkey. The situation there is much less dire because only some banks stopped operations with Russia, they said. Trade with Turkey also was mostly happening in roubles, sources said. The share of Turkish exports in roubles grew 50% from January to May, the country’s statistics show.
With India, pressure on banks from the threat of sanctions is complicated by the fact that the rupee is not fully convertible. As trade between the countries jumped after Russia invaded Ukraine, Russia accumulated billions of dollars in rupees in India.
To enable Russia to use the accumulated rupees, the Reserve Bank of India came up with rules in July 2022 that said funds can be invested into projects or Indian securities, as well as to adjust for purchases of goods and services at a future date, said officials directly aware of the details. Russia typically buys smartphones and other electronic goods, chemicals and pharmaceuticals, food products, agricultural tools and textiles from India.
Oil, Russia’s main export to India, is mostly being paid for with the United Arab Emirates dirham, which is fixed against the US dollar. Still, dollars and euros are also being used. Russian fertiliser makers and coal producers also prefer convertible currencies and do not trade for rupees, said executives at several companies.
“The problem of cross-border payments in 2024 has become a key challenge for Russian business,” said Alexander Potavin, an analyst with Finam in Moscow. “In the vast majority of cases, businesses face significant delays in making payments. Now they average about 10-16 days.”
Potavin said the Bank of Russia was “now encouraging the use of cryptocurrency” to bypass Western sanctions and facilitate transferring currency abroad.
Payment issues were at the top of the agenda when Putin recently met with Chinese President Xi Jinping, Turkish President Recep Tayyip Erdoğan and Indian Prime Minister Narendra Modi. While Russia has made proposals for developing alternative payment methods, they would take time to get up and running.
The effect of all this is yet to be reflected in statistics about exports and imports, but a report on the economic situation in the second quarter from Russia’s central bank published on 18 July highlighted the problem. Imports fell in the second quarter, according to the report, and while the total value of exports rose, physical volumes declined due to restrictions from the West on Russian metals, the report said.
Hungary embraces Chinese loan financing after €1bn deal
Hungary said it took a €1-billion loan in April from China, adding that such financing was likely to become more widespread in the future as economic links with the Asian nation grow.
The government received a three-year loan from China Development Bank, Export-Import Bank of China and Bank of China’s Hungarian unit, the Debt Management Agency said on Thursday, without providing details on why a formal announcement hadn’t been made until now. The loan would help finance infrastructure, transport and energy projects, according to the agency.
Hungary earlier took a $917-million loan in 2022 from the Export-Import Bank of China to finance the Belgrade-Budapest rail project, part of China’s Belt and Road Initiative, data from the agency show.
The latest loan came just before Chinese President Xi Jinping visited Budapest in May to sign deals with Hungarian Prime Minister Viktor Orbán on new rail and energy projects. These would total between €5-billion and €10-billion, typically financed by loans, Economy Minister Marton Nagy said at the time. A planned rail corridor around Budapest to link up new Chinese vehicle and battery plants in Hungary to western Europe would alone amount to several billion euros, Nagy said during Xi’s visit. DM