Tuesday

19th Mar 2024

Russian economic turmoil to last two years

  • Putin will give his annual news conference on Thursday against the backdrop of a mounting economic crisis (Photo: Boris SV)

Russia’s economic turmoil could last at least two years, president Vladimir Putin said on Thursday (18 December).

Speaking at his end of year news conference in Moscow on Thursday (18 December) against the backdrop of a run on the Russian rouble and the prospect of a 4.5 percent recession in 2015, Putin sought to play down fears that Russia could be on the verge of a collapse similar to 1998 when the country defaulted on its debts.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"I don't believe you can call it a crisis - you can call it what you like," he told his audience, adding that “our economy will get out of this crisis. How long? Maybe two years, but after that, growth is inevitable."

The Russian president was named Russia's Man of the Year for a 15th successive year on Tuesday, according to Russian news agency Interfax, and enjoys record-high levels of public popularity.

But he is under pressure to respond to rising fears of a deep economic recession and a currency crisis which has seen the government step in to prop up the rouble this week.

Having hit a peak of 97 roubles per euro on Monday, the government’s intervention appears to have restored calm to financial markets, with the rouble trading at 72.5 per euro on Thursday morning (18 December). The currency has still lost around 40 percent of its value since January. Media reports have suggested that many Russians have begun panic-buying household goods fearing that prices will rise as the crisis filters through to shops.

Russia’s finance ministry revealed on Wednesday that it had spent almost $2 billion of its foreign currency reserves since Monday in an attempt to stabilise the markets.

Deputy finance minister Alexei Moiseyev said Russia would continue to sell foreign currency from its treasury accounts "as much as necessary and as long as necessary". Russia is estimated to hold $400 billion in foreign reserves which should provide a bulwark against a sustained run on the rouble.

Meanwhile, the Russian central bank has reassured its financial sector that it will provide additional capital if needed. Even so, it expects that up to $120 billion (€95 billion) of foreign cash will leave Russia over the next year.

The currency collapse was triggered by the central bank’s decision to hike national interest rates by 6.5 percent to 17 percent at the weekend, the highest rate increase since 1998, when the Russian currency collapsed and the government defaulted.

The ongoing sanctions battle with the EU and the US in response to the war in Ukraine has also hurt an economy which is forecast by the central bank to tip back into a 4.5 percent recession in 2015. Putin claimed that western sanctions were responsible for 25-30 percent of the countries economic problems.

But a rapid decline in oil prices is the main cause of Russia’s economic woes.

Russia supplies Europe with most of its oil and gas, and the government needs the price of oil to stay at around $100 per barrel to balance its books.

However, as the crisis in the Ukraine has intensified, the price of Brent crude has fallen to its current rate of $59 per barrel.

Putin's speech went on to accuse the EU and Nato of trying t o destabilise Russia with sanctions and high-level criticism

He said the built a new Berlin Wall by examining eastwards in the past 15 years and organised a "coup" in Ukraine.

Drawing on the cliche of Russia as a bear, he added that the West wants to catch it, de-claw it, and skin it alive, while creating effigies in its place.

"Do we want our skin hung on a wall?", he asked.

Borrell: 'Israel provoking famine', urges more aid access

70 percent of northern Gaza is facing famine, new data shows. There is one shower per 5,500 people, and 888 people per toilet. 'How can you live in these conditions?" asked Natalie Boucly of UNRWA at the European Humanitarian Forum.

Opinion

Potential legal avenues to prosecute Navalny's killers

The UN could launch an independent international investigation into Navalny's killing, akin to investigation I conducted on Jamal Khashoggi's assassination, or on Navalny's Novichok poisoning, in my role as special rapporteur on extrajudicial executions, writes the secretary-general of Amnesty International.

Latest News

  1. Borrell: 'Israel provoking famine', urges more aid access
  2. Europol: Israel-Gaza galvanising Jihadist recruitment in Europe
  3. EU to agree Israeli-settler blacklist, Borrell says
  4. EU ministers keen to use Russian profits for Ukraine ammo
  5. Call to change EIB defence spending rules hits scepticism
  6. Potential legal avenues to prosecute Navalny's killers
  7. EU summit, Gaza, Ukraine, reforms in focus this WEEK
  8. The present and future dystopia of political micro-targeting ads

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us