Friday

21st Sep 2018

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

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join 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.

News in Brief

  1. UK's Brexit plan 'won't work', says EU's Tusk
  2. Austria ex-chancellor hints at running for Juncker's job
  3. Greece to move asylum-seekers from overcrowded Lesbos camp
  4. Transatlantic soya trade soars due to trade wars
  5. EU tables strategy for connecting Europe and Asia
  6. Bulgaria backs Hungary in dispute with EU
  7. Trump urged Spain to build Sahara wall to stop migrants
  8. EU-Arab League summit proposed for February in Egypt

Airbnb agrees to clarify pricing for EU

The justice commissioner says the accommodation-rental website will better inform users about prices, and about the legal status of their 'hosts'. Facebook, however, could face sanctions if it doesn't comply with EU rules.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  2. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  3. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  4. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  5. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  6. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  7. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  8. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  9. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  10. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  11. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  12. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  2. Mission of China to the EUChina: Work Together for a Better Globalisation
  3. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  4. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  5. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  6. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  7. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  8. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  9. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  10. FIFAGreen Stadiums at the 2018 Fifa World Cup
  11. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  12. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank

Join EUobserver

Support quality EU news

Join us