Wednesday

20th Feb 2019

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.

Investigation

EU commission appeals Dieselgate ruling

The Court of Justice of the EU annulled legislation which relaxed toxic emission limits for cars. EU commissioner Bienkowska said the commission will appeal.

EU says Hungary's anti-Juncker campaign is fake news

The European Commission has branded the latest campaign by the Hungarian government as 'fake news', after Orban's government accused Juncker of pressing ahead with migration proposals that threaten the country's security.

Stakeholders' Highlights

  1. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  2. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  3. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  4. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  5. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  6. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  7. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  8. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  9. Nordic Council of MinistersSeminar on disability and user involvement
  10. Nordic Council of MinistersInternational appetite for Nordic food policies
  11. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  12. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups

Latest News

  1. EU commission appeals Dieselgate ruling
  2. 'No burning crisis' on migrant arrivals, EU agency says
  3. 'No evidence' ECB bond-buying helped euro economy
  4. Juncker: Orban should leave Europe's centre-right
  5. College of Europe alumni ask rector to cut Saudi ties
  6. EU says Hungary's anti-Juncker campaign is fake news
  7. Trump right for once: Europe should take back foreign fighters
  8. EU should clarify rules for plant burgers and lab meat

Stakeholders' Highlights

  1. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  5. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. Nordic Council of MinistersThe Nordic gender effect goes international
  7. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Join EUobserver

Support quality EU news

Join us