russia economyRussian President Vladimir Putin said on December 25, 2014 at a government meeting in Moscow that “the difficulties that we have run into carry not only an outside factor. They are not solely tied to some sorts of limitations of sanctions or limitations tied with the objective international environment, they are tied to our not working out defects that have accumulated over the years.” He added that the government has taken efforts in order to change the structure of the economy in order to give it a more innovative nature, but said the efforts were below the needed measures: “much has been done in this but the latest events have shown that this is insufficient”.[1]

The reasons for the weakening of the Russian national currency are the low oil prices and the economic sanctions imposed on Moscow by the West in the wake of the Ukrainian crisis.

On December 23, Russian Prime Minister Dmitry Medvedev said that the Russian economy risks falling into a deep recession. "If we set more modest tasks before us, then we have risks of falling into a deeper recession than may actually occur," Medvedev said, inferring that the government may need to take on more aggressive approaches to the economic situation in Russia.[2]

Global Finance mentions that "the Russian finance ministry sold some of its foreign-currency reserves last week to support the battered ruble, according to data released Tuesday by Russia's central bank."[3] The Bank of Russia said it sold $420 million on December 19 and $500 million on December 18 at request of the federal treasury, a part of the finance ministry. The sales are the first since the finance ministry, which holds its funds at the central bank, said last week it would start selling its excessive holdings of foreign currency on the market to prop up the "extremely undervalued" ruble. The finance ministry holds about $7 billion of foreign-currency reserves but hasn't said how much it would sell.[4]

Russian First Deputy Prime Minister Igor Shuvalov stated on December 22, 2014, that the overall economic situation is more important than the rate of ruble. "The exchange rate today is behaving accordingly and there are no serious fluctuations…There is an expectation on the market that the ruble in the next few days will become stronger; however, it's not the strengthening of the ruble that is so important for us today, or just the opposite – it's weakening, but most of all the stabilization of the economic situation" Shuvalov said during a meeting with with Russian Prime Minister Dmitry Medvedev. "This is important for the Central Bank, for the export companies themselves, and for those who are planning economic operations," Shuvalov added.[5]

During a December 18 televised press conference, the Russian president said that the country's economic situation could begin to improve in the first quarter of 2015, with Russia's economy recovering completely over the next few years. But the recovery depends on the future economic contracts, partnerships and increases in the usage of ruble in foreign trade. According to New York Times, just a couple of months ago, President Vladimir Putin confidently told business leaders that the country could withstand the economic storms and that if foreign investors continued to withdraw money, he said, the government could simply tap its sizable reserves to help.[6]But looking now at the situation, what seemed a good plan before, now it is a problem: a national budget affected by the drop in oil prices, the usage of what now is a weakened ruble in trade with China and other international payments (on December 29, 2014 China and Russia will start using national currencies in mutual transactions[7]) Russia seems to finally understand the need of an innovative and diverse economy, but with a severely diminished budget it might be a little too late for a deep change in the economy structure.

[1]"Putin Blames Russian Government for Economic Situation", Sputnik News, December 25, 2014, at the Internet address

[2]"Medvedev: Russian Economy Needs Aggressive Approach to Avoid Deep Recession",  Sputnik News, December 23, 2014, at the Internet address

[3] Andrey OSTROUKH, "Russian Finance Ministry Sells Foreign-Currency Reserves -- Update" , Global Finance, December 23, 2014 at the Internet address

[4]Richard QUEST, "Moscow's plans to stop Russia's economic free-fall", CNN, December 23, 2014 at the Internet address

[5] "Economic Stability More Important Than Russian Ruble Rate: Deputy PM", Sputnik News, December 22, 2014, at the Internet address

[6] Jenny ANDERSON, "Ruble Crisis Is Testing Russia’s Resources", New York Times, December 17, 2014, at the Internet address

[7]"China to Start Payments With Russia in National Currencies on December 29", Sputnik News, December 26, 2014, at the Internet address

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