10.11.08
Economic News in Review
Crisis, Commentary, and International Outlook
September/October, 2008
The following resource is meant to quickly introduce the reader to some of the major English-language commentary concerning the current financial crisis in Russia, how that crisis might affect Russia's government and ruling structure, and what the international outlook is for Russian business.
This news review is developed via a partnership between three organizations: The School of Russian and Asian Studies, a study abroad organization which also produces several other reviews ("obzori") each month; The US-Russia Chamber of Commerce of New England, a business advocacy and networking organization which also features this obzor in its monthly newsletters; and Alinga Consulting Group, a business services company (audit, tax, accounting, payroll, legal, and HR), which also offers a monthly newsletter.
To subscribe to any of these additional news services, send us an email with "Subscribe" in the subject field and indicate which publications you would like subscribe to in the body of the email.
Government and the Crisis
Crisis-Hit Russia Must Scale Down Its Ambition
The official view is that Russia is an outstandingly successful economy temporarily derailed by a financial shock of foreign origin.
Gryzlov Justified 2009 Budget Surplus
The sizeable surplus of 2 trillion ruble that the 2009 draft budget sets forth is quite justified, said Boris Gryzlov, speaker of lower house of Russia's parliament, the State Duma.
State Duma Passed 3-Yr Budget
The lower house of Russia's parliament, the State Duma, has passed in the third final reading the federal budget for 2009 through 2011, RIA Novosti reported. The budget was amended to set forth additional appropriations to support financial system and for defense purposes.
Govt Authorized to Spend by Parliament's Approbation
The State Duma has sanctioned the government to vary the amount of state spending in 2009 without any bills passed to amend the Budget Act.
State's Wider Presence In Economy Temporary, No Nationalization Due
The Russian government's task today is not reinstating the presence of the state in the economy and it cannot be otherwise, Russian Prime Minister Vladimir Putin told an economic conference on Wednesday.
The Financial Crisis May Curtail Kremlin Plans for Modernizing Armed Forces
Medvedev's order to "guarantee continued capacity of nuclear deterrence" has been running into trouble as the Russian defense industry has been encountering problems in producing new ICBMs.
Budget Will Balance at $70 per Barrel
The 2009 Russian federal budget will balance even if oil prices sink to $70 per barrel, Prime Minister Vladimir Putin told the Consultative Council on Foreign Investment.
President Forms Fin. Market Council
Russian President Dmitry Medvedev has issued a decree, published yesterday, forming a presidential council on the development of the financial market that will "ensure stability," make proposals to the president about the protection of investor rights and prevention of crises and examine legislation in that area.
Commentary
Observations On Financial Crisis In Russia
There are increasing signs that the main problems for Russia lie ahead and that the efforts of the country's leaders to present Russia as an island of calm and stability have failed.
RAD: Russia and the Financial Crisis
This issue of the Russian Analytical Digest considers Russian economic growth over the past 10 years, followed by a discussion of the current state of the economy with a focus on the industrial sectors affected by the crisis: commodity markets, construction and retailing.
Economic Crisis Envelops Russia, Too
Russia is suffering the effects of the global credit crunch, but that doesn't seem to be making it any less of a threat to the U.S.
New Anxiety Grips Russia's Economy
At the start of the global financial crisis, Russian authorities insisted they had ample cash reserves to weather any storm. But as sorrow has succeeded sorrow — plummeting oil prices, a 70 percent descent in stock markets here, a global credit crisis and a slow-motion bank run on this country's private banks — Russia has had to spend its reserves faster than anybody imagined.
What Crisis? Kremlin Downplays Financial Woes
TV channels gloss over the subject and state news agencies are under orders to avoid frightening language. But beyond the spin, Russia's stock markets are plunging, some grocery shelves are empty and one newspaper has even suggested its readers stash some cash — under the mattress.
Is There a "Plan B"? The State Has no Clear Agenda of Combating the Financial Crisis in the Long-Term
In response to the financial breakdown, the State Duma has been taking speedy monetary decisions, on advice from high-ranking officials, without giving them much thought or subjecting them to much scrutiny or debate.
'Worst Yet To Come' For Russia
A former adviser to Moscow and other post-Soviet governments says Wall Street woes are likely to be felt acutely in Russia. Anders Aslund warns that the fallout could combine with a beefier foreign policy to crush hopes for key reforms.
Answers to Journalists' Questions Following the Meeting of the Eurasian Economic Community (EurAsEC) Interstate Council
Europe understands that today no economic problems of a global order can be solved without Russia's participation. Just as the global nature of the economy precludes Russia from resolving all the problems associated with the crisis in financial markets alone.
Russia Counts Its Blessings in the Global Financial Crisis
A distinct note of triumph is entering the statements of Russian officials on the scale and possible consequences of the global economic crisis.
Russia Strong Enough to Stop Crisis, Says Chubais
Russia is already well-guarded against a financial crisis, Anatoly Chubais, ex-CEO of RAO UES and the head of the Russian Nanotechnology Corporation, said in an interview with South Korea's newspaper Chungang Ilbo.
Financial Crisis Yet to Peak - Russia's Finance Minister
The global financial crisis has yet to peak, and individual governments must now take appropriate measures to deal with its effects, Russia's finance minster said.
Russia Will Continue Economic Liberalization – Minister
Russia will continue the course towards liberalization of its economy, making an adjustment for the need to increase state regulation to some extent, Russian Deputy Prime Minister and Finance Minister Aleksey Kudrin said in Washington.
Business in Russia
Businessmen Ready to Shed Sidelines
Thirty-five percent of the businessmen surveyed plan to "sell something unneeded" in the fourth quarter of the year. The second most popular measure is to reduce overhead by investing in new technology (25% of respondents). Cutting wages, dismissing personnel and cutting production were mentioned by 19 percent of respondents each.
Why Russian business can not get Western clients
Having spent quite some time working on developing Russian suppliers, being Russian myself and understanding Westerners and Western Business, please allow me to give the following treatise for advice.
Disturbed Businesses
The Russian Business and Entrepreneurship Union ctiticizes anti-crisis measures. The powers-that-be pay no heed to businesses.
Unscheduled Business Inspections
Creating a second package of amendments to antitrust laws by the Federal Antimonopoly Service was discussed at a work meeting with First Vice-Premier Igor Shuvalov.
Survive the Crisis!
Paul Backer: Survive the Crisis!
If you are doing business in Russia/CIS during the crisis, how do you get a seat? This is a time when good transactional counsel shine and can earn you a significant multiple of their costs.
Part 2, Operations and Staffing
A consultant with crisis survival experience should not try to teach clients how to better manufacture, market or ship their widgets, not his job. He should apply painfully gained experience in prior crises to help your business survive this one.
Part 3, Finance and Legal
Every business borrows funds, lends funds or operates on its own funds. Your ability to control your financial situation in a crisis comes down to 1. availability of viable options and 2. coercive capacity. If you are a borrower, the crisis presents significant new challenges.
Part 4, Lending During a Crisis
An economic crisis inevitably worsens borrower and lender relationships. The most effective (shield and sword) means for Russia/CIS borrowers to defend their economic assets is their knowledge of their local law, practices, application and enforcement.
Corruption
Russians Want Execution for Corruption
Thirty percent of Russians approve of the idea of public executions to fight corruption, the All-Russia Center for the Study of Public Opinion has found.
Comptroller's Office Head Stepashin On Its Steps To Counter Corruption
Interview, special to Rossiyskaya Gazeta, with Sergey Vadimovich Stepashin, chairman of the Russian Federation Comptroller's Office: "The fight against corruption has no sectors; it is a united national front".
Russian Internal Affairs Minister Nurgaliyev Interviewed On Combating Corruption
Interview with the Russian Minister of Internal Affairs Rashid Nurgaliyev by Mikhail Falaleyev: "Cleaning the Uniform. Rashid Nurgaliyev: There Will Be No More Corrupt Officials".
The Oligarchs and Powers that Be
Financial Crisis In Russia Raises Stakes for Putin
For the past eight years, the political strength of Russia's leader, Vladimir Putin, has rested on what seemed an unbeatable combination -- a soaring economy and a steady drive to consolidate control over government, media and business.
Russia Tycoons Bailout Could Turn Into Kremlin Trap
Russia has spent $8 billion from its foreign exchange reserves to help some of its richest men to refinance foreign debts and the names of the recipients give a clue to the Kremlin's favorites.
Kremlin at Crossroads Over Financial Crisis
The Kremlin is at a crossroads over how to respond to the global financial crisis -- by tightening its control over the economy and public life, or by using it as a catalyst for reforms.
No Crisis Here - Waiting for the Shake-out Behind the Scenes
Those who control the tap of state spending will decide who survives.
Moscow Dictates Rescue of Oligarchs
Russia's oligarchs are queuing up for government funding as the global financial crisis looks set to trigger a new redistribution of property in which the state will determine the winners.
Russia Tosses Life Preserver To One Of Its Richest Men
The Kremlin is stepping in to bail out one of the country's richest men, in what could be the first move in a shakeout among the powerful businessmen known as oligarchs, whose holdings are spread throughout the Russian and world economies.
Twilight Of The Oligarchs
Nobody quite agrees what exactly oligarch means; these days it has become a loose synonym for Russia's super-rich. But in the new post-credit-crisis world everyone can concur on one thing - that Russia's oligarchs are in trouble.
Moscow agrees bailout for struggling oligarchs
EB has been entrusted with a total of $50 billion by the Kremlin to bail out indebted Russian firms.
Oligarchs Lose $230 Billion in Collapse
Russian billionaires from aluminum magnate Oleg Deripaska to football club owner Roman Abramovich lost more than $230 billion in five months during the nation's worst financial crisis since the 1998 default on its debt.
Kremlin Holds Key as Crisis Threatens Oligarchs
The global financial crisis is set to force a huge redistribution of wealth in Russia, with some oligarchs losing heavily, others profiting and the state helping decide who survives.
Stock Slump Imperils Putin's Effort to Pump Up Russian Wealth, and His Legacy
The stock market here has swooned so often in recent weeks that regulators have repeatedly shut it down, as if Russia, which aspires to be a financial powerhouse, has become just another bumbling backwater.
Russian Elite Look to Kremlin For Aid as Wealth Evaporates
The wealth of the top 25 on the Forbes Russia list has plunged nearly $240 billion in the past five months.
Russian Oligarchs Feeling The Heat Of Financial Crisis
Amid a global financial crisis, Russia's stock market is nose-diving. Its politically connected oligarchs are losing hundreds of billions of dollars. And the Kremlin is scrambling to find a way to stop the bleeding.
State Ready to Turn the Tables in New Sale of the Century
The Russian state could wind up owning huge chunks of formerly private companies as a result of the bail-out measures it is implementing.
Economic Indicators, Forecasts
FACTBOX - Key Facts About the Russian Economy
Russia's reserves have, but remain plentiful and could ensure that Russia suffers less from financial market turmoil than some emerging market peers.
Economic Indicators Fall Harmoniously
The "soft landing" predicted for the Russian economy is now taking place. The Ministry of Economic Development's monthly report on the economy this year states that "It is estimated that the growth of the GDP between January and September, thanks to high dynamics built up from the beginning of the year, will total 7.7 percent. A result of the expected slowing of the dynamics in the fourth quarter, GDP growth on the level of 7.3 percent is expected in 2008."
Russia to Continue to Stake on Negative Rates
In its regular review of the macroeconomic situation in emerging economies, Merrill Lynch attempted past week to forecast the extent of stability of this group of nations. Its outlook signals that the situation would be rather tense in the certain states that could be already viewed as the instability points due to the capital outflow, drop in the raw export prices and volatile national currencies.
No Crisis in Sept. Economic Data
Tendencies are continuing as they have been in previous months, with growth slowing gradually. Real wages rose 2.7 percent (as opposed to government forecasts of 0.6 percent) as compared to the previous month.
Imports Not Affected By Crisis
The Federal Customs Service estimates published last week of import volumes in September show no signs of influence of the financial crisis. Imports in September 2008 are up 51.7 percent over September of last year.
Currency
Rumors about Ruble Rubbish
Rumors of the devaluation of the ruble (to 40/$) were answered yesterday when the ruble rose against the dollar by almost 20 kopecks to 26.06. The euro lost 22 kopeck for 35.17 rubles.
Nation Barters Rubles
The financial collapse coupled with the ruble depreciation prompted the nation to convert into dollars their ruble deposits. The September reports of Russia's banks revealed the decline in ruble deposits and the growth of deposits denominated in foreign currencies. The trend has strengthened in October due to the material appreciation of the U.S. dollar.
CBR Hit by Outflow
Central Bank of Russia (CBR) posted another record decline in the foreign exchange assets of the country. The October 17-24 drop reached $31 billion, while the aggregate amount shed below $500 billion first time from March. The CBR is selling foreign currency to rescue the ruble rate and the foreign capital is flowing out of the country.
Russian Economists Predict Ruble Collapse, Govt. Dismisses Fears
Many economists in Russia say a ruble devaluation similar to the 1998 collapse is very likely, but authorities reject their analysis, saying the country has enough resources to prevent the scenario.
Central Bank Spends Reserves on Ruble
The Central Bank of Russia continues to prop up the national currency, selling dollars from its international reserves to prevent the ruble from falling sharply.
Ruble Stuck in the Trenches
Russia's international reserves are dwindling fast. Between October 10 and 17, they were reduced $14.9 billion to $515.7 billion, the Central Bank reported yesterday.
Russia's Dvorkovich Restates Ruble Won't Be Devalued
Russia won't devalue the ruble, the economic aide to President Dmitry Medvedev repeated at a conference in Moscow Wednesday.
M2 Growth Has Slowed For A While
The Central Bank published statistics yesterday on the money mass (M2), which, on October 1, stood at 14.4 trillion rubles.
Govt. Markets Ruble To Replace Dollar
Expectations of inflation and weakening of the euro and dollar have provided the Russian government its chance to begin an advertising campaign for the ruble as a means of payment for international contracts.
International
Russia Seeks Sales, Not Strife, in U.S. Backyard
Russian naval missions and strategic bomber sorties to Venezuela are a showcase for arms exports, not an attempt to nurture Latin American allies for a new Cold War with Washington, diplomats and analysts say.
London High Court Counted Assets of Roman Abramovich
London High Court released its ruling specifying the assets that belong to Chukotka's Parliament Speaker Roman Abramovich.
China Supports Russia's Membership In WTO
China resolutely supports Russia's admission to the World Trade Organization, China's Premier Wen Jiabao announced today during the meeting of Russian-Chinese Economical Forum in Moscow.
Putin Might Attend Davos Forum
Russia's Prime Minister Vladimir Putin will probably participate in the World Economic Forum in Davos in January of 2009, a source with the RF government told Interfax.
On Ways to Address the Current Global Financial Crisis
In the wake of President Dmitry Medvedev's address to the Federal Council, Presidential Aide, Arkady Dvorkovich, spoke with RT at length about the thinking of Russia's Executive on ways to address the current global financial crisis.
Putin Calls for Financial Architecture Revision
Russia calls for modifying the global financial architecture to solve current problems, ITAR-TASS reported with reference to the RF Prime Minister Vladimir Putin.
Russia in No Rush For Crisis Summit
The Kremlin signaled Sunday that it was in no hurry to confirm its participation in an international summit called by U.S. and EU leaders to tackle the global financial crisis over the weekend.
Russia, China, India Together vs. Crisis
The finance minister of Russia and China will meet during the meeting of the finance ministers of "The Twenty" in Sao Paolo, Brazil, in November.
Russia Draws Up Plans To Revamp World Finances
Russia has drawn up its own proposals to restructure the world financial system, which President Dmitry Medvedev will present at a global summit on the financial crisis next month, a senior official said on Sunday.
The Russian Hangover
The incoming U.S. administration should use the present economic uncertainty as an opportunity to refashion relations with Russia.
