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Crisis Side Effects Could Net Billions for Kremlin

A drop of 1 ruble in its exchange rate to the dollar gives state coffers an additional 180 billion rubles ($5 billion) of revenues

Published: March 5, 2014 (Issue # 1800)



  • As the West is looking for ways to make Russia pay for the interference in Ukraines domestic affairs, statements coming from diplomats mention threats to isolate Moscow economically.
    Photo: Igor Tabakov / SPT

A cheaper ruble and more expensive oil could actually go a long way in improving Russias economy, possibly offsetting other potential aftershocks of the Ukraine crisis.

U.S. Secretary of State John Kerry in interviews on Sunday identified the rubles slide as among Russias economic challenges that could get worse if Western powers retaliated economically for a takeover of Ukraines Crimea peninsula by armed men thought to be Russian troops. He was speaking after President Vladimir Putin won unanimous approval from the parliament to use armed forces in Ukraine.

Related: Ruble and Stocks Tumble on Ukraine Turmoil

The currency declined further in Monday trading, but a ruble that is losing value is a great prop for struggling local manufacturers, which now find themselves more competitive with Western imports. Besides, oil prices that edged up about $2 a barrel Monday are creating additional income for a federal budget that depends on these revenues heavily.

Some of the consequences [of the Ukraine situation] can be for the better, said Oleg Kuzmin, an economist for Russia at investment bank Renaissance Capital. First of all, it is the weaker ruble, which will slow down the growth in imports.

Related: Ruble Falls to Lowest Level Against Euro Since 2009

At the same time, Kuzmin warned that a devaluation that was too fast would come as a shock to businesses and the general public, casting doubt on economic stability. The Central Bank intervened in Monday currency trading with all its might and largely restrained the ruble downfall. Its official ruble exchange rate for Tuesday was only 19 kopeks more per dollar, an increase of about 0.5 percent.

In another effort to keep a lid on the exchange rate, the Central Bank temporarily raised its interest rates Monday, thus restricting access by banks to the money supply, which could end up being used to buy U.S. currency. If the measure lasts for more than a month, it could further chill the countrys sluggish economic growth, Kuzmin said.

The effort comes despite the fact that a drop of 1 ruble in its exchange rate to the dollar gives state coffers an additional 180 billion rubles ($5 billion) of revenues, he said. The Central Bank set the exchange rate at 36.4 rubles per dollar for Tuesday, compared to the governments estimate of 34 rubles on average for this year.

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ALL ABOUT TOWN

Wednesday, Oct. 22


English teachers can expect to receive a few useful pointers today from Evgeny Kalashnikov, the British Council regional teacher, during the EFL Seminar this afternoon hosted by the British Book Center. The topic of todays seminar is Grammar Practice.


Young Petersburgers will get the chance to jumpstart their careers at Professional Growth, a job fair and forum featuring more than 40 major Russian and international companies vying for potential candidates for future positions. The forum not only is a chance to network but also to learn more about the modern business world and to understand what it takes to get the job you want.



Thursday, Oct. 23


AmChams Public Relations Committee meeting is scheduled to meet this morning at 9 a.m. in their office in the New St. Isaac Office Center.


Sportsmen get their chance to stock up on all kinds of gear at the Hunting and Fishing 2014 exhibition starting today at Lenexpo. Everything from rods and reels to boats, motorcycles and equipment for underwater hunting will be on sale so that any avid outdoorsman can always be prepared.



Friday, Oct. 24


SPIBAs ongoing Breakfast with the Director series continues today, featuring Tomas Hajek, Managing Director of the Northwest Division at Danone Russia. Hajek will be discussing collaborations between businesses from different cultures. The meeting is at 9 a.m. at the Domina Prestige St. Petersburg hotel and all who wish to attend must confirm their participation by Oct. 23.


Get your gong on at Sounds of the Universe, a concert at the city planetarium this evening incorporating six different gongs to create relaxing songs that will transport you upwards into the stratosphere. Tickets are 700 rubles ($17).



Saturday, Oct. 25


AVA Expo, the eighth edition of the event revolving around all things pop culture, returns to Lenexpo this weekend. Geeks, nerds, dweebs and dorks will have their chance to talk science fiction and explore a variety of international pop culture. Tickets for the event can be purchased on their website at avaexpo.ru.



Sunday, Oct. 26


Zenit St. Petersburg returns home for the first time in nearly a month as they host Mordovia Saransk in a Russian Premier League game. Currently at the top of the league thanks to their undefeated start to the season, the northern club hopes to extend the gap between them and second-place CSKA Moscow and win the title for the first time in three years. Tickets are available at the stadium box office or on the clubs website.



Monday, Oct. 27


Today marks the end of the art exhibit Neophobia at the Erarta Museum. Artists Alexey Semichov and Andrei Kuzmin took a neo-modernist approach to represent the array of fears that are ever-present throughout our lives. Tickets are 200 rubles ($4.90).



Tuesday, Oct. 28


The Domina Prestige St. Petersburg hotel plays host to SPIBAs Marketing and Communications Committees round table discussion on Government Relations Practices in Russia this morning. The discussion starts at 9:30 a.m. and participation must be confirmed by Oct. 24.



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