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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

Saturday, Aug. 23


Uppsala Park plays host to Fairy Noon today, a performance of five separate fairy tales ranging from folk classics to more haunting selections. There will be three different renditions of the tales throughout the day and tickets start at 500 rubles ($13.80) for adults and 300 rubles ($8.30) for children.


Classic Finnish cartoon characters the Moomins expect to receive a warm welcome from Russian fans during todays Moomin Festival at the Pearl Plaza Shopping Center at 51 Petergofskoye Shosse. Become a kid again or introduce a new generation to the beloved creation of Finnish writer Tove Jansson.



Sunday, Aug. 24


The tortured genius of Dutch master Vincent van Gogh gets his day in the centers Konnushnaya Ploschad during Make Art Like Van Gogh, a daylong celebration of the artist that will allow amateur artists to try and replicate the work that made the famed painter world-renowned.


Experience a variety of dances highlighting the diversity of the world around as at the final day of the Ethno-Dance International Dance Festival that has been at the St. Petersburg Humanitarian University of Trade Unions this past week. Tonights performance will feature Egyptian dancers accompanied by local orchestras.



Monday, Aug. 25


Today kicks off the Elena Obraztsovoy International Competition for Young Vocalists in the large hall of the Shostakovich Philharmonic. Talented youngsters will showcase their range over the next six days before a winner is chosen on Aug. 30.



Tuesday, Aug. 26


Love movies but hate all those words? Then check out Rodina Cinema Centers Factor of Consensus film forum this evening. Silent movie classics from the beginning of the 20th century will be screened and accompanied by a pianist, who will provide the soundtrack for the ongoing action. The screenings begin at 7 p.m. Check Rodinas website for more details.



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