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MOSCOW, June 4 (Itar-Tass) — On Saturday, Russian Prime Minister Dmitry Medvedev had a meeting on finances to discuss the rouble exchange rate, which dropped to 33.7 roubles per U.S. dollar for the previous week. Putin heard in the particularly calm way the news on the currency market and instructed the Central Bank to influence the market, if the exchange rate of the Russian currency should be supported.
Chairman of the Russian Central Bank Sergei Ignatyev named the reason for a falling Russian currency as a deepening economic crisis in Europe and the oil prices linked with the crisis, as the oil prices have been falling steadily already for two months, the Komsomolskaya Pravda daily reported. “If the oil price stops falling, the rouble will most likely get stronger. If the oil price keeps falling, probably, but not for sure, the rouble will get weaker, but at a much lower pace than before, because we will take much more active currency interventions,” Ignatyev told Medvedev.
“The Central Bank is taking currency interventions. We act according to the rules set in the mechanism of a floating currency corridor,” the Rossiiskaya Gazeta daily quoted Ignatyev as saying. He added that the raters of the dual currency basket has already got closely to the upper level of this corridor.
“As a matter of fact, you should act this way,” Medvedev approved the plan.
Prime Minister Dmitry Medvedev gave a response to a falling rouble exchange rate and declining Russian shares, the Moskovsky Komsomolets daily reported. He convened a meeting on financial markets. Now the Central Bank will stand up in protection of the rouble. Will this support be helpful? the newspaper contemplated. The Russian Central Bank has bought more dollars than those sold before the last days of May, though the rouble exchange rate has been going down already for three months.
Only after the criticism from the premier, the Central Bank recalled that the bank is responsible for the rouble exchange rate under the Russian Constitution.
Russia cannot draw lessons from the crisis. It is easier to bring Greece to account for all problems, the newspaper went on to say. It looks like Moscow hopes that the oil price growth, which may take place on July 1, when the embargo for the Iranian oil will come into effect, will overweigh everything. However, the problem is that even if Greece remains in the euro zone and the anti-Iranian embargo will push the oil price up, the happiness will not last for a long time. The July 1 effect should not be overestimated. If the European recession affects this tendency and the capital flight from Russia gets quicker, the rouble will be falling even quicker, the Moskovsky Komsomolets daily warned.
Russia is experiencing the deja vu effect, while the oil, rouble and shares are getting cheaper, the economic growth is slowing down, the Vedomosti daily recalled. The second wave of the crisis is still weaker than the first wave, but heavy trials are expected in Russia.
The second wave of the crisis broke out six months ago from a falling GDP rate in the euro zone in the fourth quarter and continued in the first quarter of this year, the newspaper cited the former Finance Minister Alexei Kudrin as saying. “A more obvious stage (of the second spiral of the crisis) is just observed now,” Kudrin said. The markets estimated the domino effect scenario, when the crisis will spread on Spain and Italy following Greece, as realistic, and “the crisis is escalating,” he said, noting that the companies and banks are curtailing the production, crediting and are getting rid of risky assets.
The blow on Russia turned out to be stronger. Last Friday, the rouble exchange rate to U.S. dollar went down 2.5%, falling to the level of the middle of March 2009, and a barrel of the Urals oil dropped four percent, getting lower 97 U.S. dollars. For the past month the Russia currency got cheaper by 15% to the U.S. dollar and the oil price – 18% down.
The production in Russia is stagnating, the economic growth has been falling for the second consecutive month, the annual rates went down from 4.9% in the first quarter and 3.9% in March to 3.7% in April.
The anti-crisis measures will be needed only in case of a sharp oil price decline to 60 U.S. dollars, the Vedomosti daily cited a high-ranking governmental official as saying. The situation on the market is being fanned up artificially, even with the current oil prices to remain the trade surplus will be kept and there are no major reasons for a weaker rouble. But the government is following the situation and First Deputy Prime Minister Igor Shuvalov has daily meetings.
“Ignatyev’s statement means in simple words that the Central Bank will seek to avoid a new sharply falling rouble,” the Nezavisimaya Gazeta daily quoted director of the department for strategic analysis of the company FBK (Financial and Bookkeeping Consultants) Igor Nikolayev as saying. “But the bank will not take some special efforts. Our Central Bank is not omnipotent,” he said. A broader corridor for fluctuations in the dual currency basket, which the Central Bank sets, is almost inevitable, he noted. “As a result a new period of a floating or creeping devaluation awaits us,” the expert stated.