The British edition of the Financial Times (FT) has recognized the effectiveness of the economic steps taken by Russia in the past two years. As the FT notes, Russian President Vladimir Putin has initiated a series of dramatic and hard steps in the economic field, which have shown to be effective in light of anti-Russian sanctions, and falling oil prices.
Snowball
After 2014, along with the oil price collapse the Western countries imposed economic sanctions against Russia. The results were significant: net outflow of foreign capital from the country in 2014 exceeded $60 billion, and the level of GDP per capita fell from $14,000 to $8,000.
It is worth recalling that in March of 2014 the Crimea residents held a referendum which resulted in the peninsula returned to Russia. In response, Western countries have actually started an economic war against Russia. In the fall of the same year, Saudi Arabia began its attack, significantly lowering the price of oil trying to squeeze Russia’s energy sector out of Europe. At the same time the EU, together with the United States began to put a spoke in the wheels of all oil projects and the Russian gas in Europe: from the “North Stream-2” to the “South Stream” and “Turkish stream.”
Despite this hard grounding of the Russian economy they resisted and, thanks to a number of economic solutions, adapted to the new realities. At the same time, experts note that the anti-Russian sanctions have touched the Russian economy in not more than a ten percent of the whole and actually failed; the main reason for the fall of the economy is the collapse in oil prices. Russia responded…
Reaction
The most difficult decision for the Central Bank of the RF was the decision to let the ruble float freely, to reduce currency infusion to support it relation to other currencies. As a result, this has led to an increase in inflation. Financial Times analysts noted that for the time being the effectiveness of such an unpopular decision was proven.
Weak ruble has helped to impose a budget in a given volume without significant losses. As a result, Russia’s economy has been much in better shape than the economies of other oil-rich countries such as Saudi Arabia or Venezuela.
It was also able to prevent a sharp rise in unemployment. The reason is that a third of Russians are working in state-owned companies, which until recently kept workers intact, laying off mostly foreigners.
Tighter fiscal and monetary policy (withdrawal of licenses from dubious banks) also helped reduce inflation from 15% in 2015 to 6% in the current year; significantly decreased and the net outflow of foreign capital. As a result, the British publication concludes that Russia today is far from the default, which was much anticipated by the western countries.
Sovereignty – this is important
Publisher’s experts say that the goal of Vladimir Putin – to avoid a repeat of the 1990s, when the economy collapsed due to the dimensionless external debt, which Russia was not able to provide. There are facts in favor of this version: despite all the economic problems of 2014 and 2015, Russia paid more than $200 billion in foreign debt. Therefore, today the Russian Federation has one of the world’s lowest levels of external debt, which does not exceed 11% of the annual GDP.
Thus, the situation shows that not always popular and strict measures in the long run would be more effective than trying to keep the economy at the expense of the simple and obvious solutions, and anti-Russian sanctions have brought pain for the authors – the Western economies.
Tags: Putin Russia
Join the conversation!
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse.