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SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JANUARY 25 • 2015
The Russian gov-
to tackle the
stalled economy, as President
Vladimir Putin defiantly called for
greater economic "sovereignty" due
to Western sanctions.
In a meeting with Putin, Deputy
Prime Minister Igor Shuvalov said
the government needs 1.375 trillion
rubles (US$21 billion, 18 billion euros)
to finance the new plan put together
to rescue the economy.
He said the money would come
from the budget as well as the
national welfare fund; a massive pile
of cash from energy exports accu-
mulated over recent years when oil
prices were high.
Russia is set to plunge into a deep
recession in 2015 as its economy has
been dealt a double blow by tumbling
prices for oil---Russia's main export
commodity--- and sanctions by the
West, which accuses Moscow of
involvement in the conflict in eastern
Putin said as he chaired the meet-
ing that Moscow had expected
"international economic rules" to
be stable, but has now learnt its les-
"Despite exterior stability of inter-
national economic rules, they are in
fact subject to erosion by political
factors," Putin said.
"We were actually rather naive,
thinking that these are fundamentals
of the global economy which are
unshakeable," he said. "That is actu-
ally rather a lesson."
But a defiant Putin said the sanc-
tions would only push Russia to
"increase its sovereignty in the eco-
However he vowed to protect the
"Whatever plans we make, we
have to carry out our social obliga-
tions," Putin said, referring to the
promises made upon his reelection
into a third historic term in 2012 to
raise pensions and wages paid to
To meet these demands and avoid
budget cuts, Russia will be digging
into its reserves in 2015 "for fiscal
stability," said Arkady Dvorkovich,
another deputy prime minister, while
at the Davos economic forum.
He added that volatility of the oil
market and the current base interest
rate of 17 per cent in Russia has made
it "impossible to do business in the
economy," and expressed hope for
the price of crude oil to rise to
between US$60 and US$80.
Russia last year prepared a 2015
budget factoring in the price of crude
at nearly US$100 a barrel, but the
price has tumbled below US$50 and
may drop even further.
If oil and the Russian ruble remain
at the current levels, "the original
spending projections would result
in a hole in the budget of over five
percent GDP," and financing it from
oil reserves would only be feasible
as a short-term solution, said Liza
Ermolenko, an emerging markets
economist at Capital Economics.
Social and defence spending,
which make up half of total spending,
would continue to be protected from
fiscal cuts according to the plan.
"It looks like political considera-
tions... will continue to dictate the
priorities," she added.
Food prices skyrocket
The anti-crisis plan has been dis-
cussed for days, and Kommersant
daily reported that it contains more
than 100 clauses aimed at supporting
growth, diversifying the economy
and keeping small and medium-
sized business from closing.
Considerable help will be provided
to the Russian banking system, up
to 50 billion rubles will be allocated
to supporting the agriculture sector,
20 billion to industry, and 16 billion
to the health ministry for buying
medicine, Shuvalov said.
The government is especially wor-
ried at creeping consumer prices
which could lead to public discon-
tent. Economy minister Alexei
Ulyukayev said that inflation in Jan-
uary will hit 13 per cent after reaching
11.4 per cent for 2014.
Russian law enforcement agencies
have been tasked with making sure
consumer prices stay low, but the
results have not been encouraging,
with some products more than dou-
bling in price.
"The results of ongoing work show
growth of prices all over the country"
by up to 150 per cent on meat, fish,
eggs, grain, dairy and produce, the
prosecutor general's office said in a
To counter this there will be
"checks" of large supermarket chains
to find out how they calculate their
sale prices and prevent instances of
"price collusion," the statement said.
The government last year intro-
duced countermeasures to Western
sanctions, namely an embargo on a
wide array of food imports from
countries who have adhered to sanc-
tions measures, which many analysts
blame for further driving the food
prices up. AP
Russia unveils US$21 bn
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