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Economic crisis in Russia as a result of aggression against Ukraine

Economic crisis in Russia as a result of aggression against Ukraine
Article by: Olena Matusova
Translated by: Mariya Shcherbinina

Moscow – If the separatists in the east of Ukraine gain control over Donetsk airport, combat over which has been going on for days, or the city of Mariupol in order to create a corridor to Crimea, the EU may impose additional sanctions on Russia, reported Bloomberg agency today, citing a source close to German foreign policy. Meanwhile European and US sanctions which had been imposed earlier and are already in effect, are leaving a mark on the state of the Russian economy. This topic was one of the main ones at the Russian Calling! investment forum in Moscow. 

The speeches representatives of the economic block of the Russian government made at the investment forum confirm that experts’ pessimistic predictions are coming to pass. Inflation surpasses eight percent as of today, meanwhile economic growth is less than one percent. Such a combination, according to Russian Minister for Economic Development Alexey Uliukayev, is “dangerous and explosive.”

Citizens are already feeling economic problems not in the abstract sense, but with their wallets, as well. The dollar and euro are growing exponentially and, according to expert prognosis, the US currency may cross the 40-ruble barrier before the end of the year.

The dollar, the ruble and motivation

Head of Sberbank German Gref said in his speech that the crisis had launched irreversible processes.

“Half of our economy is monopolized. Which means there will be zero efficiency. The ruble has jumped to 39,5 per dollar, it will bounce back. However, the prices will not. We do not believe that prices will bounce back. Why? Because there is no competition. Nothing will force the prices to turn around. If Artemyev (head of the Russian anti-monopoly committee – ed.) works well again, he may be able to gain some product groups. But no more. Investment climate, motivation… We cannot motivate people with the GULAG, like in the Soviet Union. This motivation is not long and it breaks,” Gref says.

Putin await Ukraine’s escape from the crisis

Russian President Vladimir Putin also spoke at the investment forum. He called the actions of western governments (the sanctions) that limit business on such a prospective market as Russia “complete madness,” and said that the state would assist the companies and entire sectors of the Russian economy which were subject to Western sanctions. Putin did not forego the topic of Ukraine, either.

“Russia’s national interests will benefit from Ukraine’s escape of the political and economic crises. The country is really in a state of deep political and economic crises today. The renewal of the economy, political and social sphere. We are interested in having a predictable partner and neighbor,” Putin noted.

Entrance to and escape from the crisis

The events in Ukraine became, essentially, a detonator for the economic crisis in Russia. They are direct consequences of Russia’s involvement in the conflict in Donbas, experts note.

Academic head of the National Research Institute High School of Economics Yevhen Yasin thinks that the current economic crisis in Russia is a direct consequence of the policies of the government which may soon face a crisis of trust. According to Yasin, even with the most optimistic prognosis, it is pointless to expect a swift solution to the crisis.

“It began with the toppling of Yanukovych’s government and making radical decisions again. Including Crimea, Donbas… In general, surrounding Ukraine. However, it is not just Ukraine, as sanctions are now aimed at Russia. Russia has imposed response sanctions, which also landed a real blow to the population. This process is currently far from reaching its end. Because it is easier to enter crisis than to escape it,” Yasin said live on Radio Liberty.

All local economists without exception speak about the Russian economy being in crisis. Their predictions fluctuate between weak optimism and a swiftly impending catastrophe.

Translated by: Mariya Shcherbinina
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