Crisis Evolution in Russia

Yevgeny Volk / March 11, 2009

The past few weeks saw a certain stabilization of the ruble against the key international currencies. The Russian national currency’s de facto devaluation has brought about a dramatic nearly 40-percent drop in imports compared to the same period last year. This development helped to offset export losses and retain a foreign trade surplus.

The shrinking export trend is ongoing, however, despite the favorable international circumstances owing to the devalued ruble. Last January saw a more than 50-percent plunge in exports. This tendency highlights grave flaws in the Russian government’s exports policy that rests largely on energy exports. Thus, a slide in world energy prices has inflicted an irreparable damage on Russia’s economy. Given a weak competitiveness of Russian goods, even the 50-percent ruble devaluation cannot increase Russian exports.

The government-initiated measures show that it is continuing to pin hopes entirely on the likelihood of growing oil prices. Admittedly, there is a tendency to dismantle certain ambitious projects put in place in the pre-crisis time. (more…)