Monday, October 20, 2008

Should Russia Feel Confident?

The Moscow Times has in today's edition a piece by Anna Smolechenko, "Russia in No Rush for Crisis Summit." In it, an unidentified senior Russian government official makes a number of comments that I wanted to "bullet point" on the blog for TWR readers:

--Russia's economy will continue to grow even under the most pessimistic scenario for next year, which sees it dipping a little under 5.5 percent ... By comparison, several European Union countries may struggle with negative growth, and the United States is expected to post zero growth ...

--Russia would suffer from a slowdown in economic growth in the West and, therefore, would see demand for oil fall. The budget for this year is balanced at $70 per barrel, and if the price falls below this level, the state might need to tap into the stabilization fund. [NOTE: oil was trading at $73.83 in London today. Some predict it may be at $50 by the end of 2008--so we will see how well Russia has prepared for the rainy day.]

--He said the government was aware that countries like Ukraine had begun feeling the weight of the global liquidity crunch and would consider helping neighbors that sought support. Moscow has already extended loans to China, India, Cuba and Belarus this year. [NOTE: my comment here--an interesting mix of states. And the mention of Ukraine is critical, as we head into key parliamentary elections and after Tymoshenko's failure to rally support for an anti-crisis coalition.]

An interesting set of points to consider.

Russian officials also say that the economy of the country is not dependent from oil prices. It's undergoing the process of diversification..
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