The Political and Economic Results of December 2013

Abstract

In December 2014, Russia’s authorities faced a severe foreign exchange crisis, which forced them to increase the CBR key interest rate to 17% and to order a number of major state-owned companies, including Gazprom and Rosneft, that their foreign exchange reserves should be brought back to the levels of 1 October 2014 – in other words, that a considerable part of these reserves should be sold. However, Russia’s financial position has remained strained due to the continuing drop in oil prices, the forthcoming heavy foreign debt repayments to be made by Russian companies, and the generally tense international situation. In his annual Presidential Address to the Federal Assembly, Vladimir Putin promised a full amnesty for Russian individuals who would return capital to Russia (although no decision has been taken as yet on the most important issue of whether or not the amnesty should be extended to legal entities). He also proposed that ‘holidays from inspections’ should be established for small businesses (‘if a company has acquired a good reputation and if there have not been any serious charges against it for three years, then for the next three years it should be exempted from routine inspections…’). In addition, he expressed his full confidence in the innocence of Vladimir Yevtushenkov (who would be immediately released from house arrest in the aftermath of this statement). All these developments sent reassuring signals to businesses, although their effect was somewhat weakened by the inexplicable administrative ban on grain exports, imposed by the RF authorities later in December in spite of the fact that Russia’s grain harvest in 2014 had been huge, and there was no shortage of grain on her domestic market.