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Crisis Side Effects Could Net Billions for Kremlin

A drop of 1 ruble in its exchange rate to the dollar gives state coffers an additional 180 billion rubles ($5 billion) of revenues

Published: March 5, 2014 (Issue # 1800)



  • As the West is looking for ways to make Russia pay for the interference in Ukraines domestic affairs, statements coming from diplomats mention threats to isolate Moscow economically.
    Photo: Igor Tabakov / SPT

A cheaper ruble and more expensive oil could actually go a long way in improving Russias economy, possibly offsetting other potential aftershocks of the Ukraine crisis.

U.S. Secretary of State John Kerry in interviews on Sunday identified the rubles slide as among Russias economic challenges that could get worse if Western powers retaliated economically for a takeover of Ukraines Crimea peninsula by armed men thought to be Russian troops. He was speaking after President Vladimir Putin won unanimous approval from the parliament to use armed forces in Ukraine.

Related: Ruble and Stocks Tumble on Ukraine Turmoil

The currency declined further in Monday trading, but a ruble that is losing value is a great prop for struggling local manufacturers, which now find themselves more competitive with Western imports. Besides, oil prices that edged up about $2 a barrel Monday are creating additional income for a federal budget that depends on these revenues heavily.

Some of the consequences [of the Ukraine situation] can be for the better, said Oleg Kuzmin, an economist for Russia at investment bank Renaissance Capital. First of all, it is the weaker ruble, which will slow down the growth in imports.

Related: Ruble Falls to Lowest Level Against Euro Since 2009

At the same time, Kuzmin warned that a devaluation that was too fast would come as a shock to businesses and the general public, casting doubt on economic stability. The Central Bank intervened in Monday currency trading with all its might and largely restrained the ruble downfall. Its official ruble exchange rate for Tuesday was only 19 kopeks more per dollar, an increase of about 0.5 percent.

In another effort to keep a lid on the exchange rate, the Central Bank temporarily raised its interest rates Monday, thus restricting access by banks to the money supply, which could end up being used to buy U.S. currency. If the measure lasts for more than a month, it could further chill the countrys sluggish economic growth, Kuzmin said.

The effort comes despite the fact that a drop of 1 ruble in its exchange rate to the dollar gives state coffers an additional 180 billion rubles ($5 billion) of revenues, he said. The Central Bank set the exchange rate at 36.4 rubles per dollar for Tuesday, compared to the governments estimate of 34 rubles on average for this year.

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ALL ABOUT TOWN

Wednesday, Sept. 3


Although the Peter and Paul Fortress sand sculptures are more central and therefore more visible to the throngs of tourists, the 300th Anniversary Park of St. Petersburgs own collection closes today. The World Collection of Sand Sculptures that have been on display at the park reaches its final day, so fans of the classic beach activity should get there while they can.



Thursday, Sept. 4


Vladimir I. Danchenkov, Head of Baltic Customs, will be in attendance during AmChams Customs and Transportation Committee Meeting convening this afternoon at the organizations office near St. Isaacs Square at 3 p.m.



Friday, Sept. 5


Scrabble lovers and chess masters get their chance to assert their intellectual dominance at the return of the British Book Centers Board Game Evenings tonight. Held weekly on Friday nights, the event gives both board game lovers and those hoping to improve their English the chance to meet, greet and compete. Check out the centers VK page for more details.



Saturday, Sept. 6


Athletes will relish the chance to get the latest gear and try out something new at I Choose Sport, an annual event at Lenexpo forum that plans to welcome more than 30,000 people this week to the international exhibition center. Not only will visitors get to try their hand at various athletic endeavors but they will also be able to peruse equipment that can fulfill their dreams of becoming a champion.


Local KHL team SKA St. Petersburg open their season this evening at home against Lokomotiv Yarovslavl at the Ice Palace arena next to the Prospekt Bolshevikov metro station. See their website for a full schedule and available tickets.



Sunday, Sept. 7


Check out retro and antique cars at Fort Konstantin on Kronstadt Island in the Gulf of Finland at FORTuna, a yearly car festival that highlights the eccentricities of the Soviet automobile industry. A car race, contests and a stunt show will give visitors a chance to rev their engines.



Monday, Sept. 8


This evening marks the opening of the two-week ballet festival High Season at the Mikhailovsky Theater. Check the theaters website for more details about performances and featured dancers.



Tuesday, Sept. 9


Discuss the latest news and issues at the AmCham Hazardous Waste Management Roundtable this morning in the Tango Conference Hall of the Sokos Hotel Palace Bridge on Birzhevoy Pereulok. Starting at 9 a.m., planned topics include the Krasny Bor landfill and waste transportation between Russia and Finland.


Learn more about the citys modern architectural trends at the SPIBA Real Estate and Construction Committees meeting on the topic Contemporary Petersburg Style: What is It? Participants will get the chance to discuss whats in-demand with RBI Holdings Irina Petrova and Lubava Pryanikova, and the current state of the local real estate market. Please confirm your attendance by Sept. 5 through SPIBAs website if you wish to attend.



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