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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

Thursday, Nov. 27


The Customs and Transportation Committee for AmCham meets this morning at 9 a.m. in their office on Ulitsa Yakubovicha.


Tickets are still available for local KHL team SKA St. Petersburgs showdown with Siberian club Metallurg Novokuznetsk tonight at 7:30 p.m. in the Ice Palace outside the Prospekt Bolshevikov metro station. Tickets can be purchased on the teams website, at the arena box office or in their merchandise store on Nevsky Prospekt.


Celebrate one of Russian literatures most tragic figures during Blok Days, a two-day celebration of the 134th anniversary of the poets birthday. The tragic tenors work, which led to writer Maxim Gorky to hail him as Russias greatest living poet before his death in 1921, will be recited and meetings and discussions about his contributions to the Silver Age of literature in St. Petersburg will be discussed in the confines of his former residence.



Friday, Nov. 28


Join table game aficionados at the British Book Centers Board Game Evening. Held every Friday at 5 p.m., aficionados and amateurs alike can come take part in a variety of different games that test ones intellect and cunning.



Saturday, Nov. 29


Cats, dogs, birds, rodents and reptiles are just some of the things that will walk and crawl at Lenexpo convention center this weekend as part of Zooshow, a two-day exhibition featuring not only mans best friends but a four-legged fashion show, as well as a food fair that will help pet owners find out more about which kibbles are best for their hungry pets.



Sunday, Nov. 30


Remember the 75th anniversary of the beginning of the Russo-Finnish war in 1939 during todays reenactment titled Winter War: How it Was. More than 200 people will take part in recreating the opening salvoes of the battle for the north in Kamenka, a small village situated between Vyborg and St. Petersburg, using authentic equipment and vintage vehicles from the era. The faux battle begins at 2 p.m.



Monday, Dec. 1


Serbia filmmaker Emir Kusturica is the featured guest this evening at the Lensovet Palace of Culture the Petrograd Side. Fans of the director will get the chance to watch his movie Black Cat, White Cat, as well as ask questions about his award-winning filmography. Tickets for the event, which starts at 7 p.m., start at 2,000 rubles ($42.50).



Tuesday, Dec. 2


Today is the final day of Takoy Festival, a three-week program of plays based on the works of Dostoevsky, Remarque and other famed European writers, whose work is transcribed for theatrical performances. Tonights festival finale is Fathers and Sons, a two-act drama staged by the Novosibirsk Academic Drama Theater based on Turgenevs classic about familial relations.



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