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Crimea Worsens Economic Crisis

Published: April 30, 2014 (Issue # 1808)


It is no simple task foreconomists tocalculate thecosts ofRussias current foreign policy course, thelosses resulting fromfrightened investors andcreditors andthe damage that sanctions will cause. Some claim that any lack ofenthusiasm forthe economy however justifiable is patently unpatriotic. Others hold just theopposite view, condemning any attempt topropose this or that economic policy given theposition inwhich Russia now finds itself.

Before seizing Crimea, thegovernment should have done more toreduce corruption andimprove theclimate forbusinesses andforeign investors. Theevents inCrimea andeastern Ukraine make both foreign anddomestic investors even more skittish. They also lower Russians faith inthe ruble andin Russian banks.

There is now aneven greater need toimprove theenvironment forbusiness andinvestors. Thequestions Russias leaders need toask themselves are: How can we give businesspeople more investment opportunities? How can we facilitate technology transfer given theworsening situation?

Under thecurrent circumstances, Russia must focus onachieving aradical reduction inthe bureaucracy forbusinesses bysimplifying all procedures. Forstarters, Moscow could simplify therules forobtaining aRussian visa andwaive theneed forcertification if imported products have already been certified inthe U.S. or theEuropean Union.

Instead, it seems that authorities are competing with each other tosee who can do themost harm tothe economy. One top Russian official proposed selling off thecountrys dollar andeuro reserves without explaining how they would be replaced. Perhaps he would prefer theyen andyuan. But aquick look atthe currencies preferred bythe central banks ofother countries is enough toshow that they are far less reliable. Maybe he feels Russia should keep its money ingold.

Forevery difficult andcomplex situation, leaders should respond with better andmore responsible economic policy andnot just make matters worse.

Konstantin Sonin, acolumnist forVedomosti, is Professor ofEconomics andVice Rector atthe Higher School ofEconomics inMoscow.





 


ALL ABOUT TOWN

Friday, Jan. 30 through Wednesday, Feb. 4



A retrospective of the films of Roman Polanski starts today at Loft-Project Etagi, 74 Ligovsky Prospekt, with a screening of Repulsion at 7 p.m. and Rosemarys Baby at 9:15 p.m. The series runs through Feb. 4 and will include Polanski's eminently creepy The Tenant, the cult comedy The Fearless Vampire Killers and Cul-de-sac among others. Tickets are 150-200 rubles and the complete schedule is available at www.vk.com/artpokaz/



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