How Don Trump Gave the Russian Economy a Leg Up

Brent-Crude

Buying Dollars No Way to Stop: Russian Finance Ministry Purchasing Foreign Currency at Record Pace in Aftermath of Putin’s Announcements
Alexander Pirozhkov
Delovoi Peterburg
May 10, 2018

As of today, the Russian Finance Ministry will be buying dollars at a record pace over the next four weeks. It will spend a total of ₽323 billion on these deals during the period. Since the start of the year, the Finance Ministry has spent nearly ₽3 billion on replenishing its foreign currency reserves. If we take into last year’s transactions, it has spent a total of ₽1.8 trillion.

High oil prices have made it possible to buy up foreign currency aggressively. This week, the price of Brent crude jumped above $76 a barrel, its highest price in three and a half years. Russian Urals crude, which is traded at a discount of several percentage points to Brent, exceeded $70 a barrel. The price rise has continued for several months, producing a huge surplus in the federal budget (₽344.35 billion in the first quarter of 2018), since budget revenues had been planned based on a Urals price of $40 a barrel. Thanks to favorable trends in extractive resources markets, both President Putin and Prime Minister Medvedev cheerfully announced earlier this week that finding an additional ₽8 trillion to implement the president’s so-called May decree would not be a problem.

In turn, oil prices have been conquering new heights not only due to the efforts of OPEC and the countries allied to it. Quoted prices for black gold flew up an additional five to seven dollars thanks to statements by US President Donald Trump, who has been trying to dissolve the nuclear deal with Iran while blaming OPEC for high oil prices on his Twitter acccount for appearance’s sake. The US’s exit from the nuclear deal means sanctions cancelled under the previous US leader, Barack Obama, would be reintroduced against Iran, thus removing from the market, according to various estimates, 500,000 to 700,000 barrels of Iranian oil a day.

While Trump has been bending over backwards to give the Russian economy a leg up, Putin has spoken of the need to “untie” it from the US dollar in order to boost economic sovereignty. Perhaps these are mere words, not backed by real intentions, especially since they are at odds with the Finance Ministry’s actions. However, Iran itself earlier took certain steps in the same direction as it faced the threat of renewed sanctions. There is a risk the example of our Middle Eastern neighbor will prove contagious.

Translated by the Russian Reader. Image courtesy of Business Eye

Dmitry Gudkov: Making Everyone an Accomplice in Their Crime(a)

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Samples of the newly minted 200- and 2,000 Russian ruble notes. The 200-ruble note contains images from occupied Crimea.

Dmitry Gudkov
Facebook
October 12, 2017

There was an awkward moment when one of the first questions put to the head of the Russian Central Bank at the press conference on the roll-out of two new banknotes was a question about Crimea.

“You’ve put pictures of Crimea on the 200-ruble note. Aren’t you afraid it will affect the ruble’s [value]?”

Elvira Nabiullina had to talk about the gold and foreign currency reserves and “the state’s might,” for that was the mildest way of putting it.

Yes, yes, the reserves are particularly relevant in this instance. The Central Bank has been feverishly buying up gold for good reason: in case of new sanctions.

The rationale followed by the Russian authorities is clear. They have to implicate everyone in their Crimean adventure, whether they have traveled there or not, whether they have attended a pro-Putin rally or not, whether they have voted or not. There will be no getting away from the 200-ruble banknote. However, it is right that the first people who blush over it should be officials—officials who understand the whole thing and do not approve of it, but who have tacitly consented to it by saying nothing.

Shame, however is not smoke. It has not made anyone blind, but has only left their faces slightly reddened.

First, money was removed from people’s wallets to subsidize Crimea (you do remember what funded pensions were spent on, don’t you?), but now little pictures of Crimea have been put back into people’s wallets instead of money. We can roughly describe the entire Russian economy this way. The government takes our money and gives it back to us in the shape of TV presenter and Rossiya Segodnya News Agency director Dmitry Kiselyov, driving across an uncompleted bridge to his Koktebel estate.

Dmitry Gudkov is a former Russian MP who abstained from voting for the resolution approving Putin’s occupation of Crimea in 2014. Translated by the Russian Reader. Thanks to Irina Shevelenko for the heads-up