Experts say that rise in U.S. interest rate and oil exports threaten Russia's economy.Getty Images
The imminent rate hike by the Federal Reserve System (FRS) and the likely start of oil exports from the United States resulted in negative changes for Russia in the markets on Dec. 16, the centrist daily Nezavisimaya Gazeta reports. Meanwhile, the price of a barrel of Brent crude dipped to new lows because of the highly likely competition with American oil.
The FRS last raised its key interest rate on June 29, 2006. In 2007-2008, the regulator gradually reduced it until it reached its lowest level of 0-0.25 percent in December 2008. Low interest rates were supposed to stimulate production, to send money to the real sector of the economy and help the United States recover from the crisis. On Dec. 16, the Fed raised its benchmark rate to 0.5 percent.
Russia’s Central Bank head Elvira Nabiullina spoke earlier about how the U.S. Federal rate change could affect the Russian economy. According to her, the discrepancy between market expectations and the actual policy of the Federal Reserve to raise interest rates "could pose risks of capital outflows from emerging markets, which include Russia," and an increased volatility not only in this year, but also at least in the next year.
At the same time, experts surveyed by Nezavisimaya Gazeta assess the risks of the FRS raising rates for the Russian economy a little differently.
“The most significant risk to the economy of the Russian Federation will be the case if the rate rises quickly (i.e. at each subsequent meeting). It runs the risk of a further decline in oil prices and consequently the weakening of the ruble,” said the BCS's chief economist Vladimir Tikhomirov.
“The rate increase could lead to another round of devaluation up to the level of 72.5 rubles per dollar, and this is without additional pressure from oil,” said Artyom Deyev, head of AMarkets' analytical department.
On the whole, economists note, 2017 may become a more severe year for the Russian economy than 2016, because that is when the government will run out of its reserves.
The International Monetary Fund (IMF) ruled on the night of Dec. 17 that a $3 billion bond sold by Ukraine to Russia should be considered official sovereign debt, the business daily Kommersant reports. This means that it should not be subject to the terms of debt restructuring applicable to private creditors.
“For us, this does not change the situation. This changes the situation for the Ukrainian authorities, of course if they want it,” said Deputy Finance Minister Sergei Storchak, commenting on the IMF’s decision.
He explained that the Ukrainian authorities got an opportunity to review the list of debts to be restructured, which was approved this spring and which included Ukraine’s Eurobond bought by Russia.
Russia insists on the exclusion of the issue purchased by Russia from the restructuring program and on its repayment until Dec. 20 – otherwise, Ukraine will enter default as a borrower on Dec. 30.
Finance Minister Anton Siluanov has already said that the recognition of the status of debt "will strengthen Russia’s position in court,” and that the Russian Ministry of Finance is ready to consider the proposals of Ukraine “in the view of the IMF's decision.”
“We are ready to consider them. There are three days left. We have a plan of action. In the case of non-payment by Ukraine of its obligations, we will take measures to protect their interests,” he said.
The Ukrainian authorities, for their part, officially announced that they were hoping for continued funding from the IMF, “in spite of the position of Ukraine in relation to the 2015 Eurobond,” and were open to negotiations on the restructuring of the Eurobond bought by Russia.
The Ukrainian Ministry of Finance insists that non-payment of the debt to the Russian Federation will not trigger a default on new Eurobond issues.
Due to the sharp deterioration of relations with Turkey, Russia may begin to strengthen political relations with Greece, which is at loggerheads with Turkey, the internet newspaper Gazeta.ru suggests. This has potential, because the next year has been declared the year of cultural exchange between Russia and Greece.
The cultural events will start in January 2016. On the Russian side, an exhibition of the Bolshoi Theater’s costumes and scenery is planned, while the Greeks will bring to Moscow some jewelry from the Byzantine Museum of Ioannina, as well as unique icons from the Byzantine Museum in Athens.
Meanwhile, Secretary General of the Greek National Tourism Organization Dimitris Tryfonopoulos said that the government has decided to simplify the procedure for issuing visas to Russians.
However, according to Yury Kvashnin, a senior researcher of the Institute of World Economy and International Relations, "the Russians will not go in droves to look at the ancient treasures – because of the worsening economic situation in Russia itself."
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