Comment: The reader is advised to read Paul Craig Roberts excellent analysis of Russia's actual economic condition before wading into the mire of disinformation below.


Russian Central Bank
© BloombergRussian Central Bank
The Central Bank of Russia has said it will provide £343m of support to one of the country's more troubled banks, as analysts warn of a wave of defaults in the sector.

Russia is facing a "full-blown economic crisis", a former finance minister has warned, as the country is forced to take emergency financial measures.

The economy has been battered by a wave of sanctions as a result of tensions over Ukraine, geopolitical uncertainty, and falling oil prices.

Alexei Kudrin, a former finance minister and once considered an ally of President Vladimir Putin, said: "Today I can say that we have entered or are currently entering a full-blown economic crisis. Next year we will feel it in full force."

Analysts have warned that the Russian economy will not improve in the long-term unless either the oil price or relations over Ukraine improve.


Comment: The price of oil may be low, but Russia does not lack for customers. China and India, both massive markets, are lining up for reliable Russian energy. "Improved relations" with Ukraine doesn't even need to enter into the picture


Speaking at a press conference in Moscow, Mr Kudrin went on to say: "As for what the President and government must do now, the most important factor is the normalisation of Russia's relations with its business partners, above all in Europe, the US and other countries".


Comment: Alexei Kudrin is an interesting fellow. On the one hand, he shepherded Russia's finances to the point where they have some of the lowest debt levels in the world. On the other hand, he presided over the looting of Russia's industries under Boris Yeltsin, supports a level of privatisation that is unacceptable to the current government, and believes that all foreign NGOs should be able to operate freely in Russia. A member of the so-called 'fifth column' mentioned by Putin?


The comments came as the Russian economic crisis took a fresh turn, with the central bank stepping in to bail out a mid-sized lender.


Comment: The CBR is well-apprised of the state of Russia's banks. They have plenty of cash reserves to handle any bumps in the road, not to mention huge stockpiles of gold.


The Central Bank of Russia (CBR) said that a plan to loan Trust bank an amount of up to 30bn roubles (£343m) had been approved, while analysts warned that Russia's banking sector had become particularly vulnerable.

Anna Stupnytska, an economist at Fidelity Solutions, said that "the risk of a sovereign default is low, it's the corporate sector where the main vulnerabilities lie, and banking in particular".

"Due to sanctions, companies cannot refinance their debt as access to international markets has been essentially cut off", she added.


Comment: See above.


Trust bank has run a series of advertisements featuring actor Bruce Willis in Russia, along with the quote: "When I need money, I just take it".

A government agency which provides deposit insurance will "hold a complex assessment of the bank's financial standing in order to determine further financial resolution measures", according to a CBR statement.

Russian authorities also moved to reintroduce grain industry protections, stating that the government would develop proposals to control exports within 24 hours.

Dmitry Medvedev, Russia's Prime Minister, said: "We had a good harvest but at the same time, due to the volatility of the ruble, prices are very advantageous and exports have risen considerably".

As the rouble has crumbled over the year, the price of imported goods has risen, putting pressure on Russian budgets.


Comment: Is the slide of the rouble part of a larger strategy?

The CBR now expects that the resultant inflation will reach double digits by the end of the year.

Controls on grain may in turn help to keep a lid on increases in bread prices, although economists warned that shortages may follow.

Meanwhile, US regulators denied clearance to an acquisition by Rosneft, a majority state-owned oil company, putting brakes on its hopes for global expansion.

The decision prevented the purchase of a Morgan Stanley owned oil trading business by the Russian corporation.

"Having invested substantial efforts in the deal, the parties regret that it could not be completed", the two said in a statement.

Rosneft has suffered losses since the Ukraine crisis began, losing out on a deal with ExxonMobil to develop offshore Arctic drilling as a result of sanctions.


Comment: A temporary setback at best. Putin has correctly welcomed these turns of events as opportunities to increase his country's self-reliance. Russians are proud, hard-working, ingenious people who will go on to develop whatever technologies they need in whatever field they are needed.


Despite the assorted storm clouds assembled over the Russian economy, the country's currency rallied somewhat yesterday.

At its high against the dollar, the greenback purchased a mere 54 roubles, compared with more than 79 last Tuesday.