Putin Addresses Russia Amid Economic Crisis – Voice of America

Posted: Thursday, December 18, 2014

President Vladimir Putin struck an optimistic chord at his end-of-year news conference Thursday, telling Russians the country’s economy will rebound and the ruble will stabilize, yet offering no new remedy in halting the deepening financial crisis.


Putin said the current crisis could last two years at most, but the economy could recover faster if external factors change for the better.


Speaking during an end-of-year news conference, he said the nation’s currency reserves are sufficient to keep the economy in stable condition.


Putin is under pressure to show he has a plan to fix the economy, which is heading into a recession in what one minister called “a perfect storm” of low oil prices, Western sanctions in the Ukraine crisis and global economic problems.


Diversify economy


The president said Russia must diversify its economy to reduce dependence on oil, its major export and a key source of state income, but he stuck largely to broad promises rather than going into details and announced no major new proposals.


“Of course, the current situation is caused by external factors first of all, but we also understand that we have not done many of those things we planned to do and we said we would do to diversify our economy over the past 20 years,” Putin said, adding that the central bank’s reaction was “adequate.”


Hinting at internal divisions, Putin also said earlier, more decisive action by the central bank, such as halting foreign exchange interventions to support the ruble sooner, might have made this week’s big interest rate rise unnecessary.


The bank increased its key lending rate by 6.5 percentage points to 17 percent on Tuesday, and has spent more than $80 billion trying to shore up the ruble this year, but to little avail.


The ruble hit an all-time low on Tuesday, prompting Russia’s central bank to reassure banks and financial companies that it would provide additional capital if necessary. At one point the currency plunged to 80 rubles to the dollar. The ruble has lost nearly 60 percent of its value against key Western currencies this year.


Market action


The ruble strengthened on Thursday morning ahead of Putin’s speech. But by midday, it was weaker, trading at 62 rubles to the dollar.


Putin also addressed the Ukraine crisis Thursday. He acknowledged that Western economic sanctions over Russia’s course on Ukraine was just one factor behind the Russian economic crisis.


But he also criticized NATO over its eastward expansion following the fall of the Berlin Wall and said Kyiv had been wrong to use forces against the separatists. 


Despite his tough anti-Western rhetoric, he said he wants Ukraine to remain one political entity and voiced hope that the crisis could be solved through peace talks, suggesting that Kyiv and the Russia-backed rebels in eastern Ukraine should conduct a prisoner swap before Christmas.


Russia has been hit by Western sanctions, put in place after Putin annexed Crimea from Ukraine in March.


Economy minister Alexei Ulyukayev told Vedomosti daily in an interview published Thursday that Russia’s economy was going through a “crisis” and conceded that there was no coherent plan on how to tackle it if oil prices do not rebound.


“I guess we found ourselves in a perfect storm, and I guess it’s not an accident. Because in some way we prepared this storm ourselves,” he said in an interview conducted Monday.


Opinion polls show Putin has high popularity ratings since annexing the Crimea peninsula from Ukraine in March, but the ruble’s decline and Russia’s slide toward recession could erode faith in Putin’s ability to provide financial stability.


Some material for this report came from Reuters, AFP and AP.

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