Enjoying ad-free content?
Since July 1, 2024, we have disabled all ads to improve your reading experience.
This commitment costs us $10,000 a month. Your support can help us fill the gap.
Support us
Our journalism is banned in Russia. We need your help to keep providing you with the truth.

A Small Victory for Liberals: With Oil Prices Rising, Russia Starts Saving


First Deputy Prime Minister Igor Shuvalov announced that the rising price of oil has made it possible for “us” to resume buying currency on the market. By “us” he apparently meant the Finance Ministry and, perhaps, the Central Bank. He made the statement in order to reduce the volatility of the ruble as the Finance Ministry, Economic Development Ministry, and Central Bank develop a plan to lower long-term volatility. Of course, Shuvalov’s remarks caused a drop in the value of the ruble.

By 1 pm on Thursday, the euro rate had gained 72 kopeks and the dollar 47, returning the rate to 60 rubles to the dollar – a benchmark of psychological importance to the government and to which, as Finance Minister Anton Siluanov explains, Russian industry is accustomed. However, a short time later, the ruble resumed its growth.

It is not immediately clear why the 60-ruble benchmark is so important for financial authorities.

What is important is that Siluanov, the key economics official, repeated what his colleagues had earlier said – namely, that the additional revenues the country will receive from higher oil prices will be added to reserves. (The budget is based on a price of $40 per barrel for Urals crude, whereas the market price surpassed $52 per barrel this month.) Siluanov had said on the eve of that statement that the Kremlin supported the government’s decision not to spend those extra oil and gas revenues in 2017 until new budget parameters were developed. Given current conditions, it makes good strategic sense to increase reserves rather than expenses.

According to Alexandra Suslina of the Expert Economic Group, there is no point hoping that prices will climb significantly higher or remain high because the global picture has not changed and the economy is in recession. She agreed that it is better to augment reserves than to increase expenses – especially expenses associated with typical election campaign promises of higher benefits and pensions.

This is something of a victory for the “liberals” in the government.

Without any reasons for optimism other than a rise in oil prices and a very illusive hope that the West will lift its sanctions, the government reasons that it will probably need that money it has set aside for a rainy day sooner than later. Forecasts indicate that the current reserve fund will be depleted this year, after which leaders will be forced to draw from the National Welfare Fund.

The views expressed in opinion pieces do not necessarily reflect the position of The Moscow Times.

… we have a small favor to ask. As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

paiment methods
Not ready to support today?
Remind me later.

Read more