Former Russian Finance Minister Aleksei Kudrin has warned that the country’s current financial crisis is now deteriorating into a "full-fledged economic crisis" that will be sharply felt across Russia during 2015.
Kudrin, who now heads a Russian think tank called the Civic Initiatives Committee, told the Interfax news agency on December 22 that Russia’s most optimistic forecast is a 2 percent decline of gross domestic product during 2015.
But he said that forecast is based on the global oil price rising to $80 per barrel.
Kudrin said if oil prices remain at the current $60 per barrel level, Russia’s GDP will decline 4 percent or more next year.
Kudrin concluded: “I can say today that we have entered or are entering a genuine, full-fledged economic crisis. We will feel it in full measure next year.”
Meanwhile, Russia’s Central Bank on December 22 announced that it is bailing out a midsized Moscow-based retail bank to save it from insolvency.
Trust Bank has become the first financial casualty of Russia’s currency crisis and the latest sign that the depreciating value of the ruble is straining the country’s banking system.
The Central Bank said it will issue a loan to Trust Bank for 30 billion rubles, or about $500 million at the current exchange rate, to help the bank continue normal operations.
It also will place Trust Bank under its own supervision until an investor is found.
Major Russian banks said they had no interest in acquiring Trust Bank, which lists assets of about $5 billion.
On the balance sheets of a retail bank, the loans that the institution has given out to creditors are listed as assets.
That is why lending institutions are hit hard by devaluation of a currency like the ruble, which has lost nearly half of its value against the U.S. dollar during 2014.
When the rubles that creditors pay back to the bank are worth less than the original loan plus its interest rate, the bank’s assets generate losses rather than profits -- and the bank technically can become insolvent.
Russian President Vladimir Putin on December 22 acknowledged that the Russian economy is facing “uneasy times.”
But Putin vowed that Russia has enough resources to overcome the problems the country now faces in the wake of fallen global oil prices and international sanctions over Russia’s role in the Ukrainian crisis.
Putin voiced hope that oil prices will rise again soon and that a key priority would be to fight corruption.
Putin said: “The best expression of patriotism is not to steal.”