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Russian President Vladimir Putin speaks during his annual news conference in Moscow. Photo: AP
President Vladimir Putin said on Thursday Russia’s economy would rebound after the rouble’s collapse against the dollar but warned that it could take two years for the country to emerge from crisis.
Under pressure to show he has a plan to pull Russia out of crisis at his end-of-year news conference, Putin supported the actions of the central bank and government in a crisis he blamed on external factors but said further measures would be required.
Russia’s economy is heading into recession in what one minister called a “perfect storm” of low oil prices, Western sanctions in the Ukraine crisis and global economic problems. The rouble is down 46 per cent against the dollar this year.
“If the situation develops unfavourably, we will have to amend our plans. Beyond doubt, we will have to cut some spending. But a positive turn and emergence from the current situation are unavoidable,” Putin said.
“The growth of the global economy will continue and our economy will rebound from the current situation.”
He said Russia must diversify its economy to reduce dependence on oil, its major export and a key source of state income and a recovery could start at some point next year.
The rouble was more than 2 per cent weaker on the day, despite central bank action to prop up the currency and around 45 per cent down against the dollar this year.
Putin had been silent as the currency collapsed this week before recovering some ground.
A prominent opponent, former Prime Minister Mikhail Kasyanov, said the crisis showed Putin had mismanaged the economy and that he should organise free elections to quietly end his almost 15-year domination of Russia.
“Russia is going into decline,” Kasyanov said in an interview late on Wednesday, suggesting Putin should accept that “he needs an exit strategy” to leave power.
Economy Minister Alexei Ulyukayev said in a newspaper interview the Western sanctions were likely to last “a very long time” and Russia was paying the price for failing to carry out structural reforms, describing events as “the perfect storm”.
“When a US law is passed it is very hard to change it afterwards - looks like it will be in place for decades,” Ulyukayev said, referring to US moves on sanctions.
Opinion polls show Putin has sky-high popularity ratings since annexing the Crimea peninsula from Ukraine in March, but the rouble’s decline and Russia’s slide towards recession could erode faith in Putin’s ability to provide financial stability.
A 6.5 percentage point increase in the key lending rate to 17 per cent failed to prop the rouble up on Tuesday. Russia has also spent more than US$80 billion this year trying to shore it up. Putin failed in a state-of-the-nation address on December 4 to offer any big ideas to turn around the economy.
His annual news conference and phone-in, shown live on television, is usually a marathon performance that can last more than four hours.
The European Union and the United States have imposed several rounds of sanctions on Moscow over the seizure of Crimea and because of its backing for pro-Russian separatists in a conflict that has killed more than 4,700 people.
EU and US officials say they have seen some positive signs from recent comments by Russian officials on Ukraine but want Moscow to do more to resolve the crisis.
Putin says Russia economy will be cured, offers no remedy
By Timothy Heritage and Alexei Anishchuk
MOSCOW Thu Dec 18, 2014 1:02pm EST
Russian President Vladimir Putin speaks during his annual end-of-year news conference in Moscow, December 18, 2014. REUTERS-Maxim Zmeyev
(Reuters) - President Vladimir Putin assured Russians on Thursday that the economy would rebound after the ruble's dramatic slide this year but offered no remedy for a deepening financial crisis.
Defiant and confident at a three-hour news conference, Putin blamed the economic problems on external factors and said the crisis over Ukraine was caused by the West, which he accused of building a "virtual" Berlin Wall to contain Russia.
At times sneering, at others cracking jokes, he ignored pressure to say how he will fix an economy facing what his economy minister calls a "perfect storm" of low oil prices, Western sanctions over Ukraine and global financial problems.
The rouble has fallen about 45 percent against the dollar this year, and suffered particularly steep falls on Monday and Tuesday, but Putin refused to call it a crisis and said it would eventually rise again.
"If the situation develops unfavorably, we will have to amend our plans. Beyond doubt, we will have to cut some (spending). But a positive turn and emergence from the current situation are inevitable," Putin said in comments to a packed conference center that were broadcast live to the nation.
Although he said the recovery might take two years, much will depend on how long the West maintains sanctions on Russia over its role in the Ukraine crisis.
European Union diplomats said the 28-nation bloc would ban investment in Crimea from Saturday over Russia's annexation of the Black Sea peninsula and President Barack Obama is set to sign legislation authorizing new U.S. sanctions.
But Putin showed no sign of heeding a call by EU foreign policy chief Federica Mogherini for "a radical change in attitude toward the rest of the world and to switch to a cooperative mode".
Sitting at a big desk in front of two large screens showing close-ups of his face, a white mug with a presidential crest on beside him, Putin appeared mainly intent on showing Russians he is in command and will not kow-tow to the West.
DIVERSIFICATION PLEDGE
The former KGB spy said Russia must diversify its economy to reduce dependence on oil, its major export and a key source of state income, but he gave no details and has said many times during 15 years in power that he will do this.
The rouble slipped as he spoke, and was about 2 percent weaker against the dollar on the day. The central 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 rouble this year, but to little avail.
Although Putin said the central bank and government had acted "adequately", he chided the bank for not halting foreign exchange interventions sooner, suggesting more decisive action might have made this week's big rate rise unnecessary.
"All this implies pretty big divisions within the administration as to how to react to the crisis and pressure on the rouble," said Timothy Ash, head of emerging market research at Standard Bank in London, adding that heads could roll.
Neil Shearing, chief emerging markets economist at Capital Economics in London, said Putin signaled no change of policy and capital controls remained "a measure of last resort".
"Whatever happens, a deep recession now looms," he said.
Putin's popularity has soared over the annexation of Crimea but the ruble's decline could erode faith in his ability to provide financial stability, an important source of his support.
An opponent, former Prime Minister Mikhail Kasyanov, said problems would mount as prices are expected to surge next year and Putin would need "an exit strategy" to leave power.
But Putin said he felt the "support of the Russian people", though he had not decided yet whether to seek a new six-year term in an election due in 2018.
Asked about Ukraine, where Russia has irked the West by backing pro-Russian separatists fighting in two eastern regions, Putin said Moscow wanted a political resolution to a conflict that has killed 4,700 people.
He also called for "political unity", suggesting he does not intend to annex the regions that have rebelled, and avoided calling them "New Russia", a phrase he has used in the past.
But he blamed NATO for the worst relations between Moscow and the West in decades.
"Didn't they tell us after the collapse of the Berlin Wall that NATO would not expand eastwards? But it happened immediately. Two waves of expansion. Is that not a wall? ... It's a virtual wall," he said.
(Additional reporting by Moscow newsroom; Editing by Giles Elgood)
