The threat of financial rupture and the economy of the Russian Federation: development scenarios

Crisis in Russia

The threat of financial rupture and the economy of the Russian Federation: development scenarios

Will high oil prices protect Russia??

President Obama concluded a meeting with Democratic and Republican leaders from both houses of Congress. The parties made another attempt to find a compromise, trying to avoid a “financial cliff” – increasing taxes while reducing budget expenditures. If these attempts end in failure, then the consequences may affect as early as January next year..

To prevent a “cliff”, the relevant decisions must be approved by both houses of Congress and signed before the New Year..

How will this or that scenario in the United States affect the Russian economy? Experts disagree. Judging by the available forecasts, both a serious crisis and continued economic growth are possible..

“The situation will not get out of control”

Valery Garbuzov, Deputy Director of the Institute for the USA and Canada Studies of the Russian Academy of Sciences, is convinced that the parties will agree before the situation gets out of control. This is not the first time that negotiations between Republicans and Democrats are on the verge of collapse. In the past, however, opponents have always come to a compromise, says the analyst. “In this situation, the Republicans must make concessions that relate to the financing of social programs, and Obama, in turn, must reduce the tax on large fortunes,” Valery Garbuzov told the Voice of America correspondent.

True, Garbuzov makes a reservation, “if the parties do not agree, then many scenarios can be thought up. But immediately after this there is another question – an increase in the limits of the US public debt, i.e. increased debt ceiling. There will be difficult negotiations on this issue “.

However, the expert notes, “the problems associated with the increase in public debt are a constant companion of the United States.”.

“America will plunge the world into a global depression”

Director of the Institute of Globalization Problems Mikhail Delyagin shares Garbuzov’s opinion only partially. Answering the questions of the “Voice of America”, he also noted two problems – the “financial cliff” and the increase in the national debt limit. However, the forecast was formulated more pessimistic.

The threat of financial rupture and the economy of the Russian Federation: development scenarios

“If at least one of these problems is not resolved by the end of January,” said Mikhail Delyagin, “America will tear the world into a global depression, which will be even worse than the depression in the late 1920s.”.

Such a development of events will affect, according to Delyagin, the situation in Russia. “Reducing oil prices to, for example, $ 60 per barrel for Russia is a shot in the head from a grenade launcher,” the analyst said..

“At the same time,” stressed Delyagin, “you need to understand that the reserve that our management boasts is almost all invested in securities, which will be devalued in the global depression. For us, this will be a more significant disaster than for the United States, which will simply experience some inconvenience. They will remember 2008, we – 1917 “.

“Oil prices will remain high”

Chris Weafer, an analyst at Sberbank Investment Research, believes, however, that in the event of a recession in the United States, Russia will be protected by high oil prices..

In an interview with Voice of America, Weafer recalled that direct trade between the United States and Russia is not large. However, according to him, “Russia could suffer from the consequences that could be in the global economy if the world’s largest economy falls into recession.”.
“It’s not entirely correct to say that Russia would be an immediate victim of the US recession,” Weafer said, “but we will certainly suffer an indirect blow.”.

According to Weafer, the most severe consequences of the negative development of events may be for China. However, Russia cannot but feel the consequences of the deteriorating situation in China. We are talking, in particular, about a decrease in demand for oil and metals. “This,” Weafer continues, “will reduce export revenues, which represent a significant portion of the overall budget revenues. Budget tightening will hinder the government’s ability to stimulate domestic growth. “.

At the same time, the analyst also warns against hasty conclusions. “Oil prices,” he says, “will remain high over the next year. In addition, the Bank of Russia is now beginning to take a much more flexible approach to fiscal policy. They have learned the lessons of 2008-2009 and do not want to repeat mistakes. ” Therefore, Weafer emphasized, even in the event of economic problems in the United States, we still expect 2% economic growth in 2013. “.

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