Three Main Problems With The Russian Economy: Oil Prices, Sanctions & Lack of Reform

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Translated by Ollie Richardson for Fort Russ

4th January, 2016


The main factors restraining the Russian economy are the collapse in oil prices, Western sanctions and the lack of structural reforms. The head of Sberbank German Gref stated this in a conversation with The Financial Times.

According to Gref, because of the sanctions, which were imposed after the start of the crisis in Ukraine, the savings Bank experienced a sharp outflow of deposits. This was facilitated by the collapse of oil prices. However, later on, because of the crisis, customers began to choose larger and more reliable banks, from which demand for the services of Sberbank rose again.

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In the interview Gref also said that the EU banking sector should expect hard times because of the “strange” policy of the ECB.

“European banks will be in a very, very difficult period… the Banking system is experiencing the most dramatic period in its history. If you look to the future, we realize that it would also be quite difficult”, — said the head of Sberbank.

In late December, former Finance Minister Alexei Kudrin said that Russia has not yet passed the peak of the crisis. According to him, one of the main problems is the “sharp decline in oil prices”. If the price of oil will remain low for another half year or year, Russia will face “continued decline of the economy,” says Kudrin. “Thus we cannot say that the peak of the problems has passed”, — concluded the head of Committee of civil initiatives.

The President of Russia Vladimir Putin in late December urged the Russian government to prepare for a period of low prices for raw materials and key export products. He also admitted that “external constraints can be tightened”.

The head of state expressed the view that such difficulties should serve as “an incentive to improve the efficiency of the economy and social sphere”.

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