In comparison with 2014, when oil prices began to fall, today more Russian citizens are following the situation on the oil market, according to results of a public opinion poll by the Public Opinion Foundation. The majority of respondents share the view that the Russian economy is dependent on oil-and-gas prices; almost everybody admits there is a negative influence of the oil crisis on the country’s economy and personal incomes. People believe that oil prices are falling due to oversupply of oil and destabilization of politics.
However, experts believe that low oil prices are not the only problem of the Russian economy. According to Sergey Glazyev, academician of the Russian Academy of Sciences, the main factors in the reduction of inflation are scientific and technological progress, cost reduction, modernization of production and improvement of efficiency, and therefore investments. “Nevertheless, our monetary authorities are still guided by the primitive recipes of the Monetary Fund and try to ensure macroeconomic stability by raising interest rates. The drop in economic growth has become quite a predictable outcome of this policy, which ultimately led to the current crisis. At such interest rates, as you can see, they are prohibitively high. They are low in advanced countries, even negative in real terms, if we talk about refinancing rates,” the Academician says.
According to him, there is no need to talk about the competitiveness of our economy: “Our competitors draw the necessary credit resources without any restrictions. And in a situation where US sanctions have led to the fact that external sources of credit are closed to us, therefore cheaper sources of credit are closed, our monetary authorities do not create the cheapest sources, they do not replace external credits with internal ones, which has resulted in a contraction of the monetary base. We have lost 250 billion dollars in foreign loans and outflow of capital in the past two years. In the absence of mechanisms of substitution of foreign loans, this has led to a contraction of our monetary volume in real terms. And as a result, there is a deterioration in the quality of circulation of money, an increase in costs due to high interest rates, with a decrease in production.”
Glazyev thinks that the macroeconomy is uncontrollable today: “The monetary authorities are planning to compress the monetary base in real terms by almost 30%, taking into account the last year. And if the dependencies, which have worked until now, between money mass dynamics and the dynamics of production continue to be maintained, and they are likely to be maintained, we should expect a further deepening of the crisis with such a monetary policy. At the same time, there is a limit to the demonetization of the economy, after which disorder of monetary circulation begins. We have seen this in the 1990s. That is, the chaos will be increased with this approach, and there will be no economic growth to talk about.”
The expert is sure that such a monetary policy does not lead to the stabilization of the ruble exchange rate: “Of all the oil-dependent countries, only Russia has such fluctuations and devaluation of such a depth. Even countries that are much more dependent on oil exports than us have devalued their currency 3-4 times less than we did. At the same time, fluctuations continue, although there are no objective reasons for such a volatility of the ruble. Both in terms of availability of reserves for the ruble, and in terms of the ratio of the nominal exchange rate and purchasing power parity, and in terms of the dynamics of the trade balance, which remains positive.”
Glazyev also stresses that all this policy is still accompanied by an outflow of capital: “The offshorization of our economy plays a big role. The total amount of exported money today, what can be counted, about a trillion, half a trillion is the source of refinancing of investments, which return to the country under the guise of foreign investments. And this degree of offshorization emphasizes the previous idea of the uncontrollability of our current macroeconomic situation. The process of reproduction of capital is largely formed abroad. The economy is critically dependent on external sources of credit, and because of that, economic sanctions with the monetary policy that was conducted had such a negative impact. It was possible to avoid it. But the sanctions have blocked a major source of money in the Russian economy, it is the inflow of foreign loans and investments. All internal sources of money are much smaller. This is, first of all, the speculative supply of money through operations of currency and ruble repo. The only source for the real sector, refinancing under the non-marketable assets, amounts to no more than 10% of the credit issue. And when they were blocked by external credit flows we got such a collapse of the volume of money, in particular its credit component forming from abroad. And since measures to compensate for these negative factors were not taken, we have found ourselves in a crisis, but we have all the opportunities for sustainable growth.”