Crimea and Russia's finances

By Vestnik Kavkaza

The Russian ruble will be officially launched in the territory of Crimea on March 24th. At the moment the ruble exchange rate is growing in Crimean exchange offices. In Russia the ruble is strengthening in the context of reduction of geopolitical risks.

However, yesterday the USA decided to extend the list of Russian officials against whom strict sanctions are launched. 20 people have been included on the list, including the head of the presidential administration Sergei Ivanov, his deputy Alexei Gromov, the State Duma chairman Sergei Naryshkin, the leader of A Just Russia Sergei Mironov, businessmen Arkady and Boris Rotenberg, businessman Yuri Kovalchuk, the owner of Volga Group Gennady Timchenko and the head of Russian Railways Vladimir Yakunin. The US President stated that sanctions were being launched against “organizations which provide material support to the Russian government”, i.e. the bank ‘Rossiya’. Barack Obama also signed an order on possible sanctions against key sectors of the Russian economy. Whether the sanctions will affect ordinary citizens of Russia is not clear.

Oleg Kazakovtsev, a member of the Federation Council Committee on Budgets and Financial Markets, says that people are only interested in one type of question: “If I have certain savings, will these savings remain? What should I do with them? How will I get my salary? Will the Central Bank fight inflation? These questions are major. People are trying to protect what they have saved. If we look at the market today as a whole, we'll see that there are very few mechanisms with which people can temporarily invest their savings: 80% are accounted for in bank deposits, some of them are accounted for in currencies, but people have generally taken the process of de-dollarization - in 1998 as well as in 2013 - rather calmly. There is another mechanism - through buying property, the only given document is a certificate of ownership and those who are able to still spend their money on real estate. The stock market for the majority is in fact unavailable. We have about 1 million citizens who own shares or are somehow involved in it. In comparison, in America more than 50 million people purchase shares, invest, try to earn something and so on,” Kazakovtsev says.

He thinks it is necessary for the Central Bank to adopt a more flexible policy. “Unfortunately, the policy carried out by the CB of revoking licenses is a relevant measure, but nevertheless every week licenses of regional banks are suspended. This creates an additional negative reaction among depositors. Not all the information reaches people. This all has its impact, and people are trying to purchase foreign currency. There is speculative demand. In 1998, for example, a threshold was introduced for commercial banks - 15%, that is, the addition to the currency price could not be higher than 15%. Now, when people come to the exchange office, they find out that either there is no currency or that some banks are trying to raise the price. As a result, the difference between the rate of the CB and the sale price in exchange offices is quite significant, which causes unexpected interest. I believe that today the Central Bank conducts audits and has resources. The issue is that, if there are doubts, let's make formal requests.”