Russian President Vladimir Putin has sought to ease fears over his country’s economy, insisting that the dramatic fall in the ruble will stabilize.
Speaking at his end-of-year news conference, which lasted over three hours, Vladimir Putin blamed “outside factors” for the currency hitting an all-time low.
However, he admitted Russia’s central bank could have acted more swiftly.
Russia is on the verge of recession due to falling oil prices and sanctions over its role in the Ukraine crisis.
However, Vladimir Putin denied pursuing an “aggressive” foreign policy and accused the US and EU of conspiring to weaken Russia.
He accepted Russia had failed to diversify its economy for the past two decades and relied too heavily on its oil and gas exports.
But the president insisted the nation’s currency reserves were sufficient to keep the economy stable, saying the central bank should not “burn” its $419 billion reserves.
“I don’t believe you can call it a crisis – you can call it what you like,” he told a packed conference hall.
If the economic problems persisted, Vladimir Putin said, the government would have to “reduce social spending and future growth”.
He added: “Our economy will get out of this crisis. How long? Maybe two years, but after that, growth is inevitable.”
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Although the ruble strengthened on Thursday morning, it has taken a battering in recent days.
The currency’s collapse came after a drastic 6.5 percentage point rise in Russian interest rates to 17%.
Earlier this week, there were reports of Russians flocking to the shops to spend their cash before prices shoot back up. Many were said to be buying cars and home appliances.
Vladimir Putin estimated that Western sanctions, put in place after Russia annexed Crimea from Ukraine in March, had accounted for roughly 25-30% of the ruble’s troubles.
On Ukraine, he said he was hopeful the conflict could be solved through peace talks.
Vladimir Putin urged the Ukrainian government and pro-Russian rebels in the east of the country to conduct a quick “all for all” prisoner swap before Christmas.
Ukraine and the West accuse the Russian president of sending troops to fight with the rebels, but the Kremlin denies the allegations.
Vladimir Putin accused the US of hypocrisy, saying that Russia has just two military bases outside its borders while there are American bases “all over the world”.
Meanwhile, the EU approved further sanctions against Russia on December 18. They target investment in Crimea and oil and gas exploration in the Black Sea and come into force on Saturday.
“We are doing this because the EU has said the annexation [of Crimea] is illegal and what we’re doing is part of implementation of non-recognition of this policy by Russia,” EU spokeswoman Maja Kocijancic told reporters.
President Barack Obama is also expected to sign legislation this week authorizing new economic sanctions on Russia.
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The Russian ruble has regained some ground from yesterday’s all-time low, although trading remains edgy and volatile.
The currency opened 4% lower on December 17, but then edged up. By early afternoon, one US dollar bought 68 rubles, far fewer than the record low of 79 on December 16.
The ruble has been hit by worries over the Russian economy, which has been affected by cheaper oil and sanctions.
Russia’s Finance Ministry said the currency was “undervalued” and that it was intervening in the market.
It also gave details of the amount it spent on such action, saying it had spent almost $2 billion on December 15 in an attempt to stop the ruble sliding.
Deputy finance minister Alexei Moiseyev said Russia was going to sell foreign currency from its treasury accounts “as much as necessary and as long as necessary”.
The drastic 6.5 percentage point rise in Russian interest rates to 17% early on December 16 failed to halt the slide in the currency.
The rate rise, which was meant to strengthen the ruble, helped it to hit 58 to the dollar early on Tuesday but the rate then collapsed to a record low of 79.
There is not much more Russia can do to prop up its currency, which has only been allowed to move in line with the world’s currency markets in the past year.
Capital controls, where money is restricted from moving out of the country, are the main, final option.
Russian PM Dmitry Medvedev ruled that out. Speaking at an emergency meeting of ministers and industry leaders, he said he was confident that Moscow could contain the crisis: “Central bank and the government have worked out a package of measures to stabilize the situation. What we are seeing today is mainly emotional games.
“It is in our interests to bring order to the markets, no one gains from instability. But at the same time, there is no need for tough regulations, as used to happen in the past. It does not bring anything good – we shall use market tools.”
The ruble has lost more than half its value against the dollar this year, hit by Western sanctions and the fall in the oil price which have both weakened the Russian economy.
Russia’s economy is expected to shrink next year, although the amount by which it does is closely linked to the price of oil, with the economy rising or falling in line with that.
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Apple has announced it stops selling products online in Russia because the ruble’s value is too volatile for it to set prices.
The technology giant stopped sales of its iPhones, iPads and other products in Russia after a day in which the currency went into free-fall.
The ruble has lost more than 20% this week, despite a dramatic decision to raise interest rates from 10.5% to 17%.
Early on Wednesday, the ruble was down 5% with one dollar buying 71 rubles.
The currency all time low, set on December 17, saw one dollar buying as many as 79 rubles.
Apple last month increased its prices in Russia by 20% after the weakening ruble left products in Russia cheaper than in the rest of Europe.
Russia’s central bank said on December 17 it had spent almost $2 billion intervening in the currency market on December 15.
It has spent around $80 billion trying to prop up its ruble this year, but despite that, the currency has lost more than half its value against the dollar since January, with cheaper oil and Western sanctions over its stance over Ukraine the chief factors.
Both of these have weakened the Russian economy.
Russia’s central bank has pledged fresh further measures to try to stabilize its currency, with First Deputy Governor Sergei Shvetsov describing the situation as “critical”.
The ruble’s slide this week was prompted by fears that the US was considering a fresh set of sanctions against the country for its support for separatists in Ukraine.
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