Pi Attitude Zone: Conformity & Stability

Rouble Trouble

The euphoria in Russia in the wake of the Sochi Winter Olympics had a pretty short sell-by date.  Have the games, and Russia’s dominance of the medal rankings, done much lasting good to the national mood?  Are there signs of a “Russian Renaissance”?

Probably not.  First, a fifty billion dollar invoice for the Games has fallen due, squeezing the national funds available for such non-luxuries as education, public services and healthcare.  Sochi’s Olympic Park could now fall into debt-hobbled disrepair while the tight-knit financing group that built it runs away with the profit.

Second, the falling value of the Rouble – it’s down 20% in two years, and has reached a four-year low against the US dollar – is hitting the country hard.  The currency is even at record lows against the battered Euro.  This is largely because the market for Russia’s main export of gas and petrochemicals has fallen in value, making the price of imported goods much harder to afford.  Middle-class Russians have become used to improving their lives with food, fashions, smartphones, tablets and a wealth of other foreign-made goods.  Their prices are suddenly climbing steeply, and look set to rise still further.  So too is the cost of traveling abroad, an increasingly desirable escape for those fed up with the day-to-day strictures of domestic Russian politics.  

What’s the reaction of those in power?  You guessed:  there is “absolutely nothing wrong”.  Finance minister Anton Siluanov dismissed the idea of another Rouble collapse with the insouciant observation that “There is no problem.  The idea is to make the Rouble flexible, not to artificially support it as we did in the past.”  Specifically, the Russian Central Bank policy has been withdrawing its support for the currency, and allowing it to float down to its natural value.  “Float”, however, seems a less accurate choice of word than “tumble”.

After getting used to 8 percent annual economic growth, buoyed up on a sea of high-priced petroleum and gas, Russians are now staring at the stark reality of shrinkage to 1.5% a year or less.  Most are pulling wry faces, shrugging their shoulders, and resigning themselves once again to tightened belts and continuing work long into their old age.

Except, of course, for those now planning to live the rest of their lives somewhere other than Russia...


Zone: Conformity & Stability Country: Asia / Pacific Product – Other