Date :Monday, February 2nd, 2015 | Time : 14:53 |ID: 10061 | Print Details Plans to Bolster Its Economy, but Experts Scoff

SHAFAQNA (International Shia News Association)- With oil prices down more than 50 percent in the past year and still falling, the ruble having lost more than half its value, a recession looming and the country already dipping into its rainy-day funds, the Russian economy is in a race against time. But one would be hard pressed to grasp the depth of the troubles from the Kremlin’s prescriptions.

After Anton Siluanov, the finance minister, laid out the government’s long-promised “anti-crisis” package in a live broadcast on state television last week, economists unanimously dismissed as inadequate his laundry list of half-measures and a vague promise of a 10 percent budget cut.

“That plan is nonsense,” the Russian oligarch Aleksandr Y. Lebedev said in an interview, describing it as throwing away money to rescue some of Russia’s worst companies. “Lots of words and little specific.”

Yet a wide array of business owners, economists and former senior government officials said in interviews that they expected the Kremlin to react to the crisis the way it had in 2008, the last time it faced a precipitous decline in oil prices — with disaster management, but no fundamental changes.

“They are trying to get by, manage it strategically and hope that oil prices rise, hope they can make a few adjustments and it will all go away,” said Kenneth S. Rogoff, an economics professor at Harvard University who recently attended a high-level economics conference in Moscow. “There is no appetite for fundamental reform. They are just going to wait.”

The Damoclean sword hanging over the economy is whether $385 billion in government reserves will run dry before oil prices rise. Mr. Rogoff, a former chief economist for the International Monetary Fund, noted that governments habitually underestimate how fast they will go through their financial reserves when they race to bail out banks, save major state corporations and douse flames throughout an ailing economy.

Last year, for example, the Central Bank of Russia said it had shelled out more than $80 billion to shore up the value of the ruble on currency markets. “If oil prices stay low, under $70 per barrel, they are going to run out of money sooner rather than later,” Mr. Rogoff said.

In 2008, oil prices quickly rebounded, as the effects of the financial crisis began to fade. But this time is likely to be different, energy experts say, and it may take years for prices to reach former levels. Russia, they say, is simply not prepared — or perhaps is unable — to take the measures needed to stimulate economic growth to make up for lost oil revenue.

Measures detailed in the plan or pledged earlier include more than $22 billion to shore up banks and major state companies, including roughly $8 billion from the rainy-day Russian National Wealth Fund.

The plan protected two of Mr. Putin’s most important constituencies — older Russians and the security establishment. It earmarked more than $2.7 billion to peg pensions closer to the inflation rate, which mushroomed to 11.4 percent last year and is expected to be at least as high in 2015. No cuts were announced in military spending.

The government appropriated roughly $700 million for agricultural aid. That is meant to help Russian farmers increase production, because prices soared after the Kremlin barred a host of food imports from the West in retaliation for economic sanctions imposed by the European Union and the United States over the annexation of Crimea and Mr. Putin’s actions in eastern Ukraine. Food prices over all climbed more than 15 percent last year, with some staples like sugar up 40 percent.

Even members of Parliament complained last week that a bowl of porridge in their cafeteria had jumped to 53 rubles, from 20 last year.

Russia’s economy is expected to contract at least 4 percent in 2015. While the government holds very little foreign debt, private companies, including some at the very core of the state-dominated economy, have more than $100 billion in loans coming due this year. Most of that is owed to Western banks and will be hard to refinance because of economic sanctions.

The Kremlin’s response combines confidence that oil prices will rebound soon with official bravado that Russians will endure any hardship, including eating less, for the motherland.

The first part of the anti-crisis plan is also aimed at supporting strategic targets like exports and high-tech manufacturing. But no specific steps were included.

“You never hear the details of what structural change means,” said Konstantin V. Remchukov, the editor in chief of Nezavisimaya Gazeta and an economics professor. It is not discussed “at any level,” he added.

Fighting between the conservative, nationalistic security establishment surrounding Mr. Putin and his liberal economic advisers has raged for years. Mr. Putin’s choices, ranging from a huge investment in modernizing the armed forces to military adventures in Ukraine, have gradually solidified the position of the security establishment to the detriment of the economists.

Moreover, Mr. Putin came to power after the chaotic 1990s promising to restore order at home and to re-establish Russia’s status as a world power. Easing his singular grip on the country’s political and economic levers or pulling back in Ukraine would threaten the foundations of his presidency and his personal popularity.

Mr. Putin and his closest advisers, particularly those like him who are former agents of the K.G.B., remain wary of the consequences of too much economic freedom, many experts said.

“He is afraid to let it go,” said Igor Yurgens, the chairman of the Institute of Contemporary Development, a liberal-leaning research organization. “You have to give much more freedom to those who will implement the changes.”

Serious questions about whether the Kremlin has a crisis plan have circulated for weeks.

Recently, at the Gaidar Forum, the country’s premier annual economic conference, three top officials painted rather different portraits of the economy.

Prime Minister Dmitri A. Medvedev called the reliance on raw material exports “a thing of the past,” without saying what exactly would replace them.

Alexei Ulyukayev, the minister of economic development, said Russia had plenty of money to ride out the hard times until economic growth resumed in a year or two. (“He’s a Buddhist!” quipped Mr. Lebedev, noting that the private sector was markedly less calm.)

Only Mr. Siluanov, the finance minister, expressed concern, saying: “In the Ministry of Finance we have no peace of mind. It’s only tension.”

The lack of a unified message aggravated the sense that there was little economic coordination at the highest levels of government. “Today, even nonspecialists see that the authorities don’t act as one team,” Mikhail D. Prokhorov, one of Russia’s richest men, wrote on Thursday in the daily business newspaper Kommersant.

“Mr. Putin believes that in six months oil prices will come up; this is his deep conviction,” Mr. Remchukov, the newspaper editor, said. “If we don’t fall apart, we will be in chocolate in two years.”

Russia’s oligarchs avoid criticizing Mr. Putin publicly or privately, since maintaining their vast fortunes depends on his favorable opinion. Asked at the annual meeting last month of the World Economic Forum in Davos, Switzerland, whether he had shared his bleak economic outlook with the Kremlin, Oleg V. Deripaska, the chairman of the aluminum giant United Company Rusal, said he had been too busy.

Mr. Prokhorov, who has taken a lower political profile recently, pleaded in Kommersant for a “new strategy” to emerge from the crisis.

Mr. Lebedev, accepting that structural changes needed more time, proposed immediate measures to stimulate economic growth, including deregulating the timber industry, subsidizing agricultural loans at a much lower rate (he is an investor in one of Europe’s largest potato producers), and aiding the construction industry by releasing public land.

But Mr. Lebedev mused aloud about how to transmit his ideas to Mr. Putin, and groused that regional governments, like the Kremlin, tended to kill proposals that meant surrendering control over state assets.

For now, there is no actual panic in the Kremlin, analysts said.

“It is a big machine, which still has money, which still sells a lot of oil and gas, which still receives a lot of revenue,” Mr. Yurgens said, noting that Russians had endured much rougher economic periods in recent memory, including long lines for food in the last decade of the Soviet Union.

“It’s tolerable,” he continued. “There is vodka, there are groceries on the table, there are pickled cucumbers. We will manage.”

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