In response to the Chinese and Greek crises, the Russian government is keeping a tighter lid on its currency, according to Bloomberg. The Bank of Russia purchased $200 million in daily reserves to increase the total amount to $500 billion, which may take anywhere from five to seven years, and Russia has only purchased $7.4 billion thus far. Finance Minister Anton Siluanov stated that Russia is prepared to prevent any volatility in the nation’s exchange rate. The Russian ruble remains weak, but producers are benefiting from a weaker currency, as Russia hopes to spur the economy forward.
Rumors circulated that Russia was prepared to step in and rescue Greece, but it appears that the Russians are being extra careful in averting any risk. In a recent BRICS summit, which is an annual meeting comprised of such nations as Russia, India, China and Brazil, the finance minister made no mention of Greece. The debt standoff with Greece, including the market volatility of China, has had a negative effect on Russian assets, and officials are concerned about Russia’s ability to navigate the turmoil of the world economy. By taking more control of the currency, the nation hopes to strike a delicate balance by remaining an open economy while protecting itself from the shock of the world economy.
However, a tighter control over currency has more to do with Russia entering recession territory, the first of which since 2009. It remains to be seen if Chinese investors, who so far have purchased anywhere from 50 to 60 billion rubles in Russian bonds this year, will be enough to lift the Russian economy out of the recession. Russia has been increasingly looking east in response to western sanctions over the Ukraine situation, but with China undergoing its own problems, the Russians are in a precarious position. Also, the sanctions were extended until January of next year, the same time when all border territories must be returned to the Kiev government. In return, the Russian government has extended a food import ban for another year.
On the plus side, the sanctions has forced many Russians to travel within the country, fueling hotel services and other sectors of the economy. The West remains a contentious topic with Russia, but Chinese investors remain interested despite the sanctions, including many other investors around the world. With that being said, the Russians still need western companies to invest in Russia to maintain economic momentum.