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Rubles
Effects of the Russia rouble’s nosedive will undoubtedly be felt in Finland. One Finnish expert says the only thing that will save Russia’s economy now would be decisive leadership from President Vladimir Putin. FOREX Finland announced on Tuesday evening that it has stopped buying roubles.
The exchange rate ofthe Russian rouble has sawed back and forth Wednesday morning, beginning with afive percent drop against the US dollar in the morning, but recovering slightlythereafter once the markets opened in Moscow. The value of the rouble hasdropped sharply this week, causing it to lose 15 percent of its value. Over thecourse of the last year, the rouble has lost over half of its value.
The decline in oilprices and western sanctions against Russia are both suspected to play a partin the currency’s downfall. Yesterday evening news broke that US President BarackObama was expected to approve of a new round of economic sanctions againstRussia on Friday.
Russia’s Central Bankraised its key interest rate Tuesday night to combat the trend, but it wasn’tenough. Monday the bank announced it was supporting the rouble with aninjection of 1.6 billion euros.
The Russian newsagency Tass reported Wednesday that Russian wheat producers announced a freeze onnew export contracts concerning deliveries after February 2015 due to theunstable currency.
Forex Finland won’tbuy roubles
Forex Bank Finland hasannounced it will not be buying Russian currency for the time being from newcustomers, although it will still exchange currency it has sold in the past toexisting customers. The decision was made on Tuesday, effective immediately.
Forex Finland’sdirector Harri Andersson says the uncertainty is just too great at the moment. ForForex, fluctuations in value that surpass 20 percent are just too much. Roubleswill continue to be sold at Forex locations, however, and the bank stressesthat the current ban is only temporary. The Finnish news agency STT was thefirst to report on the Forex decision.
Expert: Fall willprevent Finnish growth
Russian’s economicdifficulties will also affect the Finnish economy, says Professor Pekka Sutela,a specialist in the Russian economy at the Lappeenranta University ofTechnology. The world is now looking to Russia’s leaders to quickly puttogether a credible plan for moving forward long-term in order to restore marketconfidence and turn the country’s economy around.
The plummet in therouble’s value will result in a sharp drop in imports next year, meaningFinnish exports to Russia will also diminish, says Sutela. He says it is clearthat this will result in a steep downturn in Finland’s total production.
Sutela says thatRussia’s Central Bank has already done all it can to halt the spiral, and isnow powerless to do anymore. He says all eyes are now focused on the country’spresident: Vladimir Putin.
“The only thing thatcan be done is try to calm the market. Someone must present a credible,long-term programme to fix the Russian economy,” he says, continuing, “TheRussian economy has been too slack and lazy for the past five years.”
As a former advisor tothe Bank of Finland, Sutela says Putin must now assume a visible and decisiverole in Russia’s economic policy, asserting that there is a strong master of thetroubled house.
So far, the financialcrisis in Russia has not affected Putin’s popularity among the Russianpopulace. Most Russians believe the collapse is a direct result of thewestern-imposed trade embargo. But Putin’s ratings could fall if the crisiscontinues too long, says Sutela. On the other hand, the series ofeconomic downturns in recent years might mean Russians are becoming accustomed to fiscalinsecurity.
Putin is scheduled tohold a televised speech on Thursday in which he is expected to address thesituation.
Soini: No one benefitsfrom a weak Russia
Timo Soini, chair ofthe parliamentary Foreign Affairs Committee and chair of the opposition FinnsParty, was the only Finnish politician to comment on the Russian rouble developmentsby Wednesday noon. Soini says the effects of the economic situation in Russiaare difficult to forecast, but he is concerned.
In Soini’s view, thesituation could even be considered dangerous when combined with theUkrainian crisis and sanctions policy.
“I believe thatRussians will now begin hoarding everything that preserves its value better than their currency,” said Soini in a radio interview.
He says finding asolution to the conflict in Ukraine should be paramount.
“Thebest solution would be to launch real negotiations leading to an attainable peaceprocess. This would release the pressure. No one benefits from fiscal decline and constant one-upmanship,” says Soini.
