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Ruble's Drop Has Implications For Global Economy

RENEE MONTAGNE, HOST:

President Vladimir Putin has been conspicuously silent since the ruble's plunge this week. For some insight on what's happening, we turn now to journalist Kirill Belyaninov, who writes for Kommersant, a major business and political newspaper in Russia. He joined us from Moscow. Good morning.

KIRILL BELYANINOV: Good morning.

MONTAGNE: Now, the ruble has stabilized in trading this morning after Russia's central bank started buying up rubles with the bank's foreign reserves. The ruble though has lost half of its value this past year against the dollar. What happened there?

BELYANINOV: Well, there are a number of reasons for that - dropping oil prices. As you know, the (unintelligible) oil and natural gas is a main source of fueling the budget in Russia. Western sanctions, which were imposed after annexation of Crimea, of course played a role.

But lately there are two major reasons. First, Russian government tried to help a few major oil companies which have to pay their foreign debt - like, for example, yesterday, the government secretly gave to Rosneft 640 billion rubles. And, of course, this company immediately wanted to exchange, started buying dollars to pay for (unintelligible). And that sparked some panic on the exchange.

Also on Monday, for the first time since the late-'90s, central bank increased the interest rate from 10.5 percent to 17 percent. So it's a major increase in 15 years. And that isn't any comfort to the people who are trading on the foreign exchange.

MONTAGNE: And this major oil company Rosneft is also though run by an oligarch who is in the inner circle of President Putin, right?

BELYANINOV: Yes, it's run by Igor Sechin, who is often called one of Putin's cronies on the West.

MONTAGNE: So one of his closest allies - and I guess what I'm getting at is, you know, what does it mean when a company, in this case an oil company like Rosneft, is bailed out?

BELYANINOV: Yeah, well, basically it's also very bad expectations. The Russian companies will have to pay in early January $700 billion to the foreign creditors. And so everyone expect that this money will be taken from the state budget. And the ruble will drop even further, so there are very long lines in every single bank. People trying to buy any currency they can - dollars, euros, British pounds - whatever they can hold of.

MONTAGNE: And what is all of this doing to ordinary Russians and the Russian economy more broadly?

BELYANINOV: You have to understand in the 15 years, the idea of the economy was that we not (unintelligible) anything ourselves. We're just basically selling gas and oil, and we buying everything we need. So people basically understood that country can't rely on its own production because it's nonexistent.

On the one hand people are panicking because the prices for groceries are growing. They increased about 40 percent in the last three months. And it's - of course, it's a very tough situation for the pensioners, for anyone who's living on state subsidies, for the elderly, for poor. But on the other hand, Russians lived through many, many crises in the last 20 years. So there are a lot of jokes about that already. But people are very busy watching the exchange rate. That's the number one news.

MONTAGNE: And President Putin - he has been very popular, but he's been silent this week. How can he - how can he do that in the midst of what seems like a crisis?

BELYANINOV: That's the question people here are asking, because President Putin tomorrow going to have his annual press conference - the very famous event which usually lasts four to five hours. He answers questions of journalists. But he's specifically said that he's not going to address the situation with the ruble, the economic situation in general. And also he specifically said that the government has no control over the central bank - central is independent body and they act on their own. Basically, there is a sense that Russian authorities simply don't know what to do with the situation. They're trying to figure it out.

MONTAGNE: Well, thank you very much for joining us.

BELYANINOV: You are very welcome.

MONTAGNE: Kirill Belyaninov writes for the business and political newspaper Kommersant. He joined us from Moscow. Transcript provided by NPR, Copyright NPR.