The Foundry

The past few weeks saw a certain stabilization of the ruble against the key international currencies. The Russian national currency’s de facto devaluation has brought about a dramatic nearly 40-percent drop in imports compared to the same period last year. This development helped to offset export losses and retain a foreign trade surplus.

The shrinking export trend is ongoing, however, despite the favorable international circumstances owing to the devalued ruble. Last January saw a more than 50-percent plunge in exports. This tendency highlights grave flaws in the Russian government’s exports policy that rests largely on energy exports. Thus, a slide in world energy prices has inflicted an irreparable damage on Russia’s economy. Given a weak competitiveness of Russian goods, even the 50-percent ruble devaluation cannot increase Russian exports.

The government-initiated measures show that it is continuing to pin hopes entirely on the likelihood of growing oil prices. Admittedly, there is a tendency to dismantle certain ambitious projects put in place in the pre-crisis time. In conjunction with this, quite telling is the Cabinet staff reshuffle that disbanded a special department responsible for the national priority projects.

It is common knowledge that the grand plans to fund health care, education, agriculture and housing projects propped up by massive infusion of petrodollars were a powerful campaign tool for Medvedev who easily won the 2008 presidential election. Today these projects are being relegated to the background due to both their political inexpediency and financial reasons. This would inevitably entail social tensions and disaffection of the populace with the Kremlin’s failure to make good on its promises.