Ambivalence of Russian economy’s resilience

While its ally Iran should not benefit from its record oil production anytime soon due to record low of its currency the rial (IRR) against the US dollar (USD), Russia seems in a reverse situation.

Moscow has worked extensively with Saudi Arabia for the signing of the agreement between OPEC and non-OPEC member countries with a view to reducing the volume of world oil production by about 2% after the continuous decline of the price per barrel from 110 dollars in the summer of 2014 to about 52/55 dollars currently.

Russia also coped better than expected with the economic sanctions imposed by the United States and the European Union (EU) and took advantage of them to embark on a vast program of modernization and reform of its too dependent on natural resources economy, particularly in agriculture and technology.

The unexpected resilience of the Russian economy and Kremlin’s activism to raise the price of raw materials may be producing an ambivalent result. The Russian currency the ruble (RUB) reached a one year and a half record high against the USD at about 60.12 and against the Euro (EUR) at around 62.70, an average increase of 17% in 2016.

It’s therefore good news for Russian consumers however it prefigures a possible increase in the public deficit and a decline in exports, especially for the military industry. Whatever the general situation of the Russian economy which proved globally stronger than expected, those who said in 2015 that investing in Russia was a good idea have been right so far.