Russia's pride may turn into 'disaster' in 2016 - KEREM ALKIN

Russia's pride may turn into 'disaster' in 2016

First of all we need to emphasize that even if the diplomatic tension experienced with Russia because of Turkey's right to protect its national sovereignty has been criticized by some circles with the view far from “core values," that the Turkish economy will pay a heavy price, we should not be surprised that the “unreliable" point of view of the same circles is ignoring the truth that Russia has been facing much more severe economic risks. Of course it is a serious problem that a Russian jet has been downed by a NATO member country for the first time in 60 years.

As a general cultural weakness of this region, Russia's oversensitive response to this issue with an emotional outburst is a situation we are familiar with, as the people of this region.

However, Russia, which faces serious economic sanctions by the US and EU member states because of its tension with Ukraine, has forgotten that it was only able to take a short breath because of Turkey, showing the problem of the behavioral disorder in this region.

Let's hope that Russia can see that within all these emotional outbursts when the serious risk of global energy prices falling in 2016 is considered, it is going to need Turkey and the economic opportunities provided by the Turkish business world.

The International Monetary Fund (IMF) has estimated the real GDP growth of Russia for 2016 as shrinking -0.6 percent.

Russia is in a quite difficult situation, for many reasons: the fall of oil prices to 30 USD in 2016 due to sanctions of Western countries and Russia's presenting itself as a constantly troubled country. The capital outflows it is now facing are an indicator.

PR should be focused on alternative markets

According to the information collected by Anadolu Agency, in the light of data announced by the Russian Federation Statistics Bureau Service, it is indicated that in the first quarter of 2015 Russia's GDP narrowed 2.2 percent, in the second quarter 4.6 percent, and in the third quarter 4.1 percent compared with the same period in the last year.

This situation means that Russians have been experiencing the perception of a high cost of living because of the partial impoverishment and evaporating buying power. The resources problem of the Russian people and weakening of their buying power was already reflected in our fresh vegetable and fruit exports in Antalya, our tourism industry and our textile companies in Laleli, Istanbul, which have been the symbol of “shuttle trading“ and which for 1 or 1.5 years have seen a 10- to 30-percent and even 40-percent decrease.

There is no situation such as a sudden decline in earnings since the Russian plane was downed. Besides, for partly or completely compensating the losses of our exporters, shuttle traders and hotels, agencies and airline companies in the tourism industry, the ministers in charge can focus on other markets, increase support for the Turkish business world in these markets, and take precautions to increase the promotion of Turkish goods and tourism in these alternative markets.

The evaluations of Associate Professor Alexander Bulatov, the Head, Department of Political Theory, Moscow State Institute of International Relations (MGIMO University), Ministry of Foreign Affairs of Russia on the questions of Anadolu Agency regarding what is in store for the Russian economy next year, have been indicating that 2016 will not be a brilliant year for Russia's economy.

Negative growth is a big risk

Professor Bulatov, remarking on the forecast of both Russian authorities and the IMF that oil prices would be about USD 50 per barrel, shows that the IMF's negative growth expectation does not agree with Russia's anticipated increase of 0.7 percent for the real GDP growth for Russia in 2016.

Due to the growth and the negative pressure on macro-economic sources, Bulatov, pointing out that Russia will limit many social expenses, reminds that there will be a budget constraint of 7.9 percent in education, 10.9 percent in health and 41 percent in construction and social services.

Oleg Shibanov, a lecturer in the Finance Department of the New Economic School, said that great problems would arise from the sanctions, especially increased scarcity of equipment that Russian oil companies import from the West.

Shibanov underlined that in the first half of the year, investments in Russia fell by 8 percent. He also noted that Russian companies have been hesitating to invest because of macro uncertainties.
The revenue that Russia, among the biggest oil and natural gas exporting countries in the world, generated last year from these sources was 68 percent of total domestic income.
A decrease of USD 10 in oil prices each time has been reducing the Russian exchange revenue USD 20 billion.

That's why, Russia had to spend USD 13 billion from the Reserve Fund to close the budget deficit in the first eight months of this year.

You can´t live off your capital indefinitely

The international reserves, the biggest guarantee Russian President Vladimir Putin and the Russian government, were about USD 600 billion before the 2008 global crisis. It dropped below USD 500 billion in the first period of the crisis. Then it increased to USD 520 billion, and with the Ukrainian crisis and oil prices decreased to USD 380 billion. The Russian Reserve Fund, with almost USD 66 billion and the National Wealth Fund with USD 74 billion may continue to be an important finance source for the Russian economy in 2016.

But Russia's isolation may deplete its existing reserves. “You can´t live off your capital indefinitely" and Russia has no concrete and detailed answer on how it will fix these points.

'Next year will be the most difficult for the Russian economy'

Shamil Yenikeyeff, the director of the International Energy Center, European University at St Petersburg, also said next year would be difficult for the Russian economy. Indicating that in addition to the sanctions, oil prices will follow a low trend, therefore since the crisis would continue, Yenikeyeff said a difficult year is expected in Russia's economy.

Vice president of Renaissance Capital, Oleg Kozmin, emphasized that for the Russian companies prevented from dealing with Western finance companies, the local credit conditions would have negative effects.

Kuzmin said that local demand in the Russian market could not be met in 2016 either. He expressed that a 3.4 percent downsizing is expected in the Russian industry this year, whereas next year growth of 0.8 percent is expected.

Russia struggles with the crisis

After the protests at the end of 2013 in the Autonomous Republic of Crimea of Ukraine and Russia's invasion of Crimea, Western countries imposed some sanctions on the politicians and businessmen close to Russian President Putin. To stop the military activities of Russia in Ukraine, EU countries and the US started sanction packages directly targeting the Russian economy.

As the result of these sanctions on the Russian banking, energy and defense industries, as it was banned for Russian companies to get loans from Western institutions, Western companies suspended or postponed commercial activities in many areas.

"Investments decreased 8 percent in the first half of the year in Russia."


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