Under pressure to show he has a plan to fix the economy, Putin
told an end-of-year news conference the actions of the central bank
and government had been "adequate" in a crisis he blamed on external
But hinting at internal divisions, he said more measures were needed
and the central bank should have halted foreign exchange
interventions to support the rouble sooner. Earlier, more decisive
action by the central bank, he implied, might have made this week's
big interest rate rise unnecessary.
The economy is heading into recession in what one minister called a
"perfect storm" of low oil prices, Western sanctions in the Ukraine
crisis and global economic problems. The rouble has fallen about 45
percent against the dollar this year.
"If the situation develops unfavorably, we will have to amend our
plans. Beyond doubt, we will have to cut some (spending). But a
positive turn and emergence from the current situation are
inevitable," Putin said.
"The growth of the global economy will continue and our economy will
rebound from the current situation," he said, sitting at a large
desk and looking confident as he spoke to a studio audience and live
He said Russia must diversify its economy to reduce dependence on
oil, its major export and a key source of state income, and a
recovery could start at some point next year.
But he stuck largely to broad promises rather than going into
details and announced no major new proposals. He has said many times
during 15 years in power that he will reduce Russia's reliance on
energy exports but has failed to do so.
The rouble slipped as he spoke, moving to around 3 percent weaker on
the day. The bank increased its key lending rate by 6.5 percentage
points to 17 percent on Tuesday, and has spent more than $80 billion
trying to shore up the rouble this year, but to little avail.
HEADS TO ROLL?
Analysts said Putin's assessment of the government and central
bank's performance was lukewarm and could indicate that heads would
"All this implies pretty big divisions within the administration as
to how to react to the crisis and pressure on the rouble," Timothy
Ash, head of emerging market research at Standard Bank in London,
said in a note.
A prominent opponent, former Prime Minister Mikhail Kasyanov, said
the crisis showed Putin had mismanaged the economy and his problems
would increase because prices are expected to surge next year
because of the ruble's weakness.
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"Russia is going into decline," Kasyanov told Reuters in an
interview late on Wednesday, suggesting Putin should accept that "he
needs an exit strategy" to leave power.
Economy Minister Alexei Ulyukayev said in a newspaper interview the
Western sanctions were likely to last "a very long time" and Russia
was paying the price for failing to carry out structural reforms,
describing events as "the perfect storm".
But Putin said: "Under the most unfavorable external economic
scenario, this situation may go on for about two years. But it may
also start improving in the first quarter, in the middle, at the end
of the next year."
Opinion polls show Putin has high popularity ratings since annexing
the Crimea peninsula from Ukraine in March, but the ruble's decline
and Russia's slide toward recession could erode faith in Putin's
ability to provide financial stability.
Asked about Ukraine, where Russia has irked the West by backing
separatists fighting government forces in the east, Putin said
Moscow wanted to restore political unity and denied any link between
the conflict and Russia's economic problems.
He said he wanted the conflict, in which more than 4,700 people have
been killed, resolved by political means. But he criticized NATO
over its eastward expansion following the fall of the Berlin Wall
and said Kiev had been wrong to use forces against the separatists.
(Additional reporting by Moscow newsroom, Editing by Elizabeth Piper
and Janet McBride)
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