Chinese expert: Russia has reached a strategic dead end

deadend

Because of the Ukrainian crisis Russia has got “into the most serious strategic dead end since the beginning of the century”. This opinion was expressed by Feng Yujun, the director of the Institute of Russia at the Chinese Academy of Contemporary International Relations.

He says that because of the sharp decline in oil prices and “severe sanctions of Western countries, Russia’s economy has entered a period of depression”.

As noted by the agency “Xinhua“, Russia is going through a difficult period, since petrodollars have always been an important part of the Russian economy. The Ministry of Economic Development has calculated that with the oil price at $40 the country’s GDP would fall by 5%. At the same time, the Ministry of Finance estimates that the budget will suffer more than 3 trillion rubles ($42.7 billion) of deficit.

However, Xinhua indicates that this is not the most serious challenge. According to analysts, one of the main causes of the financial and economic instability in Russia in 2014-2015 is a structural economic crisis that began in 2012. Its is the matter of de-industrialization of the economy, and decline of agriculture, and usually there is no quick recovery of the manufacturing industry and the agricultural sector after it ends.

In addition, as the agency reminds, with the beginning of the Ukrainian crisis Western countries imposed sanctions against Russia to change Moscow’s policy in relation to Kiev. In response, Russia has imposed “neat sanctions” by banning the import of food products from the United States and the European Union.

“Because of geopolitical tensions not only the flow of investments in Russia reduced, but also the cost of foreign loans significantly increased for Russian banks and companies”, – emphasized in the publication in “Xinhua”.

Last year the devaluation of the ruble against the dollar and the euro was 72.2% and 51.7%, respectively. The currency crisis has led to an acceleration of inflation, hence, to lowering of real disposable incomes and consumer demand.

“It is not possible to get out of a systemic crisis without breaking the disparities in the development of the financial and real sectors of the economy, which continue to grow,” – points the agency.

Source: Rosbalt