World Economy

Putin: Russia Will Remain Open Economy

Putin: Russia Will Remain Open EconomyPutin: Russia Will Remain Open Economy

Russian President Vladimir Putin pledged that the country would continue to develop as an open market, but fired a broadside at the US by halting the use of the dollar for trade.

Putin’s promise to keep free movement of capital was seen as a signal that Russia’s relatively pro-market economic “liberal” faction has gained the upper hand in the struggle for control of the country’s moribund economy, CNBC reported.

His pledge to start using “national currencies” rather than US dollars, the world’s reserve currency, for trade, may be more significant in the long term. If Russia (and possibly China, with which it has just signed a $400 billion, 30-year gas deal) stops using dollars, this might have a broader effect on the US economy.

“In the future we aim actively to use national currencies in energy resources trade to settle... international trade accounts, with China and other countries,” Putin said.

After days of speculation that Russia may impose capital controls or make other anti-free market measures, Putin reaffirmed the government’s commitment to develop as an “open market.” He told an audience of business leaders in Moscow that the government would not impose controls on the flow of money in and out of the country, or on currency movements.

Putin pledged to stick to the standards of the World Trade Organization - but could not resist the suggestion that other members (i.e. those Western companies which have imposed sanctions against Russia) are not. And he promised government help to the companies and industries targeted by sanctions.

Since Russian economic growth began to falter this year, after investments were pulled from the country and economic sanctions enacted following its clashes with neighboring Ukraine, there has been widespread speculation that hardliners in the administration, led by President Vladimir Putin, may use short term stimulus measures to negate the effect of external factors.

Putin dismissed concerns that Russia’s development was heading in the wrong direction as top officials sounded the alarm over the economic outlook.

He said a combination of high inflation and low growth was “explosive” and the head of the country’s largest bank warned that Russia could repeat the fate of the Soviet Union.

Putin chose to make light of the doom-and-gloom predictions, pledging that Russia would remain an investor-friendly economy and ruling out capital controls or any major revision of privatizations.