Russia’s Prime Minister Dmitry Medvedev proposed last week that the country formulate budgets for only one year instead of the traditional three. Officially, the reason that the government feels unable to plan ahead for so long are the risks surrounding the oil price and rouble exchange rate fluctuations. But cabinet officials say the move was precipitated by the uncertainty over what happens when US rates rise.
Economy minister Alexei Ulyukayev has already become a laughing stock for adjusting the economic growth rate several times a year.
“But at least every time the rouble drops or soars again, at least we know what it means for the economy,” said one former senior official in Mr Ulyukayev’s ministry. “We can’t say that of the impact of US monetary policy. It could bring just a little bit more pressure on our currency and just a little bit more capital outflows, both of which wouldn’t be felt too strongly overall, or it could affect our financial stability.”
For Russia’s central bank, a stronger dollar, almost inevitably the result of a rate hike in the US, would make it even more difficult to rebuild its international reserves, which have dwindled from more than $500bn before the current crisis to $364bn.
The predictions for the fallout of a possible US interest rate rise for Russia differ widely. Western sanctions imposed last year, cheaper oil and consequently a drastically weaker rouble have already wreaked havoc, causing the economy to contract by 2.2 per cent in the first quarter and by 4.6 per cent in the second.
“Of course a US rate hike would be negative for Russia, but not as negative as for some other emerging markets, because due to the sanctions, we are no longer as connected economically with the US as we used to be,” says Oleg Kouzmin, an economist at Renaissance Capital.
晋新资本(Renaissance Capital)经济学家奥列格錠神明(Oleg Kouzmin)表示：“美国加息当然会对俄罗斯造成负面影响，但不会像对其他一些新兴市场那样严重，原因是西方的制裁使得我们与美国的经济联系已不像过去那样紧密。”
As a result of capital market sanctions, US banks now play a much smaller role as sources of new loans for Russian companies, many institutional investors have reduced their exposure to Russia, and Russian external trade has shrunk drastically.
“If you are underweight Russia already, there is not that much more you can reduce,” says Mr Kouzmin.
But others argue that the key point is how the effects of higher US rates on global trade will hit Russia.
“Russia’s heavy dependence on oil and gas exports means that its economy is more vulnerable to external shocks of all kinds,” says a US executive who has been investing in Russia for almost 20 years.
“The question is therefore more what a US rate hike does to all emerging markets and the world economy, and if it does much damage there, Russia will suffer maximum pain.”