Russia’s Minister for Finance, Aleksey Kudrin, released a sensational statement Wednesday. Speaking at the World Economic Forum in Davos, the Russian minister offered to mitigate the world credit crisis with the help of Russia’s reserves. Kudrin stated that Russia was an “island of stability in the sea of the world crisis.”
“Investors will continue to invest billions of dollars in the rising Russian economy. Stock market crises and their consequences will not be utterly negative for us,” Kudrin said. “Our country managed to achieve economic stability and to save considerable gold and currency reserves which play the role of an air bag for the national economy,” Kudrin said.
Meanwhile, financial speculator George Soros stated that the current events on the world markets mark the end of the dollar as the World Reserve Currency. The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency,'' Soros said in a debate today at the World Economic Forum in Davos, Switzerland. "Now the rest of the world is increasingly unwilling to accumulate dollars," the billionaire said.
The weak dollar is a disaster for the entire world, including Russia. Central banks all over the world keep about 65 percent of their reserves in U.S. dollars. The weakening U.S. currency automatically increases the value of the Russian ruble, which poses a threat to the nation’s competitive ability. In this case it will be impossible for the Russian government to maintain the GDP growth on the level of 6-7 percent.
It is not really clear how Russia would be able to help soften the world crisis. In theory, Russia could invest a part of its gold and currency reserves into U.S. treasury bonds. It could support the USA’s liquidity and stop the dollar reduction.
Russia’s current gold and currency reserves make up not more than $500 billion. Unfortunately, this money will not save the USA. No one knows when the U.S. crisis is going to end and what major global corporations have on their minds. It may happen that oil does not cost $100 or $90 and not even $50. Asian states do not make any state investments because they know that they can lose everything in an instant.
Translated by Dmitry Sudakov
The Russian Federation regrets that Erdogan’s statements on Crimea were made at the time when preparations for his visit to Russia are under way