Austria against long-term conflict Russia
Today and tomorrow, Austrian Minister of Foreign Affairs Sebastian Kurz is visiting his Russian colleague Sergey Lavrov. Austria is against a long-term confrontation with Russia and increasing pressure due to sanctions. One item on the agenda is the implementation of the Minsk agreements. According to Lavrov, relations between Russia and Austria are improving, with relations being characterized by “mutual trust, stability and the absence of serious problems.”
Russian reserves replenished
While there were recent reports on Russia’s decreasing financial reserves, it turns out that the downward trend has been turned around, at least between April 17 and 24. During that week, the country’s capital reserves increased by 3 billion dollars to 353.5 billion dollars, the Russian Central Bank reported last week. The sum consists of gold, foreign currency and Special Drawing Rights (SDR). This last group was issued by the IMF, and comprises various strong currencies. In the week before this increase, the reserves decreased by 3.6 billion dollars. Last year, reserves decreased by 124.13 billion dollars, a 24.4% decrease. In January, Russia had 385.46 billion dollars of reserves at its disposal.
Russia lowers most important interest rate
The Russian Central Bank has announced an interest rate cut of 150 base points. That means the interest rate will be 12.5% from May 5 onwards, with the interest rate being 14% now. With this measure, the Central Bank is looking to stimulate economic growth. The bank is adjusting the interest rate for the second time this year. The rouble has been on the rise after the significant decline late last year, and the economy is also recovering. According to figures, the GDP, corrected for seasonal influences, decreased by 2.5% in January. The economic growth amount to -1% in February, and this growth figure had halved in March. The inflation is also decreasing slightly, amounting to 16.5%.
Capital flight Russia continues
Apart from the positive reports about the Russian economy, the Central Bank reports that the flight of capital from Russia continues. According to the Russian Central Bank, 32.6 billion dollars were moved in the first quarter of this year to foreign accounts. The bank reckons with a capital flight of 131 billion dollars this year. The bank also adjusted the 2014 figure, with 154.1 billion dollars being removed from Russia rather than 151.5 billion dollars. Capital flight is disadvantageous to Russia for multiple reasons. First of all, tax income on capital decreases, which is detrimental to the Russian treasury. In addition, there are economic consequences due to the decline of capital that could potentially be invested. Investments are said to have declined by 20% in the first quarter, and the number of bankruptcies in these months reached a level unseen in Russia since the previous crisis of 2008-2009.
100 billion dollars for BRICS fund
The Russian government has agreed to an 18 billion dollar contribution to a currency pool for the BRICS countries. The pool is to protect the national currencies against large rate changes on the global market. China provides the biggest contribution to the fund, 41 billion dollars. India, Russia and Brazil are contributing 18 billion dollars, the South African contribution is 5 billion dollars. In July, the BRICS countries agreed to the establishment of this fund, with a BRICS Development Bank also being founded with an equal 100 billion dollar budget.