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The
Great Recession The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009.
in Russia was a crisis during 2008–2009 in the
Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...
n financial markets as well as an economic recession that was compounded by political fears after the war with Georgia and by the plummeting price of Urals heavy
crude oil Petroleum, also known as crude oil or simply oil, is a naturally occurring, yellowish-black liquid chemical mixture found in geological formations, consisting mainly of hydrocarbons. The term ''petroleum'' refers both to naturally occurring u ...
, which lost more than 70% of its value since its record peak of US$147 on 4 July 2008 before rebounding moderately in 2009. According to the
World Bank The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
, Russia's strong short-term
macroeconomic Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study topics such as output/ GDP ...
fundamentals made it better prepared than many
emerging economies An emerging market (or an emerging country or an emerging economy) is a market that has some characteristics of a developed market, but does not fully meet its standards. This includes markets that may become developed markets in the future or we ...
to deal with the crisis, but Russia's underlying structural weaknesses and high dependence on the price of a single commodity made the crisis' impact more pronounced than would otherwise be the case. In late 2008 during the onset of the crisis, Russian markets plummeted and more than $1 trillion had been wiped off the value of Russia's shares, although Russian stocks rebounded in 2009 becoming the world's best performers, with the
MICEX Index The MOEX Russia Index (), formerly the MICEX Index, is the main Russian ruble, ruble-denominated benchmark of the Russian stock market. It was established by the Moscow Interbank Currency Exchange (MICEX) on 22 September 1997. MICEX merged with th ...
having more than doubled in value and regaining half its 2008 losses. As the crisis progressed,
Reuters Reuters ( ) is a news agency owned by Thomson Reuters. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide writing in 16 languages. Reuters is one of the largest news agencies in the world. The agency ...
and the ''
Financial Times The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and also published digitally that focuses on business and economic Current affairs (news format), current affairs. Based in London, the paper is owned by a Jap ...
'' speculated that the crisis would be used to increase the Kremlin's control over key strategic assets in a reverse of the "loans for shares" sales of the 1990s, when the state sold off major assets to the oligarchs in return for loans. In contrast to this earlier speculation, in September 2009 the Russian government announced plans to sell state energy and transport holdings in order to help plug the
budget deficit Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit, the opposite of budget surplus. The term may be applied to the budg ...
and to help improve the nation's aging infrastructure. The state earmarked about 5,500 enterprises for
divestment In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment. Divestiture is a ...
and planned to sell shares in companies that were already publicly traded, including
Rosneft PJSC Rosneft Oil Company ( stylized as ROSNEFT) is a Russian integrated energy company headquartered in Moscow. Rosneft specializes in the exploration, extraction, production, refining, transport, and sale of petroleum, natural gas, and pet ...
, the country's biggest oil producer. From July 2008 – January 2009, Russia's
foreign exchange reserves Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold and silver held by a central bank or other monetary authority that are primarily available to balance payments of the country, ...
(FXR) fell by $210 billion from their peak to $386 billion as the central bank adopted a policy of gradual devaluation to combat the sharp devaluation of the
ruble The ruble or rouble (; rus, рубль, p=rublʲ) is a currency unit. Currently, currencies named ''ruble'' in circulation include the Russian ruble (RUB, ₽) in Russia and the Belarusian ruble (BYN, Rbl) in Belarus. These currencies are s ...
. The ruble weakened 35% against the dollar from the onset of the crisis in August to January 2009. As the ruble stabilized in January the reserves began to steadily grow again throughout 2009, reaching a year-long high of $452 billion by year's-end. Russia's economy emerged from recession in the third quarter of 2009 after two-quarters of record negative growth. GDP contracted by 7.9% for the whole of 2009. Experts expected that Russia's economy would grow modestly in 2010, with estimates ranging from 3.1% by the Russian economic ministry to 2.5%, 3.6% and 4.9% by the
World Bank The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
,
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
(IMF), and
Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
(OECD) respectively.


Background

Russia is a major exporter of commodities such as oil and metals, so its economy had been hit hard. by the decline in the price of many commodities. The Russian stock market declined significantly. Foreign investors had pulled billions of dollars out of Russia on concerns over escalating geopolitical tensions with the West following the military conflict between Georgia and Russia, as well as concerns about state interference in the economy. Those concerns were underscored in July by Prime Minister
Vladimir Putin Vladimir Vladimirovich Putin (born 7 October 1952) is a Russian politician and former intelligence officer who has served as President of Russia since 2012, having previously served from 2000 to 2008. Putin also served as Prime Minister of Ru ...
's criticism of steel company
Mechel Mechel () is one of Russia's mining and metals companies, comprising producers of coal, iron ore in concentrate, steel, rolled steel products. Headquartered in Moscow, it sells its products in Russia and overseas, and is formally known as ''Public ...
collapsing the company's stock. By September 2008, the RTS stock index plunged almost 54%, making it one of the worst performing markets in the world. Russian involvement in the US
subprime mortgage crisis The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010, contributing to the 2008 financial crisis. It led to a severe economic recession, with millions becoming unemployed and many busines ...
contributed to the volatility in Russia's financial system. The Russian Central Bank owned US$100 Billion of
mortgage-backed securities A mortgage-backed security (MBS) is a type of asset-backed security (an "Financial instrument, instrument") which is secured by a mortgage loan, mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals ( ...
of the two American mortgage giants
Fannie Mae The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New ...
and
Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is an American publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons, Virginia.taken over by the US government. This investment appeared to be bound for write-off. Many analysts, including
Andrei Illarionov Andrey Nikolayevich Illarionov (, born 16 September 1961) is a Russian economist and former senior policy advisor to Vladimir Putin, the President of Russia, from April 2000 to December 2005. Since April 2021, he is a senior fellow at the non-go ...
, former economic policy adviser to then-President Vladimir Putin, claim that in Russia the crisis in the stock market was deepened dramatically by internal factors, including concerns over state interference in the economy fueled in June by Putin's criticism of Mechel and the conflict over
TNK-BP TNK-BP (, ) was a major vertically integrated Russian oil company headquartered in Moscow. It was Russia's third-largest oil producer and among the ten largest private oil companies in the world. In 2013 it was acquired by Russian oil company R ...
, lack of transparency in banking and political risks associated with escalating geopolitical tensions following the
2008 South Ossetia war The August 2008 Russo-Georgian War, also known as the Russian invasion of Georgia,Occasionally, the war is also referred to by other names, such as the Five-Day War and August War. was a war waged against Georgia by the Russian Federation and the ...
in August.. Swedish Foreign minister
Carl Bildt Nils Daniel Carl Bildt (born 15 July 1949) is a Swedish politician and diplomat who served as Prime Minister of Sweden from 1991 to 1994. He led the Moderate Party from 1986 to 1999, appearing as its lead candidate in four general elections, b ...
said on 17 September that the current Russian financial crisis is "obviously more worrying" than the ongoing
subprime mortgage crisis The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010, contributing to the 2008 financial crisis. It led to a severe economic recession, with millions becoming unemployed and many busines ...
in view of the political development in Russia. Furthermore, Russia's overt reliance on the oil and natural gas sector made it particularly vulnerable. According to the ''
Wall Street Journal ''The Wall Street Journal'' (''WSJ''), also referred to simply as the ''Journal,'' is an American newspaper based in New York City. The newspaper provides extensive coverage of news, especially business and finance. It operates on a subscriptio ...
'' and Gazeta.ru, as the Russian market declined in September, a conspiracy theory circulated within Russian leadership that the U.S. government had incited American investors to withdraw their capital from Russia, in punishment for the war in Georgia..


Financial markets


Stock markets

On 24 July 2008,
Mechel Mechel () is one of Russia's mining and metals companies, comprising producers of coal, iron ore in concentrate, steel, rolled steel products. Headquartered in Moscow, it sells its products in Russia and overseas, and is formally known as ''Public ...
's stock plunged by almost 38 percent after Russia's Prime Minister
Vladimir Putin Vladimir Vladimirovich Putin (born 7 October 1952) is a Russian politician and former intelligence officer who has served as President of Russia since 2012, having previously served from 2000 to 2008. Putin also served as Prime Minister of Ru ...
criticized its CEO
Igor Zyuzin Igor Vladimirovich Zyuzin (; born May 29, 1960) is a Russian businessman. He is both Chairman of the Board of Directors and a major shareholder in the mining and steel group Mechel. Zyuzin is married and is a father of two. Early life and educat ...
, and accused the company of selling resources to Russia at higher prices than those charged to foreign countries. The comments, which raised fears of another attack similar to that made on
Yukos OJSC "Yukos Oil Company" (, ) was an oil and gas company based in Moscow, Russia. Yukos was acquired from the Russian government by Russian oligarch Mikhail Khodorkovsky's Bank Menatep during the controversial "loans for shares" auctions of ...
in 2004, contrasted sharply with previous efforts by President
Dmitry Medvedev Dmitry Anatolyevich Medvedev (born 14 September 1965) is a Russian politician and lawyer who has served as Deputy Chairman of the Security Council of Russia since 2020. Medvedev was also President of Russia between 2008 and 2012 and Prime Mini ...
to improve Russia's reputation as an investor-friendly country. On the following day, Mechel issued a contrite statement promising full cooperation with federal authorities, while share values rebounded by nearly 15 percent. 28 July presidential aide
Arkady Dvorkovich Arkady Vladimirovich Dvorkovich (; born 26 March 1972) is a Russian politician and economist, currently serving as the president of the International Chess Federation, FIDE. He was Deputy Prime Minister in Dmitry Medvedev's Cabinet from 21 Ma ...
then sought to restore calm, declaring that all parties would "act in a civilized way", and confirming that Mechel was cooperating with antitrust authorities. Just hours later, however, Putin announced that Mechel had been avoiding taxes, by using foreign subsidiaries to sell its products internationally. His renewed attack caused share prices to tumble once more—this time by almost 33 percent. On 16 September Russia's most liquid stock exchange
MICEX The Moscow Interbank Currency Exchange () or MICEX () was a stock exchange that operated in Russia from 1992 to 2011. MICEX was the leading Russian stock exchange and one of the largest universal stock exchanges in Eastern Europe. It merged with ...
and the dollar-denominated RTS were suspended trade for one hour after the worst one-day fall in 10 years as Finance Minister
Alexei Kudrin Alexei Leonidovich Kudrin ( rus, Алексе́й Леони́дович Ку́дрин, p=ɐlʲɪkˈsʲej lʲɪɐˈnʲidəvʲɪtɕ ˈkudrʲɪn; born 12 October 1960) is a Russian liberal politician and economist. Previously he served as the C ...
reassured markets there was no "systemic" crisis. Next day, trading was suspended for the second day in succession on Russia's two main stock exchanges (MICEX and RTS) after shares fell dramatically, forcing the Federal Financial Markets Service to intervene. The simultaneous collapse of money markets prompted reaction from the government and the Central Bank, while Finance Minister
Alexey Kudrin Alexei Leonidovich Kudrin ( rus, Алексе́й Леони́дович Ку́дрин, p=ɐlʲɪkˈsʲej lʲɪɐˈnʲidəvʲɪtɕ ˈkudrʲɪn; born 12 October 1960) is a Russian liberal politician and economist. Previously he served as the C ...
sought assurances from U.S. Treasury Secretary
Henry Paulson Henry "Hank" Merritt Paulson Jr. (born March 28, 1946) is an American investment banker and financier who served as the 74th United States secretary of the treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson ...
that the U.S. did not play politics with Russia in the crisis. The crisis continued on 18 September, as trading was suspended for the third day in succession on Russia's two main stock exchanges amidst fear of financial collapse. News agencies are quoting Russia's finance minister Alexei Kudrin as saying trading on Russian exchanges will not resume until 19 September 2008. Officials at MICEX stock exchange describe conditions in the Russian markets as "extraordinary" Deputy
Finance Minister A ministry of finance is a ministry or other government agency in charge of government finance, fiscal policy, and financial regulation. It is headed by a finance minister, an executive or cabinet position . A ministry of finance's portfoli ...
Pyotr Kazakevich asserted that "Russia is facing its worst stock market decline in a decade mainly because of a confidence crisis rather than liquidity problems". On 6 October the MICEX and RTS crashed by 18.6% and 19.1% respectively. The losses forced the Federal Financial Markets Service to suspend the stocks three times. Trading on both exchanges was suspended on the next day; Russian companies have augmented in price at London LSE. On 8 October the MICEX and RTS plunged 14.4% and 11.3% respectively, trading on the markets was halted until 10 October, respectively. However, on 9 October MICEX trading resumed ahead of schedule, and the stock market rose 14.7%. On the next day the regulator, wary of crises in American and Asian markets, decided not to open trading at all.


Money markets

The crisis in
money market The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a compo ...
s was imminent since spring, when
Central Bank of Russia The Central Bank of the Russian Federation (), commonly known as the Bank of Russia (), also called the Central Bank of Russia (CBR), is the central bank of the Russia, Russian Federation. The bank was established on 13 July 1990. It traces its ...
warned the public of a gradual contraction in bank lending due to unfolding world liquidity crisis. However, the regulator preferred to combat inflation, raising the
refinancing rate Refinancing is the replacement of an existing Collateralized debt obligation, debt obligation with another debt obligation under a different term and interest rate. The terms and conditions of refinancing may vary widely by country, province, or s ...
and bank reserve contributions. 1 September hike in reserve rate alone withdrew nearly 100 billion roubles from the money market. The raise coincided with a seasonal peak in tax payments and left the banking system in a worse state of liquidity than that of August 1998. A subsequent drop in rouble-to-dollar exchange rate and dollar-denominated prices of Russian corporate securities forced investors to crowd out, worsening the
positive feedback Positive feedback (exacerbating feedback, self-reinforcing feedback) is a process that occurs in a feedback loop where the outcome of a process reinforces the inciting process to build momentum. As such, these forces can exacerbate the effects ...
loop. The interbank money market that traditionally relied on Russian corporate stock as a collateral for the
repurchase agreement A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of secured short-term borrowing, usually, though not always using government securities as collateral. A contracting party sells a security to a lend ...
s, immediately imploded in what was called "a crisis of trust" or even "elimination of trust": when the borrowers defaulted on loans, leaving lenders with impaired collateral, other banks stopped lending as a precaution. Money market crunch passed its first lowest mark 15–17 September. 17 September the government lent the country's three biggest banks,
Sberbank The Public JSC Sberbank (, initially a contraction of ) is a Russian majority state-owned banking and financial services company headquartered in Moscow. As the Russian successor entity of the State Labor Savings Banks System of the USSR, it was ...
,
VTB Bank VTB Bank (; formerly known as ''Vneshtorgbank'', , lit. 'International Trade Bank') is a Russian majority state-owned bank headquartered in various federal districts of Russia; its legal address is registered as St. Petersburg. As of 2022, ...
and
Gazprombank Gazprombank (), or GPB (JSC), is a private-owned Russian bank, the third largest bank in the country by assets. Since November 2014, Nikolai Shamalov#Yuri Shamalov, Yuri Shamalov's Gazfond is its largest shareholder. Gazprombank is one of the m ...
, 1.13 trillion
rubles The ruble or rouble (; rus, рубль, p=rublʲ) is a currency unit. Currently, currencies named ''ruble'' in circulation include the Russian ruble (RUB, ₽) in Russia and the Belarusian ruble (BYN, Rbl) in Belarus. These currencies are su ...
(US$44 billion) for at least three months to boost
liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...
; the Central Bank lowered the
reserve requirement Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the Bank reserves, commercial bank's reserve, is generally determined ...
. This was followed 24 September by Central Bank loans to keep the current accounts afloat and prevent a
bank run A bank run or run on the bank occurs when many Client (business), clients withdraw their money from a bank, because they believe Bank failure, the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking sys ...
. The regulators also raised the cap for
deposit insurance Deposit insurance, deposit protection or deposit guarantee is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance or deposit ...
from 400 to 700 thousand roubles (equivalent to 25 thousand dollars). These actions served their short-term purpose but failed to revitalize the money market: no bank was willing to lend for longer than overnight. 17 November MosPrime interbank interest rate on rouble loans reached a record high of 22.67%, indicating another shortage of liquid funds as the bank clients transferred funds overseas or paid taxes due. Rates on six-month US dollar
forward contract In finance, a forward contract, or simply a forward, is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on in the contract, making it a type of derivative instrument.John C Hu ...
s fluctuated at 40–60%, short-term
currency swap In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. It ...
s averaged around 80% as the banks anticipated further drop in exchange rates.


Bank failures

On 15 September the KIT Finance brokerage failed to pay off its debt, signalling problems in Russia's financial sector. On 8 October the
Russian Railways Russian Railways or RZD () is a Russian fully state-owned vertically integrated railway company, both managing infrastructure and operating freight and passenger train services and has a near-monopoly on long-distance train travel in Russia. ...
and
Alrosa Alrosa () is a Russian group of diamond mining companies that specialize in exploration, mining, manufacture, and sale of diamonds. The company leads the world in diamond mining by volume. Mining takes place in Western Yakutia, the Arkhangels ...
agreed to acquire a 90% stake in KIT Finance. In the beginning of October Sergei Ignatyev, chairman of the Central Bank, announced imminent bankruptcy of 50 to 70 banks. Actually, in late August – late November the regulator has shut down only nine banks. More smaller banks showing signs of distress are allowed to operate, like the Moscow Mortgage Bank that defaulted on returning individual deposits in November. Regional banks, heavily dependent on individual deposits, were in particular hit. A
bank run A bank run or run on the bank occurs when many Client (business), clients withdraw their money from a bank, because they believe Bank failure, the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking sys ...
registered in
Bashkortostan Bashkortostan, officially the Republic of Bashkortostan, sometimes also called Bashkiria, is a republic of Russia between the Volga river and the Ural Mountains in Eastern Europe. The republic borders Perm Krai to the north, Sverdlovsk Oblast ...
in November caused local crises. Three of the four worst affected banks were promised rescue by their shareholders or third-party buyers; fate of the fourth one is yet to be decided.


Government intervention


Refinancing foreign capital

On 18 September,
Russian President The president of Russia, officially the president of the Russian Federation (), is the executive head of state of Russia. The president is the chair of the Federal State Council and the supreme commander-in-chief of the Russian Armed Forces. I ...
Dmitry Medvedev Dmitry Anatolyevich Medvedev (born 14 September 1965) is a Russian politician and lawyer who has served as Deputy Chairman of the Security Council of Russia since 2020. Medvedev was also President of Russia between 2008 and 2012 and Prime Mini ...
ordered ministers to inject 500 billion
roubles The ruble or rouble (; rus, рубль, p=rublʲ) is a currency unit. Currently, currencies named ''ruble'' in circulation include the Russian ruble (RUB, ₽) in Russia and the Belarusian ruble (BYN, Rbl) in Belarus. These currencies are su ...
of funds from the
state budget A government budget is a projection of the government's revenues and expenditure for a particular period, often referred to as a financial or fiscal year, which may or may not correspond with the calendar year. Government revenues mostly include ...
into the markets and pledged that the financial system would receive "all necessary support". On 7 October, Medvedev announced an additional $36 billion for banks on top of the $150 billion approved in September. On 29 September,
Vladimir Putin Vladimir Vladimirovich Putin (born 7 October 1952) is a Russian politician and former intelligence officer who has served as President of Russia since 2012, having previously served from 2000 to 2008. Putin also served as Prime Minister of Ru ...
announced a government policy aimed at refinancing Russian corporations that previously relied on foreign loans. Government authorized
Vnesheconombank Vnesheconombank or Vneshekonombank () is shorthand for the Bank for Bank for Foreign Economic Affairs, established in 1988 from the former Foreign Trade Bank of the USSR. It may refer to: * Vnesheconombank (USSR), a Soviet bank in activity from 19 ...
as its principal agent in distributing state loans to these corporations, amounting initially up to 50 billion US dollars, or 8% of Russia's foreign currency assets. At the same time Putin recommended the Central Bank to extend unsecured stabilization loans to Russian banks, which was duly implemented. The policy was immediately dubbed "soft re-
nationalisation Nationalization (nationalisation in British English) is the process of transforming privately owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization contrasts with priv ...
" and criticized for selective picking of "eligible" borrowers. The 50 billion installment covers only the current portion of 477 billion US dollars owed by Russian corporations to foreign lenders; total assets of the government and the Central Bank combined are estimated at 550 billion US dollars. On 23 October,
Standard & Poor's S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is co ...
changed the long-term outlook on the sovereign credit ratings of Russia from stable to negative, warning of the costs of bailing out troubled banks and a rising risk of a budget deficit in 2009. It also lowered Russia's Transfer and Convertibility (T&C) assessment to
BBB+ BBB may refer to: Codes * bbb, the ISO 639:b language code for Barai * BBB, a type of birdshot used in shotgun shells * BBB, BBB+, BBB−, investment grade Β bond credit ratings Arts and entertainment Film and television * '' Band Baaja Baara ...
from A−. At the same time, the 'BBB+' long-term foreign currency, the 'A−' long-term local currency ratings and the short-term ratings of
A-2 A2, A02, A002, A², A.II or A-2 may refer to: Biology and medicine * British NVC community A2 (Lemna minor community), a plant community * A2, the second anal vein in the Comstock-Needham system of insect wing segment naming Genes and proteins * ...
were affirmed. By 13 November, Russian government spending to quench the recession reached 222 billion US dollars, or 13.9% of its GDP; in November the state was spending its reserves at an average 22 billion dollars a week. On 8 December 2008, Standard & Poor's additionally lowered Russia's foreign currency credit ratings to BBB (long term) and A-3. It also lowered Russia's Transfer and Convertibility (T&C) assessment to BBB and the long-term local currency assessment to BBB+. On the other hand, the short-term credit rating in local currency was left intact as A-2. The lowering of credit ratings was caused by the sharp decline of reserves and investment flow. Standard & Poor's also launched a downward revision of Russian municipal and corporate bond ratings.


Tax and state budget policy

20 November
Vladimir Putin Vladimir Vladimirovich Putin (born 7 October 1952) is a Russian politician and former intelligence officer who has served as President of Russia since 2012, having previously served from 2000 to 2008. Putin also served as Prime Minister of Ru ...
announced government package of tax reforms. Corporate profit tax rate (24% in 2008) is to be reduced to 20%. Profit tax base will decrease for companies investing in capital assets as the immediately recoverable depreciation allowance is raised from 10% to 30% of the asset cost. There will be no change in
value added tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...
rates (maximum 18%) in 2009, but the government considered changing VAT accrual rules in favor of the taxpayers. Minister of finance
Alexey Kudrin Alexei Leonidovich Kudrin ( rus, Алексе́й Леони́дович Ку́дрин, p=ɐlʲɪkˈsʲej lʲɪɐˈnʲidəvʲɪtɕ ˈkudrʲɪn; born 12 October 1960) is a Russian liberal politician and economist. Previously he served as the C ...
, who resisted tax breaks until September, concurred with Putin's proposal, estimating that they will save the businesses around 500 billion roubles annually. Earlier in November, Kudrin announced that the state has accepted the fact of a long-term drop in oil prices and that the existing state budget plans will hold unchanged if the oil prices stabilize on 50 dollars per barrel mark. Even with tax breaks effective, Kudrin estimated that the 2009 state budget will break even or, in worst case, bear no more than 1% deficit. The deficit will be covered by Stabilisation Fund, without resorting to borrowing. In December the government lifted import tariffs on industrial equipment imported by metallurgy, construction, forestry and textile industry, at the same time enforcing increased tariffs on imported cars.


Corporate governance

Federal Financial Monitoring Service of Russia, the agency in charge of domestic stock markets and
corporate governance Corporate governance refers to the mechanisms, processes, practices, and relations by which corporations are controlled and operated by their boards of directors, managers, shareholders, and stakeholders. Definitions "Corporate governance" may ...
, pressed the corporations to reveal their true owners and signed an agreement with the government of
Cyprus Cyprus (), officially the Republic of Cyprus, is an island country in the eastern Mediterranean Sea. Situated in West Asia, its cultural identity and geopolitical orientation are overwhelmingly Southeast European. Cyprus is the List of isl ...
(20 November) that may enable inter-government disclosure of ownership records. Cyprus is, nominally, the number one investor in Russia; 99% of RTS stock trades are arranged between foreign shareholders.


International cooperation

Russia has agreed to co-finance
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
emergency loans to other states, initially contributing one billion US dollar. Earlier, in October, Russian ambassador to
Iceland Iceland is a Nordic countries, Nordic island country between the Atlantic Ocean, North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge between North America and Europe. It is culturally and politically linked with Europe and is the regi ...
announces that Iceland will receive a €4 billion loan from Russia to mitigate the
2008–2011 Icelandic financial crisis The Icelandic financial crisis was a major financial crisis, economic and political event in Iceland between 2008 and 2010. It involved the default (finance), default of all three of the country's major privately owned commercial banks in late 2 ...
. The loan will be given across three or four years, and the interest rates will be 30 to 50 points above
LIBOR The London Inter-Bank Offered Rate (Libor ) was an interest rate average calculated from estimates submitted by the leading Bank, banks in London. Each bank estimated what it would be charged were it to borrow from other banks. It was the prim ...
. Prime minister
Geir Haarde Geir Hilmar Haarde (; born 8 April 1951) is an Icelandic politician who served as prime minister of Iceland from 15 June 2006 to 1 February 2009, and as president of the Nordic Council in 1995. Geir was chairman of the Icelandic Independence Par ...
had been investigating the possibility of a loan provided by Russia since the mid-summer. Iceland's Central bank Governor
Davíð Oddsson Davíð Oddsson (pronounced ; born 17 January 1948) is an Icelandic politician, and the longest-serving prime minister of Iceland, in office from 1991 to 2004. From 2004 to 2005 he served as Ministry for Foreign Affairs (Iceland), foreign minis ...
later clarified that the loan was still being negotiated.


Russian economic crisis

At the end of November 2008, The Russian economy as a whole was not in a state of recession. The government forecast for 2009 stood at a 6.7% annual growth rate while a November 2008
World Bank The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
report projected 3% growth for 2009, However, a revised projection issued 30 March 2009 by the World Bank projects a 4.5% decrease for 2009 with unemployment projected to rise to 12% by the end of 2009. The World Bank report expressed concern about the condition of the poor and recommended increases in social support payments such as unemployment payments and child support payments. The report projected a slight rise in the average price of oil during 2010, up to $53 a barrel from the projected average of $45 for 2009. In the middle of December 2008 Russian officials confirmed that possibility of a recession was inevitable. "Russia is headed for a recession", the country's deputy economy minister,
Andrei Klepach Andrei Nikolayevich Klepach (; born March 4, 1959) is a Russian statesman. He has the federal state civilian service rank of 1st class Active State Councillor of the Russian Federation. In July 2014, he assumed the post of a chief economist of ...
, has said. Asked whether Russia would have a recession, he said: "It's started already. I'm afraid it will not be over in the next two-quarters. ... A major drop began in October and there will also be drops in November–December," he said, according to official reports. Recessions are normally declared after two-quarters of negative growth. He also said that full-year economic growth for 2008 would be lower than the 6.8% previously forecast.


Steel industry

Russian steel industry is dependent on foreign markets and domestic construction and automobile industries. Crisis in the industry was first publicly reported in the end of September – early October.
Magnitogorsk Iron and Steel Works Magnitogorsk Iron and Steel Works (), abbreviated as MMK, is an iron and steel company located in the city of Magnitogorsk, Russia. As of 2017, it was the 30th largest steel company in the world. In 2021, the company's revenue amounted to 786 bil ...
laid off 3,000 workers (10% of its Urals staff) and reduced output by 15% on 7 October, another layoff of 1,300 was announced in early November.
Severstal Severstal () is a Russian company mainly operating in the steel and mining industry, headquartered in Cherepovets. Severstal is listed on the Moscow Exchange and LSE and is the largest steel company in Russia. The company is majority-owned and ...
reduced domestic production by 25%; its US and Italian production dropped by 30%.
Evraz Group EVRAZ plc () is a UK-incorporated multinational steel manufacturing and mining company part-owned by Russian oligarchs. It has operations mainly in Russia as well as the USA, Canada, and Kazakhstan. Its listing on the London Stock Exchange (LSE ...
, employer of 40 thousands workers in
Kemerovo Oblast Kemerovo Oblast (, ), also known as Kuzbass (, ), after the Kuznetsk Basin, is a federal subjects of Russia, federal subject of Russia (an oblast). Kemerovo is the administrative center and largest city of the oblast. Kemerovo Oblast is one of Rus ...
, was reported negotiating layoffs with the unions and regional government since 30 October. The company, specializing in construction-grade rolled steel, was inherently in worse position than other Russian steel mills. 13 November Evraz announced that, instead of layoffs, it will decrease workers' wages by a third. Some of Evraz facilities were converted to a four-day working week; the company reduced output to an estimated 50–60% of its capacity. On 18 November
Goskomstat The Federal State Statistics Service (, abbreviated as Rosstat) is the governmental statistics agency in Russia. Since 2017, it is again part of the Ministry of Economic Development, having switched several times in the previous decades betw ...
insider reported an unprecedented drop in industrial prices – minus 6.6% monthly, following a 0.8% drop in September (the agency itself delayed its regular monthly report). Most of the losses concentrate in raw material industries; automobile and tool-making industries dropped only 0.4%. In two months, gasoline and diesel oil wholesale prices dropped by 12.8% and 16.5%. The worst price fall hit the steel industry: pig iron and ferric alloys dropped 21.7% in October after an 8.9% drop in September. Prices on aluminum and nickel are down to
break-even Break-even (or break even), often abbreviated as B/E in finance (sometimes called point of equilibrium), is the point of balance making neither a Profit (economics), profit nor a loss. It involves a situation when a business makes just enough reve ...
point. The decline is sufficient to indicate a
recession In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be tr ...
. In November the industry relied on government funds distributed through loans from
VTB Bank VTB Bank (; formerly known as ''Vneshtorgbank'', , lit. 'International Trade Bank') is a Russian majority state-owned bank headquartered in various federal districts of Russia; its legal address is registered as St. Petersburg. As of 2022, ...
. VTB issued a 10 billion roubles emergency loan to Evraz to finance its current tax payments; a similar 5 billion loan was issued to
OAO TMK "TMK" () () is a leading global manufacturer and supplier of steel pipes, tubular solutions and related services for the oil and gas industry, and specialty tubular products and pipeline systems for the nuclear, chemical, mechanical engineering ...
. Magnitka was reported "in the line" for VTB financing. The industry continued to implode, and on 14 and 18 November
Novolipetsk Steel Novolipetsk Steel, or NLMK, is one of the four largest steel companies in Russia. NLMK's share of domestic crude steel production is about 21%. It primarily produces flat steel products, semi-finished steel products and electrical steels. NLMK a ...
shut down two of its five
blast furnace A blast furnace is a type of metallurgical furnace used for smelting to produce industrial metals, generally pig iron, but also others such as lead or copper. ''Blast'' refers to the combustion air being supplied above atmospheric pressure. In a ...
s, reducing its
pig iron Pig iron, also known as crude iron, is an intermediate good used by the iron industry in the production of steel. It is developed by smelting iron ore in a blast furnace. Pig iron has a high carbon content, typically 3.8–4.7%, along with si ...
capacity by 2.5 million metric tons, or 27%. On the same day Novolipetsk Steel denied steel shipments to
GAZ Gaz may refer to: Geography *Gaz, Kyrgyzstan Iran * Gaz, Darmian, village in South Khorasan province * Gaz, Golestan, a village in Bandar-e Gaz County * Gaz, Hormozgan, a village in Minab County * Gaz, Kerman, a village * Gaz, North Khorasan, a ...
due to automobile maker's default on payments.


Automotive industry

In June 2008 ''
The Economist ''The Economist'' is a British newspaper published weekly in printed magazine format and daily on Electronic publishing, digital platforms. It publishes stories on topics that include economics, business, geopolitics, technology and culture. M ...
'' described "Russia's booming car market" as a place where "you just need someone to count the money". In November the market slowed to its lowest since January 2007.
AC Nielsen NIQ (also known as NielsenIQ, formerly known as ACNielsen or AC Nielsen) is a global marketing research firm, with worldwide headquarters in Chicago, Illinois, United States. The company has approximately 30,000 employees and operates in more ...
linked the market drop to a collapse in
auto loan Car finance refers to the various financial products which allow someone to acquire a car, including car loans and leases. History Car financing started with the General Motors Acceptance Corporation circa World War 1. Car purchases T ...
programs and general uncertainty among consumers, and predicted that unless auto loans recover, the market will slide back into the 1990s. The government supported domestic auto makers by an increase in
tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
s on imports, leading to an expected 7.5–8% price increase for imported cars.
GAZ Gaz may refer to: Geography *Gaz, Kyrgyzstan Iran * Gaz, Darmian, village in South Khorasan province * Gaz, Golestan, a village in Bandar-e Gaz County * Gaz, Hormozgan, a village in Minab County * Gaz, Kerman, a village * Gaz, North Khorasan, a ...
and KAMAZ were the first auto makers to declare production cuts in September–October 2008. GAZ truck production has decreased by 23.4% in September 2008; in October the company announced week-long shutdowns of the main assembly line to meet decrease in demand for its most successful line, the
GAZelle A gazelle is one of many antelope species in the genus ''Gazella'' . There are also seven species included in two further genera; '' Eudorcas'' and '' Nanger'', which were formerly considered subgenera of ''Gazella''. A third former subgenus, ' ...
truck. KAMAZ, the target of acquisition by
Daimler AG Mercedes-Benz Group AG (formerly Daimler-Benz, DaimlerChrysler, and Daimler) is a German multinational automotive company headquartered in Stuttgart, Baden-Württemberg, Germany. It is one of the world's leading car manufacturers. Daimler-B ...
since July, has been reporting financial difficulties since September. In October KAMAZ reduced working hours by a third, from six-day to four-day working week. KAMAZ requested a 15 billion rouble state-backed loan and took a private loan from
Citigroup Citigroup Inc. or Citi (Style (visual arts), stylized as citi) is an American multinational investment banking, investment bank and financial services company based in New York City. The company was formed in 1998 by the merger of Citicorp, t ...
at 9% over
prime rate The prime rate or prime lending rate is an interest rate used by banks, typically representing the rate at which they lend to their most creditworthy customers. Some variable interest rates may be expressed as a percentage above or below prime ra ...
; in December Daimler AG acquired the first 10% in KAMAZ stock, citing "perfect storm" as a good time acquisition.
AvtoVAZ AvtoVAZ ( rus, АвтоВАЗ, p=ɐftɐˈvas) is a Russian automobile manufacturing company owned by the state. It was formerly named as VAZ (), an acronym for Volga Automotive Plant in Russian (). AvtoVAZ is best known for its flagship series of ...
disclosed emergency measures on 16 October, when
Igor Sechin Igor Ivanovich Sechin (; born 7 September 1960) is a Russian entrepreneur and a government official, considered a close ally and "de facto deputy" of Vladimir Putin. Sechin has been a confidant of Russian leader Vladimir Putin since the early ...
held an industry-wide anti-crisis brainstorming session in Togliatti. AvtoVAZ reported a stockpile of 100 thousands unsold cars (two months' output). The company requested government assistance of 1 billion US Dollars arranged through a VTB loan. Unlike other major borrowers who used VTB loans to substitute foreign capital, AvtoVAZ loan was intended solely to pay current expenses.
AvtoFramos Renault Russia ( rus, Рено Россия, Reno Rossiya, rʲɪˈno rɐˈsʲijə), known until 2014 as Avtoframos (), was a Russian automotive company established in 1998 by the Moscow city and Renault. It was a wholly owned Renault subsidiary f ...
, Moscow-based manufacturer of
Renault Logan Renault S.A., commonly referred to as Groupe Renault ( , , , also known as the Renault Group in English), is a French multinational automobile manufacturer established in 1899. The company currently produces a range of cars and vans. It has ...
, has confirmed that instead of a planned weekly New Year holiday, the plant will stop for a month, 12 December 2008 to 12 January 2009. Trade unions asserted that AvroFramos has practiced short-time stoppages in November; plant administration refuted these statements. According to the unions, unsold stock reached 8 thousand cars, a month's output of the plant. Amtel-Vredestein has closed two of its
tire A tire (North American English) or tyre (Commonwealth English) is a ring-shaped component that surrounds a Rim (wheel), wheel's rim to transfer a vehicle's load from the axle through the wheel to the ground and to provide Traction (engineeri ...
plants due to cash flow problems. On 2 December media announced closure of
Bor Glass Works Bor may refer to: Places Populated places * Bor (Tachov District), a town in Plzeň Region, Czech Republic * Bor, Petnjica, Montenegro * Bor, Russia, the name of many inhabited localities in Russia * Bor District, a district in Serbia ** Bor, S ...
, the principal supplier of auto glass, but the news was soon refuted as false by the plant administration.


Construction and real estate

In the first half of 2008 Russian construction industry, apparently immune of the global financial squeeze, grew by 22% in nominal money compared to 2007. In September–October Mirax Group, Sistema Hals, ST Group and other real estate developers announced freezing of future projects and intention to dispose of ongoing projects in early stages, citing an unacceptable increase in interest rates and uncertain demand. According to a Mirax executive, "our clients are panicking, and that is affecting our business", "... bank financing for developers has practically ceased". Developers and builders of a lesser scale are facing a "struggle to survive", especially in regional cities. In October 2008
Orenburg Orenburg (, ), formerly known as Chkalov (1938–1957), is the administrative center of Orenburg Oblast, Russia. It lies in Eastern Europe, along the banks of the Ural River, being approximately southeast of Moscow. Orenburg is close to the ...
construction executive described regional business prospects as "very bad", notably the fact that "there is no single bank for today which grants
mortgage loan A mortgage loan or simply mortgage (), in civil law (legal system), civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners t ...
s... Construction industry will not survive under such terms." 27 October Vladimir Putin urged the government agencies to increase state purchases of road and housing construction services, arguing that the state must capitalize on the decrease in prices of raw materials. The state allocated 50 billion roubles to buy ready-to-occupy urban housing from cash-strapped developers. Putin emphasized that the new contracts must be struck on new, decreased, price terms – estimated to be 20–30% cheaper than in spring.
Strabag STRABAG SE is an Austrian international technology group for the built environment based in Spittal an der Drau, Austria, with its headquarters in Vienna. It is the largest construction company in Austria and one of the largest construction comp ...
executive estimated that in 2009 construction costs will decrease a further 30%. In November Moscow city government has been successfully pressing local developers for a 25% discount against October
auction An auction is usually a process of Trade, buying and selling Good (economics), goods or Service (economics), services by offering them up for Bidding, bids, taking bids, and then selling the item to the highest bidder or buying the item from th ...
prices; the only developer who attempted to sue the city for a breach of contract withdrew their lawsuit and accepted the government terms. City government also pulled out of the 118-floor Russia Tower project, which was immediately suspended by its developer, citing "credit crunch".


Other industries

In November, the volume of Russian paper exports to China decreased by 30–40%, coupled with a 30% drop in prices. Exports to Western Europe fare marginally better, with an estimated 25–40% drop in production volumes. Russia's largest producer of industrial paper bags, Segezh Paper Mill (controlled by the
Bank of Moscow The Bank of Moscow () was a Russian bank that provided banking services to both corporate and retail customers until May 2016. Headquartered in Moscow, the bank had 267 outlets, including branch offices and cash desks. BoM had over 114,000 corpor ...
and the City of Moscow), declared a ten-day shutdown on 24 November. UPM-Kymmene Oyj anticipates at least a 30–40% decrease in output compared to 2008. In June 2010, President Dmitry Medvedev visited Silicon Valley in San Jose, California in order to cultivate ideas of how to develop Russia as a major research center. Skolkovo, a mid-sized city near Moscow, is the proposed location for this Russian Silicon Valley, and will have its own tax structure. Yet, Medvedev has been criticized by opposition politicians for deflecting attention away from the struggling economy and corruption.


Airlines

In June–August 2008 the fleet of KrasAir, a
Krasnoyarsk Krasnoyarsk is the largest types of inhabited localities in Russia, city and administrative center of Krasnoyarsk Krai, Russia. It is situated along the Yenisey, Yenisey River, and is the second-largest city in Siberia after Novosibirsk, with a p ...
-based airline with a controlling state interest, was grounded by the fuel suppliers' refusal to extend credit to the company that defaulted on payments. Other members of AiRUnion consortium, notably Dalavia, also folded in August. Thousands of passengers were stranded in airports; flight delays and cancellations became a national agenda. Government action focused on setting the cap on
jet fuel Jet fuel or aviation turbine fuel (ATF, also abbreviated avtur) is a type of aviation fuel designed for use in aircraft powered by Gas turbine, gas-turbine engines. It is colorless to straw-colored in appearance. The most commonly used fuels for ...
prices and restructuring its assets into a new company managed by Rostechnologii, a newly formed state conglomerate. Ministry of Transportation distributed the licenses to fly former KrasAir routes to other companies. KrasAir also defaulted on payments to its staff, and on 27 October a
strike action Strike action, also called labor strike, labour strike in British English, or simply strike, is a work stoppage caused by the mass refusal of employees to Working class, work. A strike usually takes place in response to employee grievances. Str ...
, coupled with fuel suppliers' denial of service, finally ruined the airline. Dalavia lost its license earlier in October. The collapse of KrasAir also threatened
Sky Express Sky Express may refer to: * Sky Express (Greece), a Greek airline * Sky Express (Russia), a defunct Russian airline {{disambiguation ...
, Russia's first
low cost carrier A low-cost carrier (LCC) or low-cost airline, also called a budget, or discount carrier or airline, is an airline that is operated with an emphasis on minimizing operating costs. It sacrifices certain traditional airline luxuries for cheaper fa ...
co-owned by the
EBRD The European Bank for Reconstruction and Development, shortened to EBRD ( French: ''Banque européenne pour la reconstruction et le développement'' or ''BERD''), is an international financial institution founded in 1991 in Paris. As a multilat ...
and former manager of KrasAir. 22 October the assets of bankrupt KrasAir,
Domodedovo Airlines JSC Domodedovo Airlines ( ''OAO Aviakompaniya Domodedovskiye Avialinii'') was an airline with its head office on the grounds of Domodedovo International Airport in Domodedovsky District, Moscow Oblast, Russia. It operated scheduled flights with ...
, Samara Airlines and
Atlant-Soyuz Airlines Atlant-Soyuz Airlines (), known as Moscow Airlines () during 2010-2011, was an airline based in Moscow, Russia, that operated domestic and international passenger flights out of Vnukovo International Airport from 1993 to 2011. History OJSC ...
were consolidated in a new company, Rosavia, co-financed by the City of Moscow and Rostekhnologii. Rossiya, Orenair, Kavminvodyavia, Vladivostok Air, Dalavia and
Saravia Saratov Airlines (Saratov Airlines Joint Stock Company, , ''Saratovskiye avialinii'') was a Russian airline headquartered in Saratov and based at Saratov Tsentralny Airport. The company ceased operating on 30 May 2018 after the Russian aviation ...
were originally planned to join this proposed airline holding company, too, which would have made Rosavia the largest Russian airline by fleet size. Following a 20 percent drop of domestic passenger numbers in Russia per month, the
federal government A federation (also called a federal state) is an entity characterized by a political union, union of partially federated state, self-governing provinces, states, or other regions under a #Federal governments, federal government (federalism) ...
scrapped all plans concerning the new airline on 5 March 2009.


Agriculture, food industry and retail

Russia had a high grain harvest in 2008, but so it was elsewhere in the world, bringing the prices down. To support the trade,
Dmitry Medvedev Dmitry Anatolyevich Medvedev (born 14 September 1965) is a Russian politician and lawyer who has served as Deputy Chairman of the Security Council of Russia since 2020. Medvedev was also President of Russia between 2008 and 2012 and Prime Mini ...
authorized a state export subsidy of 40 US dollars per
metric ton The tonne ( or ; symbol: t) is a unit of mass equal to 1,000 kilograms. It is a non-SI unit accepted for use with SI. It is also referred to as a metric ton in the United States to distinguish it from the non-metric units of the sh ...
. This, according to the minister of agriculture, is sufficient to maintain exports at 20–25 million metric tons. The food industry is, however, locked between high costs of farm produce and tight price and credit terms dictated by retail chains. Food industry executives anticipate that the chains will eventually lose part of their clients to street markets, as the suppliers are forced to develop this independent sales channel. Domestic retail chains, heavily leveraged, were experiencing
liquidity crisis In financial economics, a liquidity crisis is an acute shortage of ''liquidity''. Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrow ...
at least since April 2008. The first chain to go bankrupt in May 2008, Grossmart (190 stores in Moscow region), had a particularly high debt-to-
EBITDA A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, pronounced ) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandat ...
ratio of 6 to 1. Arbat Prestige, subject to government attacks since 2007, defaulted on its bonds in June. In November 2008 nine leading food retail chains (out of nearly 300) received access to government-backed financing. Nevertheless, retailers are pressing food suppliers for longer credit terms or bigger cash discounts, demanding up to 50% price cut for cash payment. Suppliers, in a mirror move, raised "regular" credit prices by 20–60%. Rather than submit to the chains' demands, they simply refuse to sell; visible depletion of stocks has affected only a few affected chains.


Social impact


Unemployment

A proprietary
Ernst & Young EY, previously known as Ernst & Young, is a multinational corporation, multinational professional services partnership, network based in London, United Kingdom. Along with Deloitte, KPMG and PwC, it is one of the Big Four accounting firms, Big F ...
survey of 113 clients that leaked into Russian press in November summarized their losses at 8% of managerial and 6% of low-level jobs by end of October. All companies in the survey practiced some sort of reducing labor costs. One company in four practiced unpaid "vacations"; 8% of clients settled for reduced working hours. Federal Migratory Service announced in November that 1123 Russian companies reported upcoming layoffs of 45 thousand. Most layoffs were reported in metallurgy and financial services: 20% in Uralsib, 1000 in Vneshtorgbank's VTB24 retail division. 1 December
Vedomosti ( rus, Ведомости, p=ˈvʲedəməsʲtʲɪ, ) is a Russian-language business daily newspaper published in Moscow. History was founded in 1999 as a joint venture between Dow Jones, who publishes ''The Wall Street Journal''; Pearson, ...
reported upcoming 40% cuts in
MDM Bank MDM Bank (), is a former Russian commercial bank that operated from 1993 until it was merged in 2017 with B&N Bank. MDM-Bank was one of Russia's largest private banks originally based in Moscow. In 2009 it merged with URSA, was renamed and moved ...
and 80% in IFD Kapital.
Sberbank The Public JSC Sberbank (, initially a contraction of ) is a Russian majority state-owned banking and financial services company headquartered in Moscow. As the Russian successor entity of the State Labor Savings Banks System of the USSR, it was ...
endorsed a long-term program to reduce headcount by 25% in 2014. In telecommunications,
Sitronics Sitronics () is a Russian microelectronics company owned by Sistema Holdings. Based in Moscow, its main products are electronics fabs. It has R&D facilities NIIME and Mikron in Zelenograd, and other facilities elsewhere in Eastern Europe. His ...
laid off up to 10% in all business units; in audit services,
Deloitte Touche Tohmatsu Deloitte is a Multinational corporation, multinational professional services network based in London, United Kingdom. It is the largest professional services network in the world by revenue and number of employees, and is one of the Big Four a ...
reduced number of partners in its Russian division by 17 out of 180. Vedomosti has set up a private "layoff newsreel" syndicating independent reports of job cuts, yet as at 7 December 2008, there are no reliable nationwide statistics on white-collar unemployment, which usually escapes official unemployment record. By late November, Kremlin First Deputy Chief of Staff,
Vladislav Surkov Vladislav Yuryevich Surkov (; born 21 September 1964) is a Russian politician and businessman. He was First Deputy Chief of the Russian Presidential Administration from 1999 to 2011, during which time he was often viewed as the main ideologis ...
, was warning that the middle classes should be defended from poverty during the crisis. He called for swift measures to protect the middle class from layoffs and to support consumption. "If the 1980s were the times of the intellectuals and the 1990s were the times of the oligarchs then the 00s can be seen as the epoch of the middle classes,' Surkov said in a speech published on the Web site of the ruling United Russia party ... The main task of the state during the slump must become the preservation of the middle class, the defence of the middle class from the waves of poverty and confusion that are coming from the West," he said. According to official statements released 9 December, rate of unemployment growth peaked in the middle of November and slowed down in subsequent weeks. In the week ending 3 December overall unemployment grew by 1.6% to 1.315 million people, following a 2.3% increase in the preceding week. The state also reported an increase in unpaid vacations and reduced working week employees to 149.3 thousands. The number increased by 84% in a single week ending 3 December. The trade unions anticipate that official unemployment will peak at around 2 million people in 2009, when hidden forms of unemployment become visible to statisticians. Yet on 12 December Putin announced completely different unemployment numbers – 4.6 million in October. In February 2009 the unemployment rate peaked at a seven-year high of 9.4%, then began to steadily decline, falling to 7.7% as of October.


Consumer price inflation

Official consumer price inflation in January–August 2008 reached 14.8%. By the end of November, food price inflation for an 11-month period reached 15.3%. Overall price inflation, taking into account consumer and industrial prices, reached 12.5% compared to 10.6% for the same period of 2007. Decline in short-term inflation was credited to a reduction in monetary supply. Inflation slowed through 2009 with a year on year rate of 9.1% as of November, down from 13.8% a year earlier.Russian inflation rates
Bloomberg Bloomberg may refer to: People * Daniel J. Bloomberg (1905–1984), audio engineer * Georgina Bloomberg (born 1983), professional equestrian * Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician a ...
Retrieved on 16 December 2009


See also

*
1998 Russian financial crisis The Russian financial crisis (also called the ruble crisis or the Russian flu) began in Russia on 17 August 1998. It resulted in the Russian government and the Russian Central Bank devaluing the Russian rouble, ruble and sovereign default, defau ...
*
2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...
*
Great Recession The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009.
* 2008 Latvian financial crisis *
2000s commodities boom The 2000s commodities boom, commodities super cycle or China boom was the rise of many physical commodity prices (such as those of food, oil, metals, chemicals and fuels) during the early 21st century (2000–2014), following the Great Commoditie ...
*
Russian financial crisis (2014–2016) The financial crisis in Russia in 2017 (from 2014) was the result of the sharp devaluation of the Russian rouble beginning in the second half of 2014. A decline in confidence in the Economy of Russia, Russian economy caused investors to sell ...


References


External links


World Bank's Russian Economic Reports, April. 2015Russia's actions during the crisis compared to those of other countriesMoscow Interbank Currency Exchange Official site
{{Dmitry Medvedev R01 Economic history of Russia
Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...
2008 in Russia 2009 in Russia
Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...
2000s in economic history R01 Stock market crashes Financial crises 2000s in Russia 2010s in Russia Recessions Vladimir Putin