Russia, already battling a recession, is shielded from any direct impact from the crisis in Greece even as the turmoil feeds through via volatile oil prices, Economy Minister Alexei Ulyukayev said.
While the risk of a Greek exit from the euro is “considerable,” Ulyukayev put its probability at below 50 percent. Ruble weakness as a result of declining oil prices will be temporary, and a rate of 55 to the dollar, plus or minus 2-3 rubles, is the currency’s “natural” level, Ulyukayev said in Moscow during talks between officials from BRICS countries.
Russia is enduring its first recession since 2009 after energy prices fell and sanctions over Ukraine curbed financing. While eastern European nations such as Bulgaria and Romania have direct ties to Greece through banking, Russia is more insulated. Its lenders hold almost no Greek debt, according to Ulyukayev.
President Vladimir Putin has steered clear of offering financial aid to Greece, preferring to focus instead on joint projects and investments. Last month, Russia signed a preliminary agreement on building a 2 billion-euro ($2.2 billion) natural gas pipeline through the Mediterranean country.
Ulyukayev reiterated that Greece hasn’t asked for aid and said the question of using the financial infrastructure of the BRICS group to help outside countries isn’t on the agenda. Officials in Moscow have denied inviting Greece to become the sixth member of the BRICS’s $50 billion New Development Bank, which will start operating next year.
The leaders of Brazil, Russia, China, India and South Africa will meet for talks at the July 8-9 BRICS summit in Ufa, Russia. The group, which represents more than a fifth of the global economy, will discuss its plans to create a development bank and a foreign-exchange reserve.
The $100 billion currency pool “in effect amounts to diversification” of Russia’s international reserves, even though its participation won’t be classified as such, Ulyukayev said. Russia will contribute $18 billion, as will Brazil and India. China’s contribution will be $42 billion.
As the BRICS officials met for pre-summit talks in Moscow, oil traded near its lowest level since April on concern over economic stability in Europe and China, and as talks continued that could restore Iran’s sanctioned crude exports. The ruble headed for a three-month low versus the dollar and was 1 percent weaker at 57.4370 at 4:16 p.m. in Moscow.
There’s potential for a further cut in the Bank of Russia’s key interest rate, said Ulyukayev, a former first deputy central bank governor who handled monetary policy and was a candidate to take over the regulator two years ago.
The inflation outlook means there’s “room for several percentage points” of rate cuts, according to Ulyukayev. Price growth may end the year at about 10.5 percent on an annual basis, slowing to about 7 percent by next April, he said.
Russian capital outflows may reach $90 billion this year, less than forecast, Ulyukayev said.