Russia

Russia’s sufficient reserves and flexible monetary policy ensures the country’s financial stability for now, but a possible interest-rate increase in the U.S. and unpredictable oil prices keep the central bank ready to intervene, the Bank of Russia said Tuesday. Facing soaring inflation and a contracting economy, the Bank of Russia has been increasingly active in adjusting its monetary policy over the past months in an attempt to preserve financial stability, The Wall Street Journal reported.

Russian steel and coal producer Mechel has agreed to the terms for restructuring its debt with VTB, the country's second-largest bank said on Thursday, Reuters reported. Separately larger rival Sberbank said it had found two prospective buyers for its share of Mechel's debt. Controlled by businessman Igor Zyuzin, Mechel has been in discussions for months with its main lenders, including VTB, Sberbank and Gazprombank, over a restructuring of debts which at the end of last year were estimated to total $7 billion.

Russia on Wednesday demanded the timely repayment of all debts owed to it by Ukraine and accused Kiev of effectively preparing the way for default with a new law. It threatened to take the issue to international courts if necessary. The law, approved by Ukraine's parliament on Tuesday, gives the government the right to miss payments to its international creditors as it wrangles over the terms for restructuring $23 billion worth of foreign debt. Russia holds a $3 billion Ukrainian Eurobond whose full repayment is due by the end of the year.

Russia’s economy contracted 2 per cent last quarter, prime minister Dmitry Medvedev said, saying the country faced unprecedented challenges from a plunge in oil prices and sanctions imposed over Ukraine, the Irish Times reported. The downturn was “most acute” at end-2014 and the start of this year, Mr Medvedev told lawmakers in Moscow. The decline in gross domestic product is the first since a contraction in 2009. The economy of the world’s largest energy exporter is entering a recession after an almost 50 per cent crash in oil prices and the ruble’s worst crisis since 1998.

Determined to take Greek-Russian relations out of “the deep freeze”, a defiant Alexis Tsipras flew to Moscow yesterday for talks with president Vladimir Putin, ratcheting up the pressure on the western creditors keeping his debt-stricken country afloat, the Irish Times reported. Amid speculation that Mr Putin might make an offer of financial help that the Greek prime minister will find hard to turn down, officials said the controversial trip should be seen through the prism of Athens’s leftist-led government doing “what is best for Greece”.

Russia's VTB bank and Gazprombank are holding talks on the restructuring of mining giant Mechel's debt, along with other Russian banks, VTB head Andrei Kostin announced on Monday, Sputnik News reported. "We are working with Mechel, discussions continue, we are also holding talks with other banks, including Gazprombank, trying to find some kind of a solution, but so far I cannot say that we have a deal," Kostin said. According to the VTB head, Mechel's readiness to pay off its overdue debt is a positive development.

With the prospect of a default looming in Greece, Prime Minister Alexis Tsipras is preparing to meet next week with President Vladimir V. Putin of Russia as a European deal to give more aid to Athens falters, the International New York Times reported. The timing has raised questions of whether the visit is an ordinary component of the new Greek government’s multipronged foreign policy, or a pivot toward Russia for financial aid in the event that Greece’s talks with European officials collapse.

Facing Western sanctions and low oil prices, Russian companies are lining up for subsidies from the government. But the demand for bailouts is quickly outstripping the supply of money, raising the prospect of an economic crisis here if the funds run out, the International Herald Tribune reported. With the economy flailing, the Russian government set up a corporate bailout program last year, tapping one of the country’s sovereign wealth funds. Almost immediately, companies started applying. The state-owned oil giant Rosneft has requested $21.3 billion.

Russia’s inflation rate has accelerated to levels last seen in 2002, leaving the central bank with a policy conundrum as the economy slides into a recession, The Wall Street Journal reported. Hit by a rapid drop in the price of oil, Russia’s chief export, the country faces an economic and financial crisis similar to the one endured in 2009. But unlike six years ago, the country has been cut off from global capital markets because of Western sanctions imposed after Moscow’s annexation of Ukraine’s Crimean peninsula.

Russia sharply raised the amount it plans to draw from its reserve fund to support this year’s budget, as revenues fall along with oil prices and Western sanctions cut the country off from international financing, The Wall Street Journal reported. In addition to tapping the fund—money the government put aside in the years when oil prices were high—spending by ministries and departments will be cut 10% to keep the deficit from growing too much, Finance Minister Anton Siluanov said Friday.