Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

Running From the Ruble

The cause of Russia’s “Black Monday” was readily apparent: the government bailout of state-owned Rosneft, the country’s largest oil company. Usually, bailouts calm markets; but this one recalled early post-Soviet experiments, when the Central Bank of Russia issued direct loans to enterprises – invariably fueling higher inflation.

PARIS – In recent weeks, the fall in the Russian ruble and Russian stock markets closely tracked the declines in global oil prices. But everything changed on December 15. The oil price remained stable, but the ruble and the stock-price indices lost 30% in the subsequent 24 hours. An unprecedented effort by the Central Bank of Russia (CBR) in the wee hours of December 16 to stabilize the ruble, by hiking the interest rate from 10.5% to 17%, proved useless.

The cause of Russia’s “Black Monday” was readily apparent: the government bailout of state-owned Rosneft, the country’s largest oil company. Usually, bailouts calm markets; but this one recalled early post-Soviet experiments, when the CBR issued direct loans to enterprises – invariably fueling higher inflation. The CBR’s governor at the time, Viktor Gerashchenko, was once dubbed the world’s worst central banker.

In 2014, the CBR is more constrained than it was in Gerashchenko’s era: it cannot lend directly to firms. Yet it has also become more sophisticated at achieving the same ends that Gerashchenko sought.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/PiWZiML;
  1. elerian122_Peter MacdiarmidGetty Images for Somerset House_bigdatascreentechman Peter Macdiarmid/Getty Images for Somerset House

    Adapting to a Fast-Forward World

    Mohamed A. El-Erian

    The world is going through a period of accelerating change, as four secular developments illustrate. Firms and governments must make timely adjustments, not only to their business models and operational approaches, but also to both their tactical and strategic mindsets.

    12

Edit Newsletter Preferences