Ex-minister Kudrin warns of 'full-fledged crisis' in Russia

Mon Dec 22, 2014 5:07pm EST
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By Darya Korsunskaya, Lidia Kelly and Katya Golubkova

MOSCOW (Reuters) - Russia's government has pushed the country into an economic crisis by not tackling its financial problems fast enough, former finance minister Alexei Kudrin said on Monday, as evidence mounted of trouble spreading through the economy.

The central bank bailed out its first victim of the collapsing currency, authorities announced a tax on grain exports to protect domestic stocks and a Reuters poll of 11 economists predicted that Russia's gross domestic product would fall 3.6 percent next year.

Russia has been hit by what Economy Minister Alexei Ulyukayev recently called a "perfect storm" of plummeting oil prices, sanctions related to its military action in Ukraine, and a flight of investors' capital -- made worse by a lack of structural reforms that means the economy is overwhelmingly dependent on oil revenues..

Kudrin, one of few to criticize President Vladimir Putin, said he believed the decline in the rouble could be attributed primarily to the sanctions, imposed following Russia's annexation of Ukraine's Crimea region and its subsequent support for loyalist fighters in the east.

Putin discussed the Ukraine crisis with the leaders of Germany, France and Ukraine by telephone on Monday, the Kremlin said, noting that a ceasefire had largely held in eastern Ukraine in recent days.

It said the leaders had emphasized the importance of removing heavy weapons and exchanging prisoners, but gave no indication of whether a breakthrough had been reached.

Government officials have tried to minimize the impact of sanctions on the country and its rouble currency, which plunged 80 percent against the dollar last week despite a hike in interest rates to 17 percent. Putin has claimed "external factors" like oil were the key culprit behind the country's "tough times".

Kudrin -- a darling of investors who is credited with building Russia's $170 billion sovereign wealth funds -- warned that Russia risked having its debt downgraded to junk status in 2015.   Continued...

Russia's former Finance Minister Alexei Kudrin attends the Reuters Russia Investment Summit in Moscow September 22, 2014. REUTERS/Sergei Karpukhin