Carnegie Moscow Center
Russian banking system needs a supervisory authority independent of the central bank. Retail banks should be prohibited from investing in non-liquid assets, while the liquid securities market should be saved for investors
Transitional institutions cannot be effective unless economic agents are confident that the state will fulfill its commitments and that the rules of the game do not depend on the discretion of a ruler. Empirical evidence shows that democracy protects investors from expropriation better than dictatorships do, thereby resulting in faster economic growth.
Watching the drama of Russia’s private banks collapsing one by one naturally triggers fear: of more than 3,000 registered banks, about 2,600 have already lost their licenses. After the bailout of Otkritie and BIN, the government’s share in Russia’s banking system assets exceeds 80 percent. Fixing Russia’s banking system requires addressing the deep and systematic flaws in the central bank and the financial sector at large.
Andrey Movchan explains what lessons Russia can learn from Mexico, the United Arab Emirates, and Venezuela to deal with the perennial “resource curse.”
Authors of more recent studies almost unanimously state that even though it’s unclear whether the resource curse generally menace on average over the group of resource-rich countries, it definitely threatens nations with weak institutions.
Having found itself in a lose-lose situation, the West will most probably do nothing—keeping sanctions in place and freezing the situation. The Kremlin will be happy. Russia won’t stop meddling in Ukraine or give up Crimea.
The budget clearly illustrates its authors’ thinking. They fear popular discontent and so don’t want to risk taking unpopular steps. The regime’s main goal is short-term stability, so it keeps supporting the paternalistic governing model, which is increasingly trapped in the cycle of social spending.
Talk of an impending economic collapse in Russia is misplaced. The Reserve Fund is doing what it was built to do—cushioning the economy from the shock of falling oil and gas prices and giving it time to adjust to new conditions.
In the past, business deals could be secured if Putin endorsed them personally. Now, the Russian president seems to have stopped making promises to anyone; no deal is ironclad anymore.
The Russian government has ambitious plans to rebuild the country’s aviation industry. Despite state subsidies for manufacturers, leasing companies, and buyers, however, Russian planes aren’t selling abroad—even in countries like Iran, with which Moscow has strong political ties.