Russia is bracing for further unrest as the rouble on Friday slid to a new low against the euro after a succession of moves to devalue its currency.
A cut on Friday extended six weeks of devaluations by Russia’s central bank designed to offset the impact of the global economic crisis and falling oil prices as the country’s main export commodity approached its lowest level since 2004.
Mikhail Gorbachev, the former Soviet leader, warned Russia faced “unprecedentedly difficult and dangerous circumstances” and could be “heading into a black hole”. “It is not clear what the fate of our rouble will be or if society has sufficient financial and moral resources,” he said.
After the depreciation, which was the eighth so far this month, the rouble declined as much as 1.2 per cent to Rbs29.06 versus the dollar on Friday, a four year low. The rouble has now lost nearly 20 per cent of its value against the US currency since August.
Analysts at Barclays Capital said the best case scenario would see Russian policymakers, facing the mounting evidence of a recession, allowing a one-off depreciation of 10 per cent or more.
The rouble’s slide comes as the government faces scrutiny over its policies. A demonstration earlier this month in the far eastern city of Vladivostok marked the first major challenge to the Kremlin since the onset of the global financial crisis.
Mikhail Sukhodolsky, a deputy interior minister, warned on Christmas Eve that there could be further protests. “The situation may be exacerbated by a growth in frustration of workers over the non-payment of wages or those threatened with dismissal,” he said.
His remarks coincided with criticism of the Kremlin’s rough handling of the protests in Vladivostok. Moscow-based Omon riot police detained about 61 people in the protests against car import duties designed to prop up domestic car producers, but making foreign vehicles prohibitively expensive for ordinary Russians.
Mikhail Kasyanov, the former prime minister who now leads the liberal People’s Democratic Union opposition movement, said that an unspoken social contract between the government and the people, swapping political freedoms for prosperity and consumer goods, had broken down.
“It was a deal,” he told the FT in an interview this week. “But it has fallen apart and that is why people are appearing on the streets. The process has started . . . Things could spin out of control when people wake up and realise their neighbours have lost their jobs and they are at risk of losing theirs.” He added that “the authorities had reacted “cynically and in a very nervous manner for nothing,” against a peaceful demonstration.
Boris Gryzlov, the pro-Kremlin speaker of parliament, on Friday accused the opposition of provoking the demonstration.
Moscow, which has pledged $200bn to mitigate the effects of the economic downturn, late on Thursday published a list of 295 strategic enterprises entitled to preferential government support.
Amid suspicions that the money will not be distributed transparently, the government said the list published on its website was not complete and did not guarantee financial support for those on it.
By Isabel Gorst in Moscow and Anuj Gangahar in New York
Published: December 26 2008 19:53 | Last updated: December 26 2008 19:53
Source: Financial Times