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Russia's economy plummeting

The oil business is important for both sides - around 33 percent of all German crude oil imports came from Russia in 2018. Despite the sanctions, the share of Russian coal in Germany's total coal imports rose by as much as 12 percentage points to 36 percent between 2013 and 2018.

In addition to the corona pandemic and falling oil prices, the world's largest country in terms of area is now threatened with further shock moments: During crises, emerging countries are often additionally affected by high levels of debt, rapidly increasing capital flight and the devaluation of the national currency. The latter is already the case: at the beginning of the year only around 70 rubles per euro had to be paid, at the end of March it was around 88 rubles. In mid-June the exchange rate recovered to 78.8 rubles - but this still means a loss of 11 percent since the beginning of the year. The Russian economy, which is heavily dependent on imports, suffers from this devaluation as imports become more expensive and foreign debts rise.

Stabilization through austerity measures

However, it seems that Russia has learned from the previous economic crisis: In recent years, the country has tried to stabilize its macroeconomic situation with strict austerity measures and to strengthen the national budget. To this end, the Russian government introduced a new fiscal rule in 2016, according to which part of the oil and gas revenues flow into a national welfare fund. At the beginning of April, the fund had a volume of around 165 billion dollars - which corresponds to more than 11 percent of GDP. Russia has also continuously reduced its national debt, from around 56 percent of GDP in 2000 to 14.6 percent in 2018. This made the country less dependent on international donors.

These measures have made the Russian economy more resilient. However, it remains to be seen whether they will be sufficient to cushion the crisis. The country still suffers from serious structural problems. These include the weak industrial sector, the lack of competitiveness, the broad participation of the state in the economy and widespread corruption.

This article first appeared on iwd.de.