Ulyukayev Says Extra $92Bln to Be Printed

19 February 2009 (The Moscow Times) The Central Bank said it would print an extra 3.2 trillion rubles ($92.03 billion) to cover this year's budget deficit without causing further declines in the country's forex reserves.

The currency slid to its lowest position against the dollar in 11 years on Wednesday, hitting 36.56 per dollar and edging close to the 41 level against a dollar/euro basket, which the Central Bank has vowed to defend with its foreign currency reserves.

Rating agencies are closely watching the size of Russia's reserves, still the world's third-largest at $383.5 billion, which lost over a third of their value because of the Central Bank's policy of gradual depreciation of the ruble.

The government keeps $222 billion of rainy day savings in foreign-currency accounts in the Central Bank and will need about $90 billion to cover the budget deficit. Many analysts say this will deplete the reserves even further.

"This suggestion is methodologically wrong," the Central Bank's First Deputy Chairman Alexei Ulyukayev said in an interview cleared for publication on Wednesday.

"Roughly speaking, our reserves will be $100 billion more in 2009 than some analysts had thought. And surely they can be used for purposes corresponding to the international definition of reserves," Ulyukayev said.

The government is currently working on a budget deficit assumption of 8 percent of GDP for this year, which Ulyukayev said would equal around 3.2 trillion rubles from the $137.3 billion Reserve Fund, part of the rainy day savings.

"At today's exchange rate, that is around $90 billion, they must be sold by the government to us ... and we will [print] 3.2 trillion rubles, which will be used to fulfill budget obligations," Ulyukayev said.

He added that the same process would apply if the government decided to use some of its $84.5 billion National Wealth Fund, also kept at the Central Bank, to issue subordinated loans to the country's struggling commercial banks.

Ulyukayev said the move would not be inflationary, as it will be compensated by a reduction in the liquidity offered to commercial banks. The Central Bank is for now sticking by its inflation forecast of 13 percent this year.

"If the government increases the budget deficit by 1 percent of GDP, that means we must reduce loans to banks by 1 percent of GDP," Ulyukayev said. "If that happens, then the impact on inflation is zero."

Ulyukayev said the Central Bank has been raising rates and cutting limits on collateral-free loans to commercial banks -- the easiest form of refinancing used by banks to borrow 1.9 trillion rubles from the regulator.

He said that for the purpose of containing inflation, the exchange rate policy at the moment was more important than fiscal policy.

"If we can dampen devaluation expectations and there will be an understanding that the exchange rate will stay within boundaries written in the budget, we will meet the 13 percent inflation target," Ulyukayev said.

Ulyukayev said inflation rates may jump in February or March, as prices for imported goods come into line with the weaker ruble, but will then stabilize.

Finance Minister Alexei Kudrin has said inflation could reach 14 percent, up from 13.3 percent in 2008.

Prime Minister Vladimir Putin said the deficit should stay within limits recommended by the Central Bank and the Finance Ministry in order not to fuel inflation.
(Comment by Michaell Baehr) The Russian's seem to be solving their monitary problems
in the time honored way of printing more money

Thousands Rally Over Economy

02 February 2009, By Alexandra Odynova, Staff Writer (The Moscow Times) Angered over mounting economic problems, thousands of people took to the streets in Moscow and other cities around Russia over the weekend to denounce President Dmitry Medvedev and Prime Minister Vladimir Putin in the largest display of public discontentment in years.





United Russia, the party that dominates Russian politics and is led by Putin, brought thousands of people to Manezh Square near the Kremlin to rally in support of Putin and Medvedev.





The largest anti-government rally took place Saturday in Vladivostok, where the Communist Party led some 2,500 people in a march against the government and a recent decision to increase tariffs on imported cars. The livelihood of many local residents depends on imported cars.





Vladivostok protesters carried banners reading, "Kremlin, we are against you," and some shouted slogans for Putin to resign, news agencies reported.





Vladivostok police kept a close eye on the unauthorized rally but did not intervene. The police violently dispersed a similar protest in December, detaining about 100 people.





In Moscow, about 1,000 Communist demonstrators gathered with signs reading "Putin's plan — Peril to Russia!" at a sanctioned rally on Triumfalnaya Ploshchad, near the Mayakovskaya metro station. Communist leader Gennady Zyuganov called on the government to abandon Western economic models and nationalize broad swathes of the economy.





The 90-minute demonstration was cordoned off by hundreds of OMON riot police, and a helicopter patrolled the sky over central Moscow.

(Comment by: Michael Baehr) LET'S GO BACK TO THE USSR!

‘Goth Butcher’ and Accomplice Allegedly Ate Girl in Pie

Two young men — one of them a butcher — have been arrested on suspicion of killing and dismembering a 16-year-old girl and eating parts of her body, Russian prosecutors said Wednesday.

Media speculation has suggested that the suspects styled themselves as “Goths” or were part of the “emo” youth culture in which young people dye their hair, have face piercings and wear hoodies and drainpipe trousers.

“Goths ‘ate girl in a pie’” was a headline in Britain’s Mirror tabloid on Thursday.

The girl disappeared after leaving her home in St. Petersburg for school on Jan. 19, city prosecutor spokesman Sergei Kapitonov said. He said she was killed that night, and that body parts believed to be hers were later found in plastic bags scattered around the city.

Police arrested Yury Mozhnov, a florist, and Maxim Golovatskhikh, ...

(comment by Michael Baehr)
The Russians are getting hungry!

style="text-align: left;">Police Investigate Calls To GM Union Leader

Police Investigate Calls To GM Union Leader

By Irina Titova

Special to The St. Petersburg Times

St. Petersburg police are investigating a series of anonymous threatening phone calls made to the head of the trade union for the city’s General Motors plant Yevgeny Ivanov, the city police press service said on Thursday.

"The police are checking the situation and questioning employees of the plant on the matter," said Vyacheslav Stepchenko, spokesman for the city police.

Ivanov said he had received at least four anonymous calls in the last few weeks with threats and demands to stop union work at the plant. Ivanov fears not only for his own safety but also for the safety of his family. Ivanov has two children.

Ivanov received the first call in early December. Later his wife received another call in which the caller said that "if her husband did not stop his activities, they knew which kindergarten one of their children attends," Ivanov said.

Two other threats followed before Ivanov went to the police.

Sergei Lepnukhov, spokesman for GM, said he didn’t know about any threats received by Ivanov.

"We need to find out more about that situation, and only then to comment. First we need to figure out if those threats have any relation to the company," Lepnukhov said.

Valery Pirozhkov, curator of the city’s Trade Union Center of the Russian Labor Confederation, said "such threats should be taken seriously."

"We have the example of Alexei Etmanov, head of the Ford car-making plant’s trade union, who also previously received threats and later had problems," Pirozhkov said.

Etmanov was attacked twice in November and considers the incident to be connected to his public and trade union activities.

Meanwhile, Ivanov said GM workers are worried about the plant’s plans to slash the working week to three days after restarting the assembly line on Feb. 9 after the New Year break.

"I know of cases when high quality workers have decided to leave the plant because they won’t be able to feed their families on the new salary. They are looking for better paid jobs," Ivanov said.

St. Petersburg’s GM plant is shortening the working week after its U.S. owners said Tuesday it is cutting production in Russia as demand declines in a market only recently described as the largest in Europe.

The cuts affect GM’s new plant outside St. Petersburg and its venture with Russian manufacturer AvtoVAZ in Togliatti. GM’s Chevrolet is the best-selling foreign car brand in Russia.

Lepnukhov said the three-day week will be in place for the next few months, AP reported.

GM opened its new $300 million plant outside St. Petersburg in November with plans to produce 70,000 Chevrolet and Opel cars a year.

But with the Russian market already contracting, the plant closed down for an extended break from Dec. 20 to Jan. 19.

Production resumed for only one week before being shut down again.

In Togliatti, the GM AvtoVAZ venture is cutting back to one shift and laying off some 400 workers, about one-third of the workforce, company spokeswoman Lyudmila Murycheva said, AP reported.

The production cuts in Russia come as GM cut 2,000 jobs at two U.S. plants and halted production for several weeks at nine other U.S. factories. The U.S. car industry is facing its worst sales slump in 26 years.

Foreign car sales in Russia rose 26 percent in 2008, continuing a trend of several years, but were down 15 percent in November and 10 percent in December.

(Comment by Michael Baehr:) It looks like Chevies arn't selling in Russia either.

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