Great Recession in Russia

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The Great Recession in Russia was a crisis during 2008–2009 in the Russian financial markets as well as an economic recession that was compounded by political fears after the war with Georgia and by the plummeting price of Urals heavy crude oil, which lost more than 70% of its value since its record peak of US$147 on 4 July 2008 before rebounding moderately in 2009. According to the World Bank, Russia's strong short-term macroeconomic fundamentals made it better prepared than many emerging economies to deal with the crisis, but Russia's underlying structural weaknesses and high dependence on the price of a single commodity made the crisis' impact more pronounced than would otherwise be the case.^[1]

In late 2008 during the onset of the crisis, Russian markets plummeted and more than $1 trillion had been wiped off the value of Russia's shares,^[2] although Russian stocks rebounded in 2009 becoming the world's best performers, with the MICEX Index having more than doubled in value and regaining half its 2008 losses.^[3]

As the crisis progressed, Reuters and the Financial Times speculated that the crisis would be used to increase the Kremlin's control over key strategic assets in a reverse of the "loans for shares" sales of the 1990s, when the state sold off major assets to the oligarchs in return for loans.^[4] In contrast to this earlier speculation, in September 2009 the Russian government announced plans to sell state energy and transport holdings in order to help plug the budget deficit and to help improve the nation's aging infrastructure. The state earmarked about 5,500 enterprises for divestment and planned to sell shares in companies that were already publicly traded, including Rosneft, the country's biggest oil producer.^[5]

From July 2008 – January 2009, Russia's foreign exchange reserves (FXR) fell by $210 billion from their peak to $386 billion as the central bank adopted a policy of gradual devaluation to combat the sharp devaluation of the ruble. The ruble weakened 35% against the dollar from the onset of the crisis in August to January 2009.^[6] As the ruble stabilized in January the reserves began to steadily grow again throughout 2009, reaching a year-long high of $452 billion by year's-end.^[7][8]

Russia's economy emerged from recession in the third quarter of 2009 after two-quarters of record negative growth.^[9] GDP contracted by 7.9% for the whole of 2009.^[10] Experts expected that Russia's economy would grow modestly in 2010, with estimates ranging from 3.1% by the Russian economic ministry^[11] to 2.5%, 3.6% and 4.9% by the World Bank, International Monetary Fund (IMF), and Organisation for Economic Co-operation and Development (OECD) respectively.^[12][13][14]