MOSCOW, March 4 (RIA Novosti) – Russian annual inflation could bounce back to 15 percent if world oil prices sink sharply, given Russia's balance of payments and a high propensity to import goods, former Finance Minister Alexei Kudrin said on Monday.
“Inflation may go back in a year or two to a level of 15 percent or more, in the case of an oil price slump,” Kudrin told Prime news agency.
Consumer prices in Russia grew by 6.6 percent in 2012, down from double-digit figures in 2008. The Russian government expects to hold inflation at 5-6 percent in 2013.
Russia has seen a faster growth in imports than GDP in recent years, reflecting the trend toward a strengthening ruble, Kudrin said.
“The growth in Russia’s imports was driven by high oil prices and the [government’s] attempt to spend revenues from oil sales inside the country. The use of oil and gas revenues for investment in the economy facilitates the purchase of foreign currency by importers, expands imports and the number of importers,” Kudrin said.
“External factors related to the oil prices and the volume of oil exports will remain the main factors for Russia this year as well … because this money goes into the [domestic] market and the ruble’s strengthening increases imports,” he said.
Russia’s imports rose to an estimated $443 billion in 2012, up from $61 billion in 2000.
“This pace of growth in imports considerably exceeds real consumption volumes related to GDP growth and investment growth. The growth of GDP and investment no doubt stimulates imports but to a lesser degree than what we see now,” Kudrin said.
Kudrin said Russia’s economic growth does not require such a quantity of money, which Russia has seen in the past few years, and to which Russia has become accustomed.
“But as soon as the [oil] price falls, the [ruble] exchange rate plunges and inflation soars,” Kudrin said.
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The growing outright rivalry between the United States and China gives Russia more foreign policy weight, enabling it to assume the role of a balancer. So far it has been doing so rather skillfully. Today it may participate in a joint naval exercise with China that Beijing positions as outwardly anti-American. But tomorrow it can team up with the naval forces of the Old World.