Kudrin sees sanctions as primarily negative for Russian economy

Alexei Kudrin file photo

KRASNOYARSK. April 21 (Interfax) – Sanctions are having a negative impact on the Russian economy, the chairman of the Center for Strategic Research (CSR), former Finance Minister Alexei Kudrin said.

“We are sooner losing position on the global market. The problem is not only related to the drop in oil prices and sanctions. Sanctions are in general very sensitive and are sooner having a primarily negative effect on the Russian economy than a positive one. It’s understandable that we must conduct ourselves in a very principled way in international relations, but we must objectively assess the impact of sanctions. They are having a primarily negative influence on our market,” Kudrin said at the Krasnoyarsk Economic Forum on Friday.

However, Russia has strong internal reserves, he said. “I agree that in the next three to four years the main growth will be related primarily to investment activity. If there will be investment there will be growth. Subsequently it is difficult to increase investment, we need to increase productivity,” Kudrin said.

He also said that state companies have a large share of the Russian economy and this share needs to be reduced, since they are “otherwise motivated.”

“In leading sectors, state companies account for a large share, from extractive industries to finance, where they shouldn’t be at all. Right now state companies have 70% of revenue in energy and 46% in finance. In about seven years this will be 15%-20%, in other words it must be reduced,” Kudrin said.

He also said that access to money is restricted due to high interest rates, “and this is a derivative of market conditions, high dependence on oil.”

“I’d like to remind you that in the past ten years our approximate rate of growth is below 1.5% on average. This is a lost decade for Russia. In the early 2000s we lived for about eight years with a rate of 7%. This was a positive, high rate of growth for Russia, Russia renewed itself. In the past ten years we’ve been going from crisis to crisis with short reprieves, we have nothing to brag about,” Kudrin said.

He said the current system of state governance is an “old squeaky machine with low speed, not much power and always going the wrong way.”

“We adjust our movement, but the result’s not the same. For example, our estimate, which we did on the quality of state governance, shows that only 38% of civil servants are engaged in their direct duties, in the other cases they are engaged in putting out fires, I mean in terms of emergency situations,” Kudrin said.