Erkki Tuomioja (SDP), the Minister for Foreign Affairs, believes Russia has already paid a high price for the crisis in Ukraine – primarily due to the reaction of market forces.
“Russia has already had to pay rather a high price, […] not due to the sanctions introduced by governments or the EU but rather due to the reaction of market forces. This continues to have an effect. The annexation of Crimea has proven more costly than envisioned in Moscow,” Tuomioja stated in an interview with Helsingin Sanomat on Saturday.
Aki Kangasharju, the chief economist at Nordea, considers the views of Tuomioja surprising. “Tuomioja's point of view […] is very surprising. In terms of exchange rates, Russia hasn't had to pay because its currency had weakened already before the crisis in Crimea,” he points out.
The Russian rouble, Kangasharju views, remained stable after the escalation of the crisis for two reasons: on the one hand, the flight of capital from Russia and, on the other, the return of capital to Russia out of fear of asset freezes.
“This ensured that the currency remained at its own level. If the currency weakens, costs will emerge in Russia due to accelerating inflation and rising interest rates. These costs are not caused by the war. The stock market endured a downswing in the spring but bounced back rapidly,” Kangasharju says.
At present, the government debt in Russia only equals two per cent of the Russian gross domestic product. “Even if interest rates crept up in Russia, the country wouldn't need foreign financing. The balance of trade is also in surplus. Even that wouldn't cause outrageous costs. In these terms, the market reaction has yet to prove too costly for Russia,” argues Kangasharju.
Reetta Heiskanen – HS
Aleksi Teivainen – HT
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Photo: Roni Rekomaa / Lehtikuva