The Russian economy (catch all)

[Firn]

However it also shows once again what lessons Russian decision makers took away from history, that state debt makes Russia vulnerable to Western countries and has to be avoided at almost all costs.

All in all Russia does hit back and itself to ready itself for increased isolation.

The fact that Russia will use pension savings as a short-term budget fix for second year confirms this earlier view of mine which was based on words and actions of the Kremlin in recent years.

"This move breaches the 'social contract' between the state and society to develop long-term private savings," analysts at Russia's Alfa Bank said in a note, adding that it raised a long-term "risk for budget stability."

In a sign of deep disagreements among Russian officials, Interfax cited an anonymous source at the Central Bank on Tuesday saying that the move would "put an end to attracting investment into the sector and remove its growth chances," as well as "undermining the trust of citizens toward pension reform."

By limiting funds available for investment, the move would also lead to a sharp rise in interest rates on the bond market, potentially hurting economic activity and the budget, the source told Interfax.

So far most of the political moves regarding the Russian economy were about the short-term and very little about the longer one. This fits of course quite neatly into the (rather consistent) Kremlins political strategy as a whole, which doesn't necessarily act for the prosperity of the population. Having a budget shortfall wouldn't fit the media campaign about 'Russia is a very strong country', 'Russia can stand alone', 'Putin is doing a great job' and so forth. Kicking the can further down the road is of course a strategy employed almost everywhere.

Don't get me wrong, there was and still is a need to react to the current economic downturn but I doubt that the leadership strikes the porper balance between the federal budget and the health of the economy.