What a difference a year makes.
At the beginning of 2016, the future of Russia looked a lot bleaker than it does now. Russia had been asserting itself on the geopolitical stage to the consternation of much of the international community.
Broad sanctions were enacted and Russia seemed to be on the path to isolationism. Collapsing oil prices were undermining its economy. Meanwhile, rapid depreciation of the Russian ruble revived worries of continued macroeconomic instability.
As 2017 begins, however, the prospects for Russia are looking up. A nascent economic recovery is taking hold after two years of recession. Russian GDP is predicted to grow between 1% and 2% in 2017. Oil prices are projected to stabilize if not increase, given the agreement to cut production by OPEC.
The Russian administration has committed to adding to its reserve fund any gains made on oil sales above $40 per barrel. This will help stabilize the ruble and underwrite confidence by investors.
That said, the return to growth is expected to be gradual and uneven, given the absence of substantial fiscal or monetary policy support.
Regarding the geopolitical outlook, Russia’s leaders are quite optimistic on improved US and international relations given early signals from the new US administration.
Kirill Dmitriev, Chief Executive Officer of the Russian Direct Investment Fund, said: “We believe with the Trump administration it’s possible to start having discussions on the reduction of sanctions because we can do so much together with the US.” Imagine a world where Russia and the US jointly fight terrorism, he added.
Igor Shuvalov, First Deputy Prime Minister of the Russian Federation, added that cooperation on fighting terrorism could lead to a better economic relationship between the US and Russia.
“My hope is that Donald Trump, a superb professional entrepreneur, will become a professional president and, in order to achieve results for global security, he will agree with another great president, Vladimir Putin, on how to solve the problem of Ukraine and others,” said Shuvalov. “But for results, one needs to communicate, to talk and negotiate and not push Russia into a corner. I hope this dialogue will happen,” he said.
Miroslav Lajcák, Minister of Foreign and European Affairs of the Slovak Republic, said EU sanctions would only be lifted if there was progress on the 2015 Minsk agreement.
Shuvalov said that Russia is ready and willing to live up to its side of the bargain, but pointed to the need for all the signatories of the Minsk agreement to fulfil their obligations. “We should stop trying to scare each other off. Nobody will achieve anything through sanctions … It’s impossible to make us change our course through sanctions. The sooner everybody understands that, the better for everyone,” he said.