In another dark twist to the West’s stand-off with Russia over the crisis in Ukraine, a pro-Kremlin deputy has submitted a draft law that would allow the government to seize foreign assets in the country in response to Western economic sanctions.
The law, submitted after Italian authorities seized €30m worth of
shares and bank accounts belonging to Russian businessman Arkady Rotenberg, would also allow for oligarchs to get compensation from the state in the case of an “unjust judicial act of a foreign court.” The full (Russian language) text of the draft law can be found here.
Given Russia’s parlous economic position — GDP grew only 0.8% this year — the concept of using state funds to bail-out multi-millionaire businessmen may be received poorly in the country. Already opposition leaders are rounding on the government with Boris Nemtsov, co-chair of the RPR-PARNAS political party and outspoken critic of Vladimir Putin, writing on Facebook:
What is [the benefit of] a strongman’s friendship? It’s when you have 4 villas, apartments and a hotel seized in Italy and your accomplice in the Kremlin immediately introduces a bill for damages from the Russian budget.
As Business Insider previously noted, earlier this month President Obama unveiled new sanctions against Russia’s financial, energy, and defence sectors. The move dealt another heavy blow to the country’s fragile economy with its own central bank bemoaning “a
nemic economic growth” caused by a combination of “external uncertainty” and domestic chokes (in particular low levels of investment and weak labour productivity).
With the new sanctions set to impose an even greater cost the ruble has continued its free fall this year against the dollar, becoming the second worst performing currency in the world, ahead only of Argentina’s peso.
Earlier this week the World Bank gave its stark assessment of Russia’s prospects (emphasis added):
Over the medium term, growth will continue to be determined by slow progress in structural reforms and policy uncertainty emanating from geopolitical tensions …
The effects of weak growth for a second consecutive year, an increase in household debt burden, and continued high inflation expectations, are likely to depress consumer demand further, slowing this main engine of growth in Russia. These effects are expected to persist for the next two years.
With no major structural reforms planned, and microeconomic fundamentals unchanged, investment will remain subdued and there will be only a limited positive effect from import substitution.
Last week Russia passed a new budget in which the government committed to a generous social spending program and promised to control borrowing. With capital outflow from the country expected to hit $US100 billion this year, these will be extremely difficult promises to keep unless policymakers can halt the country’s economic decline.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.