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Despite Russia's Woes, Putin Shows No Signs Of Bending On Ukraine

ROBERT SIEGEL, HOST:

Just how bad are things in Russia? A former finance minister says the country is in a full-blown economic crisis. Between the fall in the price of oil and the sanctions imposed after Russia's annexation of Crimea, Russia is reeling. The ruble has recovered somewhat in recent days, but it's still lost about 40 percent of its value against the dollar since the start of this year. Economic forecasts suggest that the Russian economy will shrink next year. And that raises questions of what the Russians might do to soften the blow. Greg White is The Wall Street Journal's Moscow bureau chief. Welcome to the program.

GREG WHITE: Pleased to be here.

SIEGEL: And first, what do you make of the former Finance Minister Alexei Kudrin, a man regarded as close to the Kremlin, warning yesterday that this is a full-blown economic crisis?

WHITE: Well, Kudrin is an independent economist but who's still close to the Kremlin and known for his straight talk on these sorts of things. And I think it's pretty - a clear assessment of where things are headed here. There's been a really remarkable turn just over the last few months, as the price of oil has dropped, from a sense that maybe next year they get away with a mild recession to a much clearer sense that things will be, well, substantially worse.

SIEGEL: Are Russians routinely buying things that depend on imports and other currencies? And do they feel that immediately?

WHITE: Yes. Russia's very heavily dependent on imports for everything from a lot of foods to, you know, electronics and clothing and household goods, medications. You know, it's a country that even Mr. Putin admits has struggled to diversify its economy away from producing stuff that comes out of the ground - oil, gas, metals, that sort of stuff. And so prices come through very quickly. We've seen the first reaction was to try to convert the rubles that they had on hand into goods, so there was a rush to people to buy cars before prices went up and televisions and washing machines and that sort of thing. IKEA had to suspend selling kitchens for a few days last week 'cause they couldn't keep up. And since then, a number of car companies have stopped delivering new vehicles 'cause they can't figure out what prices to set on them - 'till the rubles (inaudible).

SIEGEL: Can you explain how the Russians managed to defend the ruble over the past several days? It had sunk way down, lost more than half of its value. And it regained some of that by the actions of some Russian enterprises. What did they do?

WHITE: Well, it seems like what they've done is encourage big companies that have a lot of foreign currency exporters, like the oil and gas companies and metals, and many of those are state-controlled - to begin selling those on the market. At the same time, they did a number of things to make it harder for speculators to bet against the ruble. And so as often happens when markets get overextended, it sort of popped back. It's not clear yet whether this is lasting or this is just a lull. The next round of fears is around the banking system. We had a major bank here that was taken over by the regulators on the verge of failure yesterday.

SIEGEL: Well, Greg White, what about the big question of sanctions? Are things so bad in Russia that Vladimir Putin might rethink his Ukraine policy in order to get relief from the sanctions and some economic help?

WHITE: So far we haven't seen any clear signs of that. It doesn't look like the economic troubles are converting into any sort of immediate political problem for Putin. His ratings remain strong. It's not in his political vocabulary to back down under pressure. So it seems unlikely that he'd do anything like that immediately. It's possible that, as we get into next year, support for sanctions and particularly in Europe, where the trade ties make it more painful for the Western countries to sustain the sanctions, that there might be a waning of support there, and he could see an opportunity to deescalate a little bit in Ukraine. Although, it's hard to know at the moment, though.

SIEGEL: Greg White, thank you very much for talking with us today.

WHITE: My pleasure, great to be here.

SIEGEL: That's Greg White, who is the Wall Street Journal's Moscow bureau chief, speaking to us from Moscow. Transcript provided by NPR, Copyright NPR.