Dmitry Medvedev told members of his cabinet on Thursday that their most urgent task was to repair “trust between creditor and debtor” and said he was preparing extra measures to lower risks to lenders.
The Russian president’s remarks came as the economy suffered fresh blows. The state was forced to finance the acquisition of Sobinbank, one of Russia’s top 50 banks, by Gazenergoprombank, which paid an undisclosed sum for Sobinbank after it experienced liquidity problems.
Russia’s RTS stock index dropped 9.52 per cent and Micex slipped 9.11 per cent as falling stock markets around the world spread further pessimism. The central bank spent $4bn (€3bn, £2.3bn) propping up the rouble due to capital flight.
Part of the pessimism was also because of the oil price, which fell below $70 this week. This is an important threshold for Russia, since it represents the level at which its 2009 budget begins to run a deficit.
With the heads of Russia's big banks and economic ministries gathered at his residence outside Moscow, Mr Medvedev ordered them to ensure that billions of dollars of government credits were getting to where they were needed.
“The main thing is that these measures are getting to the places where they are addressed, and helping to allay pressure not just in the financial system but in the economy overall,” he said.
Russia’s central bank funded the purchase of Sobinbank, Russia’s 39th-largest bank by assets, placing $500m on a long-term deposit in Gazenergoprombank to fund the move. It comes a day after a run on Globex, Russia’s 31st-largest bank, which forced the bank to ban withdrawals.
In the past two weeks Russia’s foreign exchange reserves have fallen by $32.2bn to $530bn last Friday. Currency revaluations, not just capital flight had been responsible, said analysts, but nonetheless the decline in reserves has accelerated since it started in early August following the beginning of the war in Georgia. Since August 6, reserves have fallen by $70bn.
Russia still has an impressive war chest to fight the effects of the credit crunch – its foreign currency reserves are the third largest in the world.
But if the oil price stays below $70, that could deal a significant blow to stabilisation efforts, especially if the economy begins to suffer from a full-blown payments crisis.
While initial efforts to allay the credit crisis have been directed just at banks, further measures have targeted other sectors, such as oil and retail. About $200bn in total liquidity support, including government credits, have been announced by Mr Medvedev over the past month and a half, of which $87bn is due to be disbursed this week and next.