October 9, 2007 (LPAC) -- At yesterday's Moscow economics meeting, Russian Finance Minister Alexei Kudrin told President Vladimir Putin that the international credit crunch is making things "more difficult" for Russian banks, but the Russian Central Bank will act on the basis of its "constitutional duty to maintain liquidity on the Russian market.... The world financial markets, above all in the United States and Europe, witnessed a crisis situation in the middle of this year," Kudrin said, the Presidential website reported today. European banks' demand for additional liquidity "has had an impact on our market. Today, it is more difficult for Russian banks and businesses to borrow on foreign markets," Kudrin said.

However, he asserted that "It is completely within our ability to fully neutralize this influence of the foreign markets," using Russia's gold and currency reserves. The Central Bank is focused on increasing banks' use of rubles, i.e., weaning them away from the use of "cheap" foreign currencies, which have totally dried up since September, and have dominated Russian banking.

Kudrin said that the Central Bank is taking measures, including use of state securities, to increase liquidity, and "above all," using "the allocation of capital to the development institutions," in the Russian market. Federal investment projects usually are launched in November and December, "and this will support an increase in budget spending over these two months," he said. Were the funds intended for the state corporations to be injected into the system, this would amount to the equivalent of about $9 billion, while yearly government spending would be about $8-$10 billion, Kommersant reported.

Kudrin said that Russia must be prepared for "a greater than planned change in the exchange rate between the dollar and other currencies," and the "deepening crisis" in world liquidity, which could lead to dropping energy prices, and other, more serious consequences. Kudrin asserted that Russia is "confident that a deepening of the crisis on foreign markets would not lead to any crisis situation on our own market."

Putin called on Kudrin, Deputy Prime Minister Alexander Zhukov, Economic minister Elvira Nabiullina, and the Central Bank leadership, to plan for a detailed meeting on the financial issues.

Today, Zhukov told the press that the Russian banking system is not threatened with default, RosBusiness reported. "Nobody is going to bankrupt banks in order to sterilize and clean up the banking system, this is all nonsense; the government and the Central Bank will do everything to support the stability of the banking system," Zhukov said.