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Russian economy needs restructuring to avoid recession

Staff writer |
Senior Russian officials urged the government to promptly draft plans to downsize the nation's dependence on imports and high oil prices in order to avert possible recession.

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"The roadmaps on import replacement in all sectors of the economy must be prepared, so in the first quarter of 2015 the work could start at the federal districts' level," head of the Kremlin administration, Sergei Ivanov, said at a meeting with senior officials.

His statement was echoed by the Central Bank's first deputy chief Ksenia Yudayeva, who noted that Russia must prepare to live in the new economic environment for a long time.

"The scenario (of sustained low oil prices) cannot be ruled out, so we must take measures for the Russian economy not simply to remain stable, but to develop," the Interfax news agency quoted her as saying.

The bank has drafted a scenario of economic development based on oil prices of 60 U.S. dollars per barrel. In that case, the economy will face a deep recession unless it becomes independent from import, Yudayeva said.

She compared the current situation at the world oil market with that in the 1980s, when the lasting period of cheap oil caused collapse of the Soviet economy, adding that in January-March, 2015, consumer inflation in the country will approach 10 percent.

To remain stable, the Russian economy in its current structure requires oil prices to hover over 80 dollars per barrel.

Since the peak high in June, the world's oil prices have contracted by over 40 percent. Russia's currency, the ruble, has also depreciated against U.S. dollar by the same rate.

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