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Today in Russian Business – Sept 28, 2011

Reports continues to circulate on how the departure of Alexei Kudrin will affect Russia’s financial solvency.  Alexander Morozov, HSBC’s chief economist for Russia and the Commonwealth of Independent States says ‘his exit poses considerable risk to maintaining fiscal sanity in the near future’.  The ex-minister left with a stark warning: ‘budget risks, connected first of all with excessive commitments in the defense sector and social sector, will inevitably affect the entire national economy‘.  The first challenge facing new minister Anton Siluanov is to present the government’s three-year budget which foresees annual spending increases of more than 20%.   As the ruble hit a 28-month low yesterday, central bank head Sergei Ignatyev said the currency was only likely to strengthen if oil prices remain at the current $100 per barrel.  The IMF has reiterated criticisms that the economy is overly dependent on oil, saying that economic growth will slow because of the decrease in crude prices and Europe’s sovereign-debt crisis.  This article argues that the prospective return of Putin has reassured investors as a mark of predictability.  Neither Vladimir Putin’s intention to seek a return to the Kremlin, nor the dismissal of Finance Minister Alexei Kudrin have affected Russia’s sovereign credit ratings, says Standard & Poor’s.  As military reform gets underway, Russia has reportedly abandoned new purchases of its popular AK-74 automatic rifle.  A Russian-controlled company will soon start supplying 20% of the aviation fuel at the strategically vital U.S. air base in Kyrgyzstan, a share which could eventually increase, says the Washington Post.  Bloomberg reports that Moscow-based bank Renaissance Group plans to slash 10% of its global workforce to ‘align’ costs with current market conditions.  Russian shopping-mall construction may climb to a record this year.