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Russia plans pension raid to cushion sanctions

The Hague - The Russian government has plans to raid the state’s pension fund to support big companies against Western economic sanctions.

Russian Minister of Finance Anton Siluanov told journalists on Monday that an amount of 100 billion rubles (about R30bn) would be paid into a new fund to alleviate the deleterious effects of Western sanctions. This amount would be financed by a budget surplus, according to reports in European media.

From next year, however, the fund would be filled by transferring money from the Russian pension fund. First of all, the state would cease paying money into the pension fund, by which 309 billion rubles (almost R90bn) would become available.

After that, the pension fund would have to provide whatever is necessary for the fund. Siluanov did not say how much money would eventually be needed, but added that he was talking about a “significant amount”.

This step is clearly a reaction to stricter sanctions from the European Union which went into force last Friday. These sanctions added some individuals to a list of names whose assets in the EU would be frozen but, more importantly, would make it difficult for some key companies to borrow money in the West.

The USA has also intensified its sanctions against Russia. The EU and the US accuse Russia of clandestinely utilising thousands of troops to aid Ukrainian rebels in the eastern Ukraine.

Russian Prime Minister Dimitry Medvedev told members of the governing United Russia party on Monday that his country would react in a level-headed way to the sanctions. Russia’s strength was being tested, he said.

“When a series of our partners, if they can be called that, test Russia's strength through sanctions and all kinds of threats, it is important not to succumb to the temptation of so-called easy solutions and to preserve and continue the development of democratic processes in our society, our state,” Medvedev said in a televised speech.

It is known that the Russian economy has been wounded by Western sanctions. One huge company, oil giant Rosneft, has asked the government for aid to the tune of 1.5 trillion rubles (almost R435bn).

The Russian government simply does not have this kind of money, and that is why the pension funds are being raided.

 - Fin24
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