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Russia to cut all budgets 10 percent, except defense

The spending cut is a warning of austerity measures.

By Ed Adamczyk
Russian Finance Minister Anton Siluanov Photo courtesy Russian Prime Minister's Office/CC
Russian Finance Minister Anton Siluanov Photo courtesy Russian Prime Minister's Office/CC

MOSCOW, Jan. 14 (UPI) -- Russian Finance Minister Anton Siluanov proposed a 10 percent cut in every government budget but that of defense Wednesday. The amount is double what President Vladimir Putin ordered in December, and an indication of upcoming austerity measures, forced by Western economic sanctions against Russia and a plunge in the value of its biggest export, oil. Siluanov, speaking in Moscow, added the country will lose 3 trillion rubles ($45 billion) in 2015 if oil prices remain at $50 per barrel. The price is currently at around $45 per barrel; benchmark Brent crude oil averaged about $110 per barrel for the past three years. Half of Russia's government revenue comes from oil and gas exports.

Siluanov added that increased borrowing by the central bank to keep the government operating could provoke an "inflationary spiral," and that cuts to spending are the only way to solve the crisis. Food prices in Russia rose 25 percent in 2014, and its inflation rate was 11.4 percent.

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A summit meeting scheduled for this week in Kazakhstan, at which Western leaders hope to persuade Russia to abandon its support of a military campaign against Ukraine, leading to a relaxation of sanctions, was cancelled. German Chancellor Angela Merkel said the lack of an agreed-upon ceasefire in Ukraine made a summit useless.

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Russian Prime Minister Dmitry Medvedev offered a more optimistic view of his country's economic issues, saying the government would not work to prop up its free-floating ruble, which fell Wednesday to its lowest level since December.

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