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Russia in the time of Western sanctions, low oil prices (News Analysis)

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Moscow, June 10
With the latest G7 summit minus Russia deciding to extend sanctions on the country over Ukraine, life here goes on as normal, perhaps even a bit more energetically under bright sunshine, in this historic month for Russians.

The city's famous Red Square, with the Kremlin Palace bounding one side, buzzed with preparations for Russia's National Day celebrations on June 12.

British journalist Maxwell Lovell-Hoare, here for an international conference organised by Russia's biggest innovation fund, the Skolkovo Foundation, offered a perspective based on his long experience of the country.

"Hardship, it seems, is a way of life that makes Russians stronger," Lovell-Hoare said, recalling the tragedies of the Russian Revolution and World War II, among others.

"This is one of the very few places in the world where the populace would go out and die for their country, and the response to the sanctions that you see around reflect the same kind of spirit," Lovell-Hoare told this visiting IANS correspondent.

A recovery in investor confidence and rising oil prices have bolstered the Russian ruble, which has risen more than 30 percent to the dollar since the beginning of February after falling 40 percent last year.

Ahead of the G7 summit in Germany, the heads of two German business lobby groups were quoted as saying that Russia should be invited to rejoin the grouping of industrial powers.

Russia's central bank has said it expects inflation to fall to 12 percent by the end of 2015. Inflation slowed in May for the second month and the price of key foodstuff began to fall, signaling that the worst of an inflation spike may have passed.

Helping keep down inflation in May was a fall in food price rises, which have outpaced overall inflation since Moscow last August banned imports of a range of foods from the West in retaliation for the sanctions.

At the same time, profits at Russia's cheese factories are booming as state support and bans on imports from the West force supermarkets to turn to local producers.

Cheese shelves at Russian supermarkets that were filled with foreign brands were hit hard when Moscow in August retaliated against Western sanctions by barring a range of food imports from the US, the EU and a handful of other countries.

"The ban on foreign imports has been like a tonic for Russian agriculture and farms are producing more to replace imported produce that used to flood city markets," PR executive Ekaterina Ivanova told IANS at a cafeteria off Red Square, with restaurants in the area packed with diners eating in the open.

Describing Russia as a "remarkably free country in many ways," a commentator wrote in the Moscow Times that "anyone sick of the government propaganda on state-controlled television can turn off the television and find news on the internet instead."

Moscow streets also threw up another perspective - this time from the more northerly city of St. Petersburg.

Gulieta Kovadji, a linguist who was passing through here in search of greener pastures in China, complained how the Metro ride in Moscow costs almost twice that in St.Petersburg.

"Things are so expensive in Moscow...and the tragedy is that my father, who recently passed away here, was only getting a pension of 300 rubles a month when he spent forty years as a fireman, saving people," Kovadji told IANS.

For the record, the World Bank last week raised Russia's growth forecast for the current year and for 2016, saying it expects the country's economy to contract less sharply than previously thought.

It cited a recovery in oil prices in recent months, a stronger ruble and slowing inflation to also raise its forecast for 2016. It now sees gross domestic product falling by 2.7 percent this year as opposed to the earlier projected 3.8 percent.

(Biswajit Choudhury was in Moscow at the invitation of the Skolkovo Foundation, Russia's largest innovation fund. He can be reached at [email protected])