Global financial crisis

   The most serious financial downturn since the Great Depression, the global financial crisis began as a result of weakness in the United States’ housing market, but quickly spread to world financial markets. As the economies of the U.S. and European Union contracted, the effect was felt in Russia, which had experienced an economic boom under Vladimir Putin. Plummeting oil and natural gas prices, the mainstay of the country’s foreign trade disproportionately harmed the Russian economy. The precipitous decline in stock prices, particularly in September 2008, erased significant portions of the oligarchs’ fortunes, allowing the Kremlin to acquire large stakes in formerly state-owned enterprises that had been privatized during the 1990s. This process has been called a reverse loans for shares program. The rapid rise in the value of the ruble prior to the crisis and a real estate boom further exposed the country to the global contagion. The Russian economic crisis was further compounded by investor uncertainty in the wake of the 2008 South Ossetian War, which sparked massive capital flight from Russia. Overall, the steel, real estate, construction, and automobile industries were hardest hit. Unemployment rose dramatically during the period, especially in the fields of metallurgy and finance. Prime Minister Putin moved to reduce the tax burden on companies, while the new president, Dmitry Medvyedev, worked with other world leaders, including those of the Group of Eight (G8) and BRIC (Brazil, Russia, India, and China) countries, to solve the global crisis.

Historical Dictionary of the Russian Federation. . 2010.

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