Russian Finance Minister Anton Siluanov says his country is beginning to shake off the damage that Western sanctions and plummeting oil prices have done to its economy over the past year.

He acknowledged at a conference of Russian business leaders on March 19 that gross domestic product fell by an annual rate of 1.5 percent in January, but he said the economy appeared to be steadying.

“The end of last year and the beginning of this year were especially difficult when we saw volatility in the foreign exchange market, the value of our assets declining sharply,” the minister said. “These two shocks hit us hard. Now, in general, we see that the worst is over.”

Siluanov said Russia, with its one-dimensional energy economy, is emerging from an economic slough caused by the steep drop in oil prices over the past nine months that was only made worse by Western sanctions imposed because of Moscow’s treatment of Ukraine.

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One sign he pointed to is that the value of the ruble, which lost 46 percent of its value in 2014, has been performing better than the currencies of emerging economies during the past month. Also, he said, inflation has stabilized, and Moscow may be able to keep it from moving over 11 percent or 12 percent for the rest of the year.

This, in turn, has allowed the Bank of Russia, its central bank, to stimulate the economy further by lowering its chief interest rate for the second time since Jan. 1, and it's indicated that it may relax interest policies even further if inflation continues to decline.

“The negative peak is behind us and instead we are seeing certain signs of stabilization,” Siluanov said. “The situation in the financial sector is also stabilizing. We see rising returns on debt markets, and the financial market is showing momentum toward growth.”

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Not all the signs are positive, though. The ruble still isn’t doing well against the dollar, remaining 40 percent below the average level in early 2013. And Russia is expected to fall into recession in 2015, the first time since the global financial crisis struck six years ago. The central bank says it expects GDP to decline by between 3.5 percent and 4 percent this year.

And there’s no evidence that the sanctions imposed by the European Union, the United States and, to a lesser extent, Canada will end any time soon. German Chancellor Angela Merkel says the sanctions will remain in place until Russia and Ukrainians separatists agree to the conditions of a cease-fire in war-ravaged eastern Ukraine.

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Siluanov wasn’t the only Russian official passing on what he considered good news to Russia’s entrepreneurs. Economy Minister Alexei Ulyukayev also pointed to the upside of the country’s economy, saying capital flight in 2015 may not be as great as expected, perhaps even below $100 billion.

Also appearing at the conference organized by the Russian Union of Industrialists and Entrepreneurs, the nation’s big-business lobby, was President Vladmir Putin himself, who promised to work even harder to provide greater freedom for entrepreneurs, the government’s “best answer to all external challenges and limitations.”

“That’s why we’ll definitely continue to create conditions for all those who are prepared to invest in the domestic economy and industry, development of technologies and creation of modern jobs,” Putin told the gathering.

By Andy Tully of Oilprice.com

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