Earlier today Putin used his his annual speech to both houses of parliament, delivered in a chandeliered ceremonial hall of the Grand Kremlin Palace in Moscow, to give a pep talk to an economy that has been faltering in recent months as a result of, if not so much western sanctions which have hurt Europe more than Russia, then certainly tumbling oil prices. As Bloomberg notes, "the ruble is near a record low, the economy is headed for a recession and banks are pleading for state aid." It was Putin's task to try to persuade Russians today that panic isn’t the answer to their economic pain.
In his speech, Putin on one hand appealed to Russian patriotism. As reported by AP, he evoked religious imagery and defended the Kremlin's aggressive foreign policy as necessary for his country's sheer survival. Putin described Crimea as Russia's spiritual ground, "our Temple Mount," and added that national pride and sovereignty are "a necessary condition for survival" of Russia.
"If for many European countries, sovereignty and national pride are forgotten concepts and a luxury, then for the Russian Federation a true sovereignty is an absolutely necessary condition of its existence," he told a full room of Cabinet ministers, lawmakers and community leaders. "I want to stress: either we will be sovereign, or we will dissolve in the world. And, of course, other nations must understand this as well."
Putin also said that Russia is not going to get involved in an expensive arms race, adding that unspecified "unusual solutions" are at the nation's disposal.
"No one will succeed in defeating Russia militarily," he said. "They would have been delighted to let us go the way of Yugoslavia and the dismemberment of the Russian peoples, with all the tragic consequences. But it did not happen. We did not allow it to happen."
Moscow-based analyst Maria Lipman said that despite bellicose statements toward the West in the beginning of his speech, Putin "also spoke about how we are by no means going to isolate ourselves, we are interested in constructive work even with Europeans and Americans."
"This year, as in many fateful historical moments, our people clearly displayed national revival, firm resistance, and patriotism," he said. "And the difficulties we encountered will create new opportunities for us, we are ready to accept any challenge of our time and be victorious."
But while his romantic, emotional appeals were to be expected, what the financial community was focused on was his proposals to stabilize the economy. Among these were a three-year freeze on impromptu inspections and tax checks for companies with a clean record.
Putin also praised the work of the Central Bank, which moved to free float the ruble this year even though the currency hit a record low on Wednesday.
Lipman said that Putin was trying to reassure both the liberal and conservative camps in the government, but realizes his hands are tied by economic factors.
Perhaps the most notable announcement by Putin was that Russia would provide a "full amnesty" for holders of offshore funds, in a push to repatriate some of the $125 billion in capital that is said to have left the nation in 2014. To entice Russia billionaires to keep their cash in Russia Putin reminded everyone how hostile the west could be toward Russian money, using the Cyprus bail-in as an example. To wit:
I announce a full amnesty for capital returning to Russia, and i repeat, a full amnesty. What does that mean? Those people who fully legalize, fully bring back their capital to Russia, should be protected from being dragged to various law enforcement agencies, and from having to prove where they got their money from, and from being exposed to criminal investigations.
We need to reverse the history of capital flight from our country, we need to end this era.... We have already done a lot of work to improve our investment climate, and now we need to turn to implement that legislation.
Do Russians want to be "ripped-off abroad" once again when the next Cyprus takes place? Their best choice is to return to Russia, Putin added.
Finally, and perhaps most entertaining, was Putin, warning that the former KGB spy himself would go after FX manipulators who have succeeded in pushing the Ruble to record lows:
We know who these people are, and we have the means to rein them in. It's time to use these instruments.
Considering the only big FX traders left are other, western, central banks, we wish Putin the best of luck, but please wait so can grab the popcorn before "using these instruments." Or perhaps Putin should just form a task force with the SEC and the FCA: last we checked regulators around the globe were also "eager" to find FX manipulators around the globe...