Is Russia's economy recession-proof?

As world markets face an economic downturn, delegates at the World Economic Forum have been looking at what the future has in store. Russia, backed by its rich energy resources, is searching for a new role in the global economy along with other emerging m

A frequent joke at Davos World Economic Forum this year – it is difficult to find an optimist here. Certainly that was the case at the beginning of the 2008 Davos meeting. All thanks to the financial crisis and growing fears of a recession in the US and elsewhere. Those who gathered here hoped for the best but feared the worst.

“What is happening is obviously there has been a psychological impact because of the American crisis,” Frits Seegers, the Chief Executive of Barclays Bank, said.

George Soros, world famous investor, went as far as calling it the most serious financial crisis in the last 60 years!

While at the previous forums the champions were the heads of the leading Western companies – this time it was businesses from the oil-rich Middle East and emerging powers such as China, India and Russia, who displayed self-assurance and good humour.

Concerns about the U.S. economy going in to recession have dominated business this week, and contributed to a volatile few days on the global stock markets. But the US secretary of State Condoleezza Rice tried to reassure everyone that the US economy is strong enough to recover.

Business leaders and politicians and the jury's still out believe Russia would be affected if the U.S. goes under.

Chairman and CEO of VTB Bank, Andrey Kostin, says the effect on Russia would be minimal.

“I don’t think either Russia's industrial or financial sectors will be very much affected – with the exception maybe of the stock price of Russian companies,” Kostin said.

Merrill Lynch CEO John Thain says that Russia is insulated from a slowdown in the U.S.

“Because of the energy sector and the importance of energy, oil and gas, to the Russian economy. So, I think Russia will do relatively better in terms of economic growth,” he added.

Meanwhile, Finance Minister Aleksey Kudrin is more cautious. He says Russia hasn’t realized all the consequences of the current crisis yet.

However Russia's Finance minister – who recently paid off its debts to foreign creditors – suggested that the country already has enough financial reserves to help cushion the impact of the world crisis.