The economic situation in Russia is tbh extremely interesting given that it's looking like Putin pretty much backed himself into a corner.
Now....I don't subscribe to the idea that the Oligarchs will turn on him as things get worse (he's far too good a political operator for that to happen. Most likely scenario is that they will either escape the sinking ship with what they can..or turn on each other). But as oil trends downwards, the deficit will grow, interests rate will shoot up..and he'll use up most.of his foreign exchange reserves trying to bolster the Russian currency. As domestic debt (most of which is held in foreign currencies) snowballs...you will see an increasing number of defaults and businesses closing down. This will then have a domino effect on the Russian economy. I give the odds at 50-50 that the Russian economy will survive this debacle without defaulting.
Putin must also be re-thinking his move to annex Crimea as the EU/US sanctions are having a major effect on the ability of Russians to access credit...which is definitely speeding up the downward economic spiral.
Only thing that can save them now imho are emergency IMF loans (which will most likely have attached clauses) or he back-tracks and leaves Ukraine alone (which is highly unlikely).
Any thoughts?
Now....I don't subscribe to the idea that the Oligarchs will turn on him as things get worse (he's far too good a political operator for that to happen. Most likely scenario is that they will either escape the sinking ship with what they can..or turn on each other). But as oil trends downwards, the deficit will grow, interests rate will shoot up..and he'll use up most.of his foreign exchange reserves trying to bolster the Russian currency. As domestic debt (most of which is held in foreign currencies) snowballs...you will see an increasing number of defaults and businesses closing down. This will then have a domino effect on the Russian economy. I give the odds at 50-50 that the Russian economy will survive this debacle without defaulting.
Putin must also be re-thinking his move to annex Crimea as the EU/US sanctions are having a major effect on the ability of Russians to access credit...which is definitely speeding up the downward economic spiral.
Only thing that can save them now imho are emergency IMF loans (which will most likely have attached clauses) or he back-tracks and leaves Ukraine alone (which is highly unlikely).
Any thoughts?
The Russian Economic Situation
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