RUSSIA’S national economy is on the verge of major collapse, hit by the double-edged sword of crumbling oil prices and debilitating western sanctions. Many feel the US is behind the silent war with Russia, and that the present crisis is all a section of a larger strategy to push the Russian financial system into crisis.
Ever since June’ 14, the international oil price has gone down by almost 50 per cent, from a high of $US114 a barrel to below $60 early this week.
The rouble has mostly chased the oil price, crumbling to a low of 80.1 to the US dollar earlier this week, notwithstanding a crucial attempt by Russia’s Central Bank to end the sell-off with an emergency interest rate lift. The locals are lined up to buy imported goods and to convert currencies as the rouble is depreciating at a rapid rate. Currency exchanges are flooded with customers.
The Central Bank has cautioned that in case the oil price remains below $60 a barrel, Russia’s economy will shrink by almost 5 per cent the following year. It has been projected that for every $10 drop in the oil price, the country’s GDP will go down by 2 per cent.
At the same time, due to western sanctions imposed to counter Russia’s role in Ukraine, businesses are not able to refinance their debts in foreign markets, resulting in currency selling to pay off debts well before they end up unsustainable.
“This is an extremely unsafe situation. We are only a few days away from a bailout situation of banks. If the currency crisis in not tackled immediately, the banking structure will require robust emergency treatment,” as reported in news daily Vedomosti.
Vladimir Putin has charged the west for the present crisis, and he’s not the only one. While common public in general have related it to an “economic war”, some western commentators agree with that view. Not too long ago, back when oil was still selling for about $88 a barrel, a New York Times columnist pointed the finger straight at the US for the break down.
The “conspiracy theory”, broadly recognized in Russia, is that the US and Saudi Arabia are working together to maintain production purposely high to chase the price lower. Even earlier, US and Saudi Arabia have acted together against the leaders of Soviet Union and this is just the continuation of the past.
The net outcome has actually been to make daily living challenging for Russia and Iran. Not to forget that Saudi Arabia and US are facing each other under a hostile situation in Syria.
US has officially made its stand clear saying that lower oil price would stimulate oil dependent economies like Japan, Germany and China.
Some experts are of the view that Saudi Arabia is doing this to maintain its market share and the role of US is much hyped than it is. Rouhani of Iran, has said that Saudi Kingdom is capable of withstanding the revenue losses and so it’s acting against the interest of people in Iran and other oil producing regions.