Henry Meyer and Ilya Arkhipov have post over at Bloomberg dealing with the mutual collapse of the ruble and possible slide of Putin’s internal credibility.
The meltdown of the ruble, which has plunged 18 percent against the dollar in the last two days alone, is endangering the mantra of stability around which Putin has based his rule. While his approval rating is near an all-time high on the back of his stance over Ukraine, the currency crisis risks eroding it and undermining his authority, Moscow-based analysts said.
This strikes me as very dangerous.
Read the whole thing.
Very dangerous indeed. The only way Putin can distract attention from domestic disaster – the Russian budget is based on oil prices at $100 for the next three years, they closed under $56 today – is by starting some foreign adventure.
One thing to recognize, this is not 1998 again. Not even close. While the budget situation is certainly nothing Putin hoped for, they aren’t facing the intractable problems and likelihood of severe catastrophe that was present (but, oddly, not often forecast) in 1998.
Also Russia in 1998 was led by an incompetent drunk. Putin, while his heart is not full of unicorns and rainbows, is a competent and careful thinker. Which is of course part of why he is dangerous and must be taken seriously.
The biggest risks of chaos in Russia actually come from the heavy handed “retaliation” (more like shooting one’s own foot) being implemented supposedly in service of the aim of stabilizing the currency. This could backfire and spiral out of control quickly. We still face no 1998 style event, though.
The Russian instability, combined with the similar effect of oil price collapses on the other oil-income supported economies (read “Middle East” and “Venezuala”), is one of the more serious crises we will face in the next couple of years.
I’m sure Smart Diplomacy will save the day!
/sarc
The oil situation IS an utter catastrophe for the Venezuelan government. Whereas Russia defaulted in 1998, Venezuela WILL default and experience a terrible economic collapse, worse than what we have already, in 2015. Add that to the fact that – ironically unlike Russia – Venezuela’s leaders are essentially communist, and you have a recipe for mass suffering, civil unrest, maybe even another coup.
The real physical dangers in Russia are more directly due to Putin’s foreign policy gamesmanship. Russian economic policy is not that great but it is good by Russian standards and maybe even GREAT compared to Venezuelan standards. I add I don’t credit the idea that OPEC is keeping production high to harm Russia. The OPEC countries (not Venezuela, obviously) that are allowing these high prices are really mainly driven by practical market concerns IMHO.
Joke found on the Instapundit site:
You should have all your money in rubles — because no one will expect to find money in a sack of rubles.