sunset from behind the wire

sunset from behind the wire

Tuesday, December 16, 2014

New Cold War?

Russian Naval Infantry
Russia's is a one-comodity economy. It runs on oil.

Unfortunately for Russia, the world's largest proven reserves of oil are in the US and Canada (320+ billion barrels). And Saudi production capacity for their proven reserves of about 250 billion barrels makes them the market maker in that they can open or close the valve to move the price just about anywhere that they want to.

Vladimir Putin wants to start another cold war fueled by Russian oil revenues. 
(Fox News) MOSCOW – The Russian ruble faced intense selling pressure Tuesday, falling at one stage by a whopping 20 percent to historic lows despite a massive pre-dawn interest rate hike from the country's central bank.
The surprise decision to raise the rate to 17 percent from 10.5 percent came in the middle of the night and represented a desperate attempt to prop up the troubled currency. The ruble has fallen sharply in recent weeks as a result of sliding oil prices as well as the impact of Western sanctions imposed over Russia's involvement in Ukraine.
Standard Bank:
Timothy Ash at London-based Standard Bank described the ruble's fall as "the most incredible currency collapse I think I have ever seen in the 17 years in the market, and 26 years covering Russia." 
Ash said "there is now a huge credibility gap for Russian policy makers in the eyes of the market" and that the decline is all the more astonishing given Russia's solid foreign currency reserves and the fact that it runs a budget surplus.
Given Russia's huge dependence on oil revenues, the recent sharp falls in the price of oil have hit the Russian economy hard. That's exacerbated by the fact that the Russian economy isn't diversified enough to withstand the shock.

I wonder if the Kremlin got the message?

4 comments:

  1. As soon as you lift up her skirts you see that Russia is still a third world country with illusions of grandeur.

    ReplyDelete
  2. Replies
    1. The USS Zumwalt looks like something out of Jules Verne.

      Delete

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