With oil prices remaining relatively low and the global economy in an accelerated slowdown, Russia could be a real loser to the times. Vladimir Putin, Prime Minister of that country, could find himself in an unpopular position.
Such a position, with weak economic backing, could cause Russia to start another sensationalist assault on a neighbor, like its brutal assault on democratic Georgia last August.
When compared with the difficulties afflicting the rest of Europe, Russia’s financial woes are nothing out of the ordinary. The value of the rouble has fallen by 20 per cent, compared with sterling’s recent 30 per cent fall, the stock market is in freefall and industrial output has suffered a dramatic decline, a pattern that has been replicated throughout most of the industrialised world.
But where Russia differs from most of its European neighbours is that it is a single industry state, with nearly all its wealth deriving from the exploitation of vast gas and oil reserves. The combined effect of the precipitous drop in the price of oil to around $40 a barrel (this year’s Russian budget was based on an average oil price of $95 a barrel) and falling demand from its European customers means that the effect of the global recession has been more sharply felt in Russia, where an estimated one million people have already lost their jobs.
Note from Ryan Mauro: My personal assessment is that such economic troubles are causing a decline in Putin’s popularity, but nothing decisive. It appears that when such trouble arises, most Russian people long for further government intervention, and reject capitalist and democratic solutions. I haven’t seen a poll yet showing that Putin isn’t viewed favorably by a firm majority of the people.