The State of Affairs in Russia

[Jacob]

I think I mentioned it in this thread earlier - the Russian Finance or Foreign minister (can't recall which) was saying that they estimated the cost to the Russian economy from the drop in oil prices was at about $100B, while the sanctions came in at $40B.

That was maybe about a month ago, and an official Russian statement, so take it for what it's worth.

Do you think the damage from the oil drop is higher than that, or do you think the sanction damages are overstated?

The price has declined a lot since then, and that overlooks the fact that oil revenue generates a great deal of the Russian government budget.

Fair enough.

I'm still feeling pretty smug about the sanctions right now, though.

[Solmyr]

Putin is set to give a major televised press-conference on Thursday, midday Moscow time. The Russian TV is... hyping it up. They made a trailer. http://russia.tv/brand/show/brand_id/35906

[crazy canuck]

It will be interesting to hear how he blames the West for the increase in the bank rate and the start of spiraling inflation.

[alfred russel]

Not sure that there is an alternative to some sanctions, and they seem to be having at least some effect. But not sure this won't long term play into Putin's hands. It gives him a case that the economic weakness is a result of the west trying to undermine Russia, rather than the reality that it is mostly due to being over reliant on fossil fuels and widespread corruption.

Also, does he want economic progress leading to the integration of Russia into the world economy? The young professionals taking jobs in multinationals tend to hate Putin. Those are the sectors the sanctions are disproportionately hurting. The "old economy" of agriculture, natural resource extraction, and industry is politically more reliable.

Of course the current situation also has lots of dangers for him.

[PJL]

My guess is Putin will try and continue and destabilise various parts of the neighbourhood as much as he can, in the hope that oil prices will go up as a result. He'll probably ramp up rhetoric, plus some actual measures such as pointing nuclear weapons at the west. If he's really desperate he could pull some sort of Cuban Missile crises stunt.

[Admiral Yi]

I think he has already made noise about basing nukes in Crimea.  I don't see how that will make any difference.

[Martinus]

I think I mentioned it in this thread earlier - the Russian Finance or Foreign minister (can't recall which) was saying that they estimated the cost to the Russian economy from the drop in oil prices was at about $100B, while the sanctions came in at $40B.

That was maybe about a month ago, and an official Russian statement, so take it for what it's worth.

Do you think the damage from the oil drop is higher than that, or do you think the sanction damages are overstated?

The price has declined a lot since then, and that overlooks the fact that oil revenue generates a great deal of the Russian government budget.

Fair enough.

I'm still feeling pretty smug about the sanctions right now, though.

Me too. The oil prices are, of course, a large factor, but sanctions prove to be the case of diplomatic judo.

[Martinus]

Oh, and Lavrov has already said that Russia believes Donetsk should be part of Ukraine (that was after Ukraine stopped any financial support for the region). Soon winter will come and Putin will have Crimea on his hands, this being the poorest region even by Russian standards, with no land connection to the mainland, difficult sea transport (due to frequent storms) and airlifts being the only reliable supply route. 

[DGuller]

I think I mentioned it in this thread earlier - the Russian Finance or Foreign minister (can't recall which) was saying that they estimated the cost to the Russian economy from the drop in oil prices was at about $100B, while the sanctions came in at $40B.

That was maybe about a month ago, and an official Russian statement, so take it for what it's worth.

Do you think the damage from the oil drop is higher than that, or do you think the sanction damages are overstated?

The price has declined a lot since then, and that overlooks the fact that oil revenue generates a great deal of the Russian government budget.

The thing is that what we're seeing now doesn't necessarily have a price tag.  Or at least it's not easily priced.  What we're seeing now is the catastrophic loss of confidence.  Oil prices alone would never lead to that.

[CountDeMoney]

It will be interesting to hear how he blames the West for the increase in the bank rate and the start of spiraling inflation.

The sanctions are going to continue to snowball the problem into a much larger one;  they can't borrow money from European banks as it is, and there are still sanctions that haven't even gone into effect yet. 

And there are more coming on the horizon:

Obama to sign new Russia sanctions bill by end of week
By Patricia Zengerle
WASHINGTON Tue Dec 16, 2014 1:56pm EST

(Reuters) - U.S. President Barack Obama will sign legislation authorizing new sanctions on Russia over its activities in Ukraine and providing weapons to the Kiev government by the end of the week, the White House said on Tuesday.

White House spokesman Josh Earnest said the White House had continuing concerns about the legislation, because it "includes some sanctions language that does not reflect the consultations that are ongoing."

"That said, because it does preserve the president's flexibility to carry out the strategy, he does intend to sign the bill," Earnest said at a daily news briefing.

In London, U.S. Secretary of State John Kerry said Russia had made constructive moves toward possibly reducing tensions in Ukraine, and said the United States and Europe were ready to ease sanctions if Putin took more steps in that direction.

Congress passed the bill on Saturday, piling more pressure on Russian President Vladimir Putin by authorizing new sanctions on weapons companies and investors in its high-tech oil projects, and to boost the Kiev government with both lethal and non-lethal military aid.

At the White House's request, the "Ukraine Freedom Support Act" does not make sanctions mandatory, giving Obama leeway over what would actually be in force.

But it passed both the Senate and House of Representatives unanimously, a rare sign of bipartisanship in the bitterly divided legislature and a clear indication of Congress' strong support for tougher action against Moscow.

Both Republicans and Democrats called on Obama to sign the bill quickly.

Concern about sanctions, along with other factors including plummeting oil prices, have taken their toll on the troubled Russian economy.

The Russian rouble plunged more than 11 percent against the dollar on Tuesday in its steepest intraday fall since 1998. Analysts have said the country is on the brink of a full-blown currency crisis.

Earnest said the direction of the Russian economy is in Putin's hands.

"The international community has said, once you demonstrate a willingness to start living up to these commitments and respecting basic international norms, we can start to relax our sanctions regime in a way that will relieve the pressure on your economy," he said.

[Razgovory]

The decrease in oil prices, also allays Euro fears of the sanctions themselves.

[Norgy]

I hope those Russians live well with a 16-17 % rate.

This is what happens when your primary exports are "soldiers on leave", "tanks passing by", oil, gas and mail order brides.

[DGuller]

I saw a Russian TV news report about how public transport ticket prices were slashed in half, from about $1 to about $0.50.

[Jacob]

Oh, and Lavrov has already said that Russia believes Donetsk should be part of Ukraine (that was after Ukraine stopped any financial support for the region). Soon winter will come and Putin will have Crimea on his hands, this being the poorest region even by Russian standards, with no land connection to the mainland, difficult sea transport (due to frequent storms) and airlifts being the only reliable supply route. 

Well, at least oil will be cheap for the transport requirements.

[Syt]

http://blogs.reuters.com/great-debate/2014/12/16/in-2015-vladimir-putin-may-witness-his-empires-death-knell/?utm_source=Facebook

In 2015, Vladimir Putin may witness his empire's death knell

The year ahead could see the outbreak of the third Chechen war, which, in turn, could be the death knell of the Russian Federation in its current borders.

If, as is imaginable, Russia dismembers itself later this century — the way the Soviet Union did in 1991 — it will largely be a consequence of President Vladimir Putin's policies.

Putin came to power in the 1990s, when civil war broke out in Chechnya, a constituent republic of Russia in the North Caucasus. The first Chechen war, between 1994 and 1996, was ignited by Muslim rebels demanding independence from Moscow. A second war started in 1999, when Putin was moving rapidly toward Kremlin leadership, first as President Boris Yeltsin's national security adviser, then as prime minister. With Yeltsin's health and grip on power failing, Putin emerged as the driving force behind a scorched-earth policy — with massive collateral damage to the population as a whole. That conflict lasted a decade.

For the past five years, the situation has been more or less quiescent, though neighboring republics have been rocked by violence. The lull in Chechnya, however, ended in early December with a series of bloody incidents in the Chechen capital of Grozny.

The group behind the resurgence of unrest is advocating a "Caucasus Caliphate," with ties to al Qaeda and, more recently, Islamic State. There is at least an indirect tie between outside support for Islamic radicalism in the Caucasus and Putin's sponsorship of Russian secessionism in eastern Ukraine.

By proclaiming ethnicity and religion as the basis for Russian statehood and aggression against its neighbors, Putin is inadvertently stoking the forces of secessionism in those parts of Russia that are historically and culturally Islamic.