13 reasons why the Russian currency crisis is a game-changer
Russia has finally lost the economic war against the West, that is clear.
The Russian ruble has turned to “rubble” in the past few days as the old currency plummeted.
But what is still uncertain is what kind of knee-jerk reaction President Vladimir Putin might attempt next in an attempt to keep control of the reins of power.
We take a look at the key factors of what will inevitably evolve into an international game changer – if it hasn’t already.
1) Fall in confidence in the federal government
After the Russian ruble suffered its worst decline in value in 16 years of 19%, confidence quickly evaporates in the federal government.
No one wants to invest in Russian bonds anymore – especially after rating agencies relegated them to the status of quasi-trash.
Lack of investment is doing Russia a disservice and measures taken by the Russian Central Bank to resolve the currency crisis by using its stock of foreign currency to buy rubles and raise interest rates have so far failed. .
2) that terrifying advertisement for Putin’s press conference
Take a good look at this ad; it features violent scenes from Ukraine and a protester burning a European flag. It offers a terrifying precursor to what the Russian president may have in store.
3) Russia threatens to send nuclear weapons to Ukraine
The Russian president has shown utter contempt for the West’s condemnation of his invasion of Ukraine by saying he will now deploy nuclear weapons in Crimea.
Sergey Lavrov, Russian Foreign Minister, said this week: “Crimea was not a non-nuclear zone within the meaning of international law, but was part of Ukraine, a state which does not possess nuclear weapons. . Today, Crimea is now part of a state that possesses such weapons in accordance with the Nuclear Non-Proliferation Treaty.
“Russia has every reason to have its nuclear arsenal … to meet its international legal interests and obligations.”
Why Putin would want to send nuclear weapons to Crimea is another worrying prospect, especially when combined with the pressure on his presidency over the ruble.
4) America turns the thumbscrews with even more penalties
When Putin annexed Crimea in March of this year, claiming that Ukrainians in the region wanted to join Russia, he sparked a backlash in America’s and Europe’s international relations.
This was further aggravated when the Ukrainian government reported the presence of Russian military convoys in the border towns of Kharkiv, Novoazovsk, Mariupol, Donetsk, Ilovaysk, Shakhtarsk, Savur-Mohyla, Luhansk and Krasnodon, which escalated tensions.
The West has responded by pushing Russia into the cold by imposing severe sanctions on Russia’s energy, defense and financial markets.
This included a ban on Russian state-owned banks in Western capital markets, an arms embargo, and a ban on “dual-use” technology intended for use by the Russian military, as well as restrictions on it. export of petroleum production machinery and a general ban on petroleum. equipment intended for use in deep water, arctic or shale gas production.
Yesterday, the White House was about to sign another bill authorizing additional sanctions against Moscow to really turn the screws. It is not yet clear what this new set of sanctions will include.
5) Political isolation: Putin frozen
All of this left Vladimir Putin feeling very lonely. Last month, David Cameron and Putin had a “tense” meeting at the G20 in Brisbane, which prompted the Russian president to leave the summit earlier. David Cameron also compared Russia to Nazi Germany right before their 50-minute talk.
President Obama had Already frozen the Russian leader by expelling him from the G8.
US Secretary of State John Kerry added to the political freeze by denouncing Russia and by pledging a billion dollar emergency aid for Ukraine.
6) Widespread job losses are looming
With families already under pressure over the value of their paychecks vanishing within days, further pain could loom on the horizon as businesses struggle to make ends meet.
Gazprom, the public gas giant, has already reported a 15-25% cut of its 459,000 workforce, but job losses elsewhere have yet to filter through.
7) Lower oil prices
Oil and gas account for half of Russia’s income, so when oil prices fell below $ 110 a barrel to just $ 60 a barrel, the country was hit hard. This one was not deliberate however. Oil prices have fallen due to a lull in demand spurred by a boom in the US shale market.
Meanwhile, the British took advantage of falling prices at the pump with an estimated cost of dip below £ 1 per liter in the new year.
8) Apple has closed its online store in Russia
You know when things really hit fans when tech giants like Apple are forced to halt sales while they reevaluate pricing structures.
“Our online store in Russia is currently unavailable while we review pricing,” Apple spokesman Alan Hely said yesterday. “We apologize to customers for any inconvenience.”
9) Soaring food prices
As the value of the ruble plummets, so does what Russians can buy every day with their wages.
Russia’s ban on imports of food from the EU in response to sanctions is also not helping matters. Last month, food inflation in Russia accelerated to 12.6%.
Food prices have become such a problem that the government is now trying to step in and increase its stocks of wheat to at least 5 million metric tonnes in an effort to lower the price of a loaf of bread.
10) People line up in front of foreign exchange stores
As uncertainty hangs over the ruble’s future, families and business owners in Russia scramble to invest in safer currencies to weather the storm. With only a number of forex stores this has led people to queue for miles just for a chance to save their personal fortunes.
If the ruble does not recover quickly, we could have a full wheelbarrow situation. In Zimbabwe in 2009, the country ditched the Zim dollar altogether after hyperinflation caused the value to disintegrate to levels where people had to use wheelbarrows just to carry the right amount of cash needed to buy a loaf. of bread.
12) Is Kim Jong-Un in love with Russia now?
Russia still has many allies, including India, China, Belarus, Iran, Syria and perhaps now North Korea. Indeed, in the midst of the gloomy Russian currency crisis, Putin invited Kim Jong-Un to visit for the end of World War II celebrations in May next year.
God knows what they will discuss.
13) The end is near for Putin… or is it?
All of this could mark the end of once-all-powerful, shirtless Vladimir Putin. His assault on Ukraine left the Russian economy in tatters and its people lost confidence in its leader. “We have lost the feeling that Putin is some sort of wizard who controls everything,” pro-Kremlin tabloid Moskovsky Komsomolets said.
Putin has very few options, but while the great Russian bear is cornered, an injured animal like Putin doesn’t just slip away quietly.
This could make him even more dangerous than ever. Hope he doesn’t bite.