Economies of the world, listen up: the Russian economy is on the verge of a collapse with the fall of the ruble, which fell to a record low of 80 to the dollar on Tuesday, December 15, 2014. Over a month has gone by, and the Russian government and the Central Bank of Russia are still fighting to stop the free fall of the nation’s economy.
In a conference held on December 15, Russian President Vladimir Putin placed the blame for the ruble’s collapse on Western embargoes. During the three-hour speech on his country’s current economic situation, Putin focused on two primary topics: foreign policy and the economy.
President Putin offered a unique metaphor connecting Russia’s foreign policy and where the country stands on global politics. He said, “Sometimes I wonder, maybe the bear should just sit quietly, munch on berries and honey rather than chasing after piglets … but they will always try to chain [the bear] up.”
With Russia playing the bear in his metaphor, President Putin provided a closer look at his primary goal: to put a fallen Russia back on top. However, since Russia can no longer borrow money from Western banks after the invasion of Ukraine, the Russian government has been forced to dip into other savings, such as foreign aid and reserves.
According to Mr. Putin, Russia “will overcome the current situation. How much time will be needed for that? Under the most unfavorable circumstances I think it will take about two years.” Mr. Putin has high hopes for oil prices to rise and the territories in Ukraine and Siberia to become huge assets to Russia. Mr. Putin also aims to knock out political opposition within Russia and create a resilient, independent economy for Russia.
President Putin’s words during the press conference failed to gain much support in the crumbling market. While it did see a slight increase the day after his speech, the ruble has since continued to weaken against both the dollar and the euro.
The Russian Central Bank reportedly spent more than $80 billion in foreign reserves to slow the ruble’s downfall in December, and this rush to revive the ruble is continuing into 2015. Russian savings could potentially depreciate and push Russia further into an isolated economy. Mr. Putin hopes that the depreciation of the ruble will “make Russia’s economy more independent,” as it is weaned off of Western influence. With Russia being such an influential nation in Northern Asia, its continued isolation could have devastating effects on global poverty.
As Russia further separates itself from the Western economies, the world feels the weight of Russian policies.
– Alaina Grote
Sources: The Economist, The Guardian, Foreign Policy, CBS