![cc Jorge Láscar, modified, The Cathedral of Vasily the Blessed (Russian: Собор Василия Блаженного), commonly known as Saint Basil's Cathedral, is a church in Red Square in Moscow, Russia. The building, now a museum, is officially known as the Cathedral of the Intercession of the Most Holy Theotokos on the Moat. It was built from 1555–61 on orders from Ivan the Terrible and commemorates the capture of Kazan and Astrakhan. A world famous landmark, it was the city's tallest building until the completion of the Ivan the Great Bell Tower in 1600 [Wikipedia.org] / https://www.flickr.com/photos/jlascar/19345522243](https://www.geopoliticalmonitor.com/wp-content/uploads/2014/11/Kremlin.webp "cc Jorge Láscar, modified, The Cathedral of Vasily the Blessed (Russian: Собор Василия Блаженного), commonly known as Saint Basil's Cathedral, is a church in Red Square in Moscow, Russia. The building, now a museum, is officially known as the Cathedral of the Intercession of the Most Holy Theotokos on the Moat. It was built from 1555–61 on orders from Ivan the Terrible and commemorates the capture of Kazan and Astrakhan. A world famous landmark, it was the city's tallest building until the completion of the Ivan the Great Bell Tower in 1600 [Wikipedia.org] / https://www.flickr.com/photos/jlascar/19345522243")
At the time of writing, the price of oil is approximately $76 per barrel. This is down from prices that approached $105 earlier this summer. By no means is a $30 per barrel reduction in price catastrophic, but it is significant, especially for Russia, which derives over half of its budget from the sale of oil and petroleum products. Recently, Russian President Vladimir Putin stated that Russia’s budget is based on oil at $96 per barrel. While it is unclear whether he was referring to the 2014 or 2015 budget, it is clear that at present prices, this budget is unsustainable. At present, six of Russia’s top ten trading partners have enacted punitive economic sanctions against it for its actions in Ukraine. Capital flight from Russian markets in 2014 has already reached $100 billion, an approximately 65 percent increase from last year. It is projected to reach approximately $125 billion by the year’s end. Recently, the IMF downgraded its economic growth forecast for Russia from an already meager one percent to .5 percent for 2015. And the Russian central bank has followed suit by dropping Russia’s growth forecast for 2015 to zero.
One of the Russian budget’s main expenditures is the massive subsidization of several underdeveloped areas of the country, including the Far East and the North Caucasus. While Russia’s Far East comes with its own set of concerns, separatism is not one of them. Not so for the North Caucasus. This is particularly concerning for the Russian government. Federal subsidies make up the bulk of the North Caucasus Republic’s economies. One of the main aspects of recent Russian strategy to maintain control of the region has been the liberal application of roubles. The distribution of this money is controlled by local elites, hand-picked by Russia to head up the governments of the North Caucasian Republics. In the past, few, if any, questions are asked of these men. If stability is maintained, the money has been well spent.
But how long can stability be maintained without money?
Russia’s negative economic outlook and projected budget shortfalls are exacerbated by the fact that much of the region’s economic activity is conducted outside of the official system. For example, the informal Lyudmila Market in Pyatigorsk is a major trade and distribution hub for the region. It is reported that billions of roubles worth of goods pass through it weekly. The existence of such a large shadow economy means that the Russian government is unable to collect taxes on a significant portion of economic output. To make matters worse, trade in some areas is now conducted according to Islamic law and zakat (giving a portion of one’s earnings to a charity) is paid instead of taxes to the government, further reducing government earnings.
