Sanctions, Oil Could Weaken Russia’s Rule in the North Caucasus

RedSquare cc Ana Paula Hirama

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.

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