Oil and gas account for 70% of Russia’s exports.
Russia needs an oil price in the region of $100 per barrel to balance its budget.
It is widely rumoured US and Saudi Arabia are deliberately pushing oil prices lower.
This is suspected to be a form of sanction against Russia for its support to separatists in eastern Ukraine.
This lowering oil price pressure is impacting Russia, Rouble and Putin.
From an exchange rate of 32.8938 Rouble per US Dollar, the rate has fallen to 68.3186 Rouble per US Dollar as on 17th Dec 2014.
To halt this Rouble’s free fall in exchange rates, Russia’s central bank has taken drastic action – by raising interest rates by 6.5% to 17%
There is also speculation that Russia would resort to capital controls to defend Rouble.
Barred new Western credits, major Russian banks have to pay old debts from their own resources.
December 2014 is one the payment peaks – the banks need to return $20 billion. Another $75 billion is to be paid next year.
Some of the out of the box actions one may expect from Russia at this juncture are:
Approach friendly countries like India for line of credit.
Keep nerve and reduce oil production over and above the committed supply requirements.
Follow austerity measures and reduce defence expenditure.
Pursue and promote non-oil exports on a large scale.
Russia and Rouble are matters to watch in the immediate future.