You think we’re in bad shape:
…Russia’s dependency on oil is pushing the country’s economy into a tailspin. Oil peaked at $147 a barrel in July but has since plunged as low as $35 a barrel. As a result of the plummeting oil price and the global financial crisis, gross domestic product shrank by 8.8% in the 12 months to January, the rouble has lost one-third of its value since September and unemployment is expected to rise to 10 million by the end of the year. The Kremlin has spent more than $200bn of its reserves to cushion the devaluation of the rouble and avoid public panic.
Neil Shearing, emerging Europe economist at consultants Capital Economics, believes the situation is going to get much worse. “The news from Russia has gone from bad to worse in recent weeks. The economy looks likely to contract by 5% this year, which would be close to the drop in output witnessed during the 1998 rouble crisis,” he said, referring to the year when the government defaulted on its debts, sending shockwaves through the global financial system. “In contrast to the 1998 crisis, a weak external environment makes a sharp bounceback in growth unlikely.”…
…Unemployment is widely expected to soar to 12% this year from 6.3% in 2008 as firms struggle to access finance. “This will spell disaster for an economy in which private consumption accounts for over half of GDP,” said Shearing. About 500,000 Russians are waiting to be paid wages which are late and since inflation is running at 13%, their purchasing power is slipping rapidly.
Take financial collapse, massive unemployment, runaway inflation and add tyrant (Putin). What to you get? Risk of nuclear-armed civil war and/or risk of Putin making a mad dog attack in order to start a war to stifle dissent at home. This is not a pretty picture.
What can we do? Strengthen our alliances with nations on Russia’s borders, eschew any long-term deals with Putin’s government and then just hunker down and hope for the best.
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