Russia’s Economy Collapse: Demise Of Russia

Russia’s Economy Collapse: Demise Of Russia
WikiImages / Pixabay

The days of Russian President Vladimir Putin’s regime are numbered, as the countdown to Russia’s economy demise has begun this week.

With many experts predicting total chaos for Russia, the sufferings of Russian economy have been affecting more and more Russians since the beginning of this year. An increasingly large number of firms across Russia have started delaying payment of wages.

While many Russians are already having over 200,000 rubles (more than $2,500 USD) to be paid for their work, this money quickly become ashes, as the value of ruble is plummeting day by day.

Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]

Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More

The future of Russian economy looks rather gloomy, as the country’s economy has recently collapsed to its lowest levels since the end of 1990s. On Tuesday, ruble fell to its weakest level ever against the dollar ($1 USD = 83 rubles).

The collapse of Russia’s economy is explained by the plummeting oil prices, which dropped to lower than $27 per barrel. And Russia’s budget is in a critical soon-to-die state, as it directly depends on oil prices.

Meanwhile, Russia’s bank system bursts into small pieces: there are literally no money for anything to save the situation. Russian State does not even have a sufficient amount of money for its needs, let alone to take loans from other countries. And with Western economic sanctions being put in place, the West is the last place on earth to help save Russia from demise.

Russia’s economy is approaching demise

Russian bankers have recently signed a collective petition to the head of Russia’s Central Bank, in which they are literally begging the leadership to take emergency measures to save Russia’s bank system. Without such measures, they claim, by the end of this month, quarter of all Russian banks will collapse: they will not be able to fulfill the minimum requirements imposed by Central Bank.

And Russian banks are only half of the much bigger problem. Another half is those banks’ clients. This week, several Russian banks were seized by Russians who had taken loans. Most of them took loans when Russia’s ruble was $30 against the dollar (now it’s over 80 rubles against the dollar).

Meanwhile, not only have wages in Russia not been increased, an increasingly large number of Russian firms have started delaying payment of wages. In one of its measures, Central Bank has recently advised bankers to re-count mortgage loans for 40 rubles against the dollar.

And while the idea is smart, its implementation will lead to huge losses suffered by banks and further collapse of Russia’s bank system. No matter what emergency measures Russia’s leadership is willing to take, the outcome does not look good for the country. Russia’s economy is approaching its demise.

Experts predict chaos in Russia

Russia is on the brink of chaos, with its economy suffering from extremely low oil prices and Western sanctions, a British expert has warned.

William Browder, CEO of Hermitage Capital – a Russian-focused investment machine, warned that Russia is approaching ‘chaos’ due to global oil prices, according to the Daily Express.

And while Moscow is hanging on for now, Mr. Browder – a long-time critic of Russian President Vladimir Putin’s regime – warned that Russia is about to fall into a huge and deep hole of economic collapse.

The investment manager explained that Russia’s aggressive actions in Ukraine and Syria are to blame for Russia’s current economic crisis, since the West imposed economic sanction on Putin’s nation, destroying any hopes for economic growth.

And that’s while oil prices worldwide have plummeted, hitting hard Russia’s biggest export. “I don’t think you can underestimate how bad the situation in Russia is right now, you’ve got oil below any measure where the budget can survive and you’ve got sanctions from the West. Russia is in what I’d call a real serious economic crisis,” Mr. Browder told CNBC, according to the Daily Express.

Russia is soon going to run out of money

Russia’s Central Bank is keeping the country’s economy together for now largely thanks to burning through cash reserves. “Eventually they’re [Russia] going to run out of that money and when they do, that’s when the real trouble begins,” the expert said.

Mr. Browder also suggested that economic sufferings of Russia have led Putin to become a more nationalistic leader with a strong geopolitical position. As a result, the Russian President has oppressed his own people and made a scapegoat of Western civilization.

Mr. Browder claims that he feels he has been under threat because of his criticism of the Kremlin and Vladimir Putin. One of his friends died in Russian police custody after trying to investigate into chaotic corruption in Russia.

Mr. Browder was kicked out of Russia in 2005 after criticizing Putin’s corrupt regime.

Days of Putin’s regime are numbered

Russia’s ruble has depreciated by 12% since the beginning of 2016, while it depreciated by as many as 5% on Tuesday – reaching over 83 rubles against the dollar. On Friday, the ruble has strengthened its stance a little bit, as the day was rather successful for oil on the global market.

Russia has virtually no economy except its oil exports, which means that the country has no economy now at all. Given the economic decline in China, the demand for oil has significantly decreased, but more importantly – there are much more oil producers around the world nowadays.

In the period between the shale revolution, Saudi Arabia’s refusal to cut down on oil production and lifting sanctions against Iran for its nuclear program, the production of oil on the global oil market reached 1.5 million barrels a day, according to estimations made by the International Energy Agency. As a result – oil prices have decreased by 75% to as low as $30 per barrel.

If oil prices continue to fall, ruble continues depreciating and Russian leadership takes no immediate emergency measures, Russia’s days will be numbered. And that’s a bad sign for the future of Putin’s crumbling regime.

Polina Tikhonova is a writer, journalist and a certified translator. Over the past 7 years, she has worked for a wide variety of top European, American, Russian, and Ukrainian media outlets. Polina holds a Master's Degree in English Philology from the University of Oxford and a Bachelor's Degree in Journalism from the Saint Petersburg State University. Her articles and news reports have been published by many newspapers, magazines, journals, blogs and online media sources across the globe. Polina is fluent in English, German, Ukrainian and Russian.
Previous article Market Sentiment As A Factor In Asset Pricing
Next article Namib Desert Beetle Teaches Scientists How To Prevent Frost

No posts to display