Ruble into Rubble

To fully comprehend this issue, we must understand why the Russian economy is going through such a massive trough. Their economy is made up of 50% revenue from oil and due to the recent drop in prices of a single barrel ($110 to 60$) Russia has taken a big hit. The reason for this major fall in barrel prices is the boom of shale rock in the United States and the decrease in demand worldwide. This is not all that has been causing the Russian economy to down spiral; western countries such as the United States, Canada and most western European countries have decided to put sanctions on Russia after what occurred in Crimea earlier in the year. They felt as though Russia was abusing their power to intimidate smaller nations such as Crimea and they needed to be punished for their actions: sanctions were the only way to control Russia’s power cupidity. This however is not working effectively because this stubborn country has yet to pull out of Crimea and is continuing to look to broaden their land despite their economy’s downfall. Putin’s tenacious spirit cannot be stopped.   

            Oddly enough, the fall of the Soviet Union was also due to oil struggles and now, this may be the same case for a nation that shares the same soil. The Kremlin has been using foreign market operations, the act of selling foreign currencies to the public for Russian Rubles, with the expectation that this would increase the value of the Ruble. This has not worked due to how scared the Russians are that the Ruble will continue to drop. Instead, they try and buy luxurious items such as cars and homes because they believe these things will hold their value, as opposed to the Russian Ruble. Next the Kremlin attempted to raise the interest rates from 10.5% to 17% as an incentive for people to keep all their currency. They want this because the increase in spending creates depreciation and high inflation. However, soon enough, if these tactics do not work, the Kremlin will create hyperinflation. The only solution Putin has to slowly rebuild his economy is to get out of Crimea because essentially, the sanctions from all these countries will be removed and they can slowly start to rebuild. However, the bottom line is that Putin is a stubborn persecutor who would rather see his country collapse than to lose power over a small portion of land that belongs to Ukraine.  

By,

Connor Munro

WORKS CITED:

Spence, Peter. “Here’s What Will Happen If The Russian Economy Keeps Tanking.” Business Insider. Markets. 14 Dec. 2014. Web. 5 Jan. 2015. 

E.L. “Why the oil price is falling.” The Economist. 8 Dec. 2014. Web. 5 Jan. 2015.

Kitroeff, Natalie. “Here’s Why The Russian Ruble Is Collapsing.” Business Week. Business Schools. 16 Dec. 2014. Web. 5 Jan. 2015.