Tag Archives: Crimea

Russia’s Economic Crisis

rubleThe Russian ruble continues to plummet despite a last-ditch effort by the Kremlin to stabilize the currency by sharply increasing interest rates. Since December, the Central Bank of Russia has nearly doubled its benchmark one-week rate, from less than 9.7 percent at the start of the month to 17 percent by month’s end. Meanwhile, the Russian ruble continued its slide, falling more than 45 percent against the US dollar. Inflation is sharply higher, and the Russian government forecast the country’s economy would shrink by half a percent for 2014.

Russia’s economic crisis has been driven by two factors. First, Western sanctions against Russia are starting to have an effect. Sanctions were imposed after Russia took control of Crimea, a region formerly under the control of Ukraine. Second, and more importantly, the sharp decline in global oil prices have sharply curtailed Russia’s foreign exchange earnings, making it difficult for the country to finance governmental operations. Oil and natural gas exports account for about one-third of the country’s gross domestic product and about half of the federal budget.  Oil is trading at just over $55 per barrel today, down from more than $115 per barrel less than a year ago. This is by far the biggest drag on the Russian economy today.

All of this is having a dramatic impact on the lives of ordinary Russians, who now face savings that have little real value, higher mortgage and interest rates, declining real wages, and higher prices for most consumer goods.

What do you think? How will Russia’s economic crisis affect President Vladimir Putin’s popularity? Will the country’s economic crisis affect Russian policy in Crimea? Why?

Addressing the Situation in Ukraine

The Daily Beast yesterday reported that Russian President Vladimir Putin has cut off high level diplomatic talks with the United States in response to the US’s efforts to isolate Russia over the Ukrainian situation. The United States has repeatedly asserted that it will seek to impose “higher costs” on Russia in response to Russia’s ongoing intervention in Crimea and eastern Ukraine. Meanwhile, Ukraine’s Prime Minister, Arseny Yatseniuk on Friday accused Russia of “wanting to start World War III by occupying Ukraine militarily and politically.”

But US options in addressing Russian intervention in Ukraine appear limited. While Secretary of State John Kerry warned that “more sanctions” will likely be announced early next week, more aggressive responses appear to be off the table, and President Barack Obama has made it clear that his “red line” would be a Russian invasion of a NATO member state.

In the following video, State Department spokesperson Jen Psaki outlines the US strategy in dealing with the situation in Ukraine.

What do you think Psaki means when she says that there is “no military solution” to the situation in Ukraine, but that the US strategy is “working”? What would a successful strategy in Ukraine look like? Do you think American sanctions will be effective in resolving the situation in Crimea and Ukraine? Why?