A Russian Crisis With No End In Sight, Thanks To Low Oil Prices And Sanctions

Former Russian prime minister Evgeny Primakov warned that, if Vladimir Putin continues his Ukraine policies, Russia will become a pariah third-world petro state. The fundamentals of the Russian economy, as it enters 2015, suggest that Russia is fulfilling Primakov’s prophesy. Russia’s fate depends on economic factors beyond its control (energy prices and gas markets) and on Putin’s continued international adventurism, which he is loath to abandon for fear of regime change. Putin can no longer keep his promise to the Russian people of prosperity and stability. No wonder his propagandists are fighting full time to convince the West to drop its sanctions. Unlike the 2008/9 financial crisis, Russia faces a long and deep recession because the underlying causes are unlikely to go away in the near term. 


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Putin's Promises To Eastern Ukraine Could Bankrupt Russia

With a Russian budget of 38 percent of GDP, or slightly less than one trillion dollars (Moscow’s Gaidar Institute), the annexation of just the Donbass region of eastern Ukraine would eat up between 6 and 8 percent of the Russian budget each year – as compared with 12 percent for the military. This is $60 to $80 billion less for investment, military expenditures, modernization, and other state activities.

If Putin were to annex the whole of east Ukraine (about 15 million population), the cost would double to $120 to $160 billion – to an untenable share of the budget.

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