Is Russia’s tanking economy making its leader vulnerable?

Russian President Vladimir Putin is being pushed “further into a corner” by falling oil prices, leaving him little option but to continue his aggression toward Ukraine and confrontation with the West, Eurasia Group President Ian Bremmer told CNBC on Tuesday.

Putin has “gone all-in on an anti-U.S., must-keep-Ukraine nationalist engagement,” Bremmer said on “Squawk Box.” He said it’s “completely inconceivable” for Putin to back down.



A plummeting currency, rising inflation and sagging oil prices — that’s the stuff Vladimir Putin’s nightmares are probably made of.

The former KGB operative has staked his reputation for years on Russia’s spectacular economic growth throughout the 2000s, thanks to its dependence on increasingly lucrative energy exports.

As the price of oil, Russia’s most important export, climbed from $16 a barrel in 1999 to more than $140 in 2008, a new middle class enjoyed the fruits of prosperity, eagerly burying the memories of the impoverished 1990s.

But as the Kremlin now lords over Ukraine and stares down the West, Putin’s nationalist gambit is finally being felt on the home front, threatening the central notion that’s helped keep him in power so long.

Russia’s currency and economy are crumbling along with oil prices, the country’s main export and revenue source. On Monday, the ruble suffered its worst one-day decline since 1998, and it looks like Russia’s economy will tip into recession next year.

“The myth of ‘stability’ has now been broken,” says Anders Aslund, a senior fellow at the Peterson Institute for International Economics.

Russian rubles on display in front of a portrait of Russian President Vladimir Putin.
Because of Putin’s aggression in Ukraine, Russia has been forced to scrap a pipeline to supply natural gas to Europe. The $40 billion South Stream project had proposed to enter the EU via Bulgaria. He said Monday the pipeline instead would be diverted to Turkey.

While Putin’s grip on power is still far from tenuous, the steady stream of gloomy economic news is probably causing at least some concern in the Kremlin.

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The effects of Western sanctions and steady drop in global oil prices to a five-year low of below $70 this week are costing Russia some $140 billion annually, according to the government’s own estimates.

Putins  current political strategy, which has spooked investors and boosted capital flight to nearly $130 billion this year.

Russian officials on Tuesday warned the country faces a recession in 2015 that could see the economy shrink for the first time in five years.

They believe it will contract by 0.8 percent next year, down from a previous estimate of 1.2 percent growth.

Ordinary Russians have watched as their currency lost nearly 40 percent of its value since the beginning of the year. They can also expect double-digit inflation by early next year, officials predict.

Taken together, these stats are why Putin has long stopped trumpeting his country’s economic statistics in order to boost popular support, says Alexander Baunov, an editor of one of Russia’s only remaining independent news outlets   . read more


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