After Vladimir Putin’s foreign adventures, it is time to reckon with harsh economic realities on the home front
As Vladimir Putin pursues a high-stakes expansionist foreign policy, problems are piling up on the home front. The rouble appears to be in freefall. Never since the financial crash of 1998 has the national currency seemed so weak. Russia’s central bank has already spent over $100bn this year trying to prop it up. Fears of inflation, and of bank runs by Russian citizens worried about their savings, are once again haunting the country, a chilling reminder of the financial instability of the 1990s. Moscow is now expecting the economy to enter recession next year, a sharp contrast with its earlier forecast of 1.2% growth in GDP. Capital flight is reaching new heights.
The main sources of this grim reality are to be found in the 40% drop in global oil prices since the summer, as well as in western sanctions imposed in response to Russia’s actions in Ukraine.