The crisis may encourage the president to allow the economic and political rejuvenation of a system made for inertia
The relentless collapse in the price of oil over the past few months has come as a big shock not only to the Russian economy, but also to its political system. As the price falls from its peak earlier in the year of $115 a barrel to below $50, the government faces some harsh choices. Fifty-two per cent of Russia’s budget revenues are derived from the energy sector. And even though the energy sector comprises only 27% of its total economy, the crisis has deflated much of Russia’s self-confidence, and will in the immediate term force the adoption of some drastic economic measures. In the long term, it may set Russia on a new political path.
The administration is facing a perfect storm of negative economic indicators. In his traditional end-of-year interview on 10 December 2014, Dmitry Medvedev, the prime minister, stressed that Russia had not entirely recovered from the great recession of 2008-09, noting that “negative trends have been adding up in our economy for the past few years” and that “there were signs of crisis in the economy all along”. In addition to falling oil prices and “outside pressure”, the rouble crisis had been provoked by “speculation in the national currency”. He admitted that “the sanctions have cost our economy tens of billions of dollars”.