The Russian Crisis Deja Vu 
Russia
From Crisis to Crisis….
Bharat Pratap
Russian crisis – Evolution and prognosis
1. Contemporary Episode – Currently ongoing panic catalyzed by falling oil prices, a highly hydrocarbon based economy and lack of diversification and transparency.
Key Statistical Highlights :
Source : World Bank & OECD
Source : CRS Compilation of data from IMF & Bank of Russia
Page 2 of 11
Russian crisis – Evolution and prognosis
Recent History & Current Situation:
Over the last 14 years, Russia was a significant beneficiary of the increasing global energy prices as well as the high level of global commodity prices. This helped Russia overcome the crippling crisis which is suffered in 1998. Additionally the country also suffered in the course of the global financial crisis of 2008-09. Due to sustained hydrocarbon prices the country reversed the slide and bounced back in 2010. However in the last 12 months Russia has been hit hard by a number political and economic of factors. This has led to an outflow of capital, a weakening of the Rouble, high inflation and of late a negative growth environment.
On December 15th, panic began to spread in the market as news of further economic strife gripped the investors, leading to a huge sell-off of the Rouble. This added to the already depreciating currency and to stem this rout, Bank of Russia announced the largest hike interest rates since the
1998 crisis and increasing the rate from 10.5% to 17% over night.
On December 16th the Rouble collapsed from an already weak RUB 60/ USD to RUB 80/USD, and this was despite the 6.5% increase in interest rates announced at midnight, further fuelling the panic. This was the culmination of a crisis which had been building for a number of years. The
Russian economy has been almost entirely dependent on oil prices. The economy is tightly controlled by a small self-interest group and foreign investors have been treated in an erratic and often unfair manner, which led to the economist publishing a
From Crisis to Crisis….
Bharat Pratap
Russian crisis – Evolution and prognosis
1. Contemporary Episode – Currently ongoing panic catalyzed by falling oil prices, a highly hydrocarbon based economy and lack of diversification and transparency.
Key Statistical Highlights :
Source : World Bank & OECD
Source : CRS Compilation of data from IMF & Bank of Russia
Page 2 of 11
Russian crisis – Evolution and prognosis
Recent History & Current Situation:
Over the last 14 years, Russia was a significant beneficiary of the increasing global energy prices as well as the high level of global commodity prices. This helped Russia overcome the crippling crisis which is suffered in 1998. Additionally the country also suffered in the course of the global financial crisis of 2008-09. Due to sustained hydrocarbon prices the country reversed the slide and bounced back in 2010. However in the last 12 months Russia has been hit hard by a number political and economic of factors. This has led to an outflow of capital, a weakening of the Rouble, high inflation and of late a negative growth environment.
On December 15th, panic began to spread in the market as news of further economic strife gripped the investors, leading to a huge sell-off of the Rouble. This added to the already depreciating currency and to stem this rout, Bank of Russia announced the largest hike interest rates since the
1998 crisis and increasing the rate from 10.5% to 17% over night.
On December 16th the Rouble collapsed from an already weak RUB 60/ USD to RUB 80/USD, and this was despite the 6.5% increase in interest rates announced at midnight, further fuelling the panic. This was the culmination of a crisis which had been building for a number of years. The
Russian economy has been almost entirely dependent on oil prices. The economy is tightly controlled by a small self-interest group and foreign investors have been treated in an erratic and often unfair manner, which led to the economist publishing a