russia close to imploding

If the oil price doesn't recover (and fast), Russia looks to be going down:-

The government’ spending plan for 2009-2011 is based on a Urals oil price of $95. Finance minister Alexei Kudrin said the state would dip into its Reserve Fund (now 8.2pc of GDP) to cover any shortfall.

This is not a strategy that can survive the global slump we face next year. The Kremlin lives off energy taxes. It has no other income to speak of. The domestic bond market is tiny.

That is why it had to order oil companies last week to renew export shipments. They were selling at near $10 a barrel in the domestic market because crude prices have fallen to a level that no longer makes it rational to sell abroad given the state’s $40 export tariff.

Russia must soon choose: either bleed its oil industry to death, or slash spending and face street riots. It is already mobilizing the apparatus of coercion. The Moscow Times bravely ran the headline “Police get orders to crush crisis unrest”.

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