(January 28, 2015 at 8:47 pm)Chuck Wrote: From the rebound in oil prices.
The low oil price is the primary driver of russian recession. Low oil price is unsustainable because there is no fundamental reduction in oil demand, or increase in oil supply. It is only being maintained in the short term by Saudi arabia maintaining high rate of production. Saudi Arabia can't keep this up, because just like with russian governement, the fiscal integrity of Saudi governement depends on tax revenue supported by high oil prices. Saudi Arabia is willing to bleed for A while to achieve some political goals. But it's can't keep it up forever.
So the growth comes from the fact that the current low oil price which is strangling russian governement income has to rebound within 2 years at most, most analysts suggests well within 1 year.
Aaactually, the Russian recession did not begin with the oil prices dropping. They started shortly after the sanctions began when Russian companies lost their borrowing power and were forced to repay their debts to outside investors, which, along with global politics adding to market uncertainty in regards to the Russian economy, began to cripple the ruble's value. In turn, Russia did everything it could to prop it up. It managed to for a short time, or at least it managed to slow down the rate of devaluation, at any rate. The drop in oil prices, however, cut the tether that Russia was using to prop up its currency. It's in free-fall. Plus, given the sheer amount Saudi Arabia makes in its oil sales, even now it's still pulling quite a lot of profit, to the tune of hundreds of billions.
Arabia can keep up the low prices. Russia cannot.
Also, to bring up the post before this one, you pointed out Russia is a global power simply by command of geography. Problem with that is the defensibility of that vast amount of geography, and sustainability of economy to fund the military to defend it. It IS a global power only by virtue of its size; which is why I said it's "barely" a global power. It's not a global power by virtue of economy or industrial capacity, and what presence it does have is with a military that, without a strong industrial basis, can be easily overwhelmed. Supply lines; no army marches on an empty stomach.
Which, of course, is why Putin is cutting every kind of domestic budget except specifically the military budget, or "defense budget."
I'm not really doing the "American triumphilism" thing; I'm merely remarking on the fact that despite your optimism, Russia's currency devaluation is fucking it hard, and recovering from the steep drops in its value is going to be rough, to say the least.
