Putin is Drowning in his own Sewage
For the Russian Kremlin to balance its annual budget this year, the price of crude oil must average $123 per barrel.
It’s an astounding fact. No other member of the G-8, and no member of BRIC, depends for budget solvency on the price of a commodity which is set abroad. Russia is, quite simply, not its own nation.
But there’s an even more horrifying reality for Vladimir Putin to face: So far this year, the price of crude oil has actually averaged $78 per barrel — and just $75 per barrel this month. That’s a whopping 40% less than the budget requires.
Vladimir Putin is drowning in the fetid sewage of his own economic mismanagement.
Russia now finds itself in a wicked economic vice. As the price of oil falls, its budgetary revenues fall along with it, and Russia needs to borrow to make up the difference. But international creditors see that Russia’s oil revenues, and hence its income, are falling, and as a result they raise the interests rates they charge Russia at exactly the wrong time for Russia.
The price of oil has plummeted 13% since its April high, and by the end of the year Russia will have virtually exhausted its budgetary reserve fund, which was down by one-third in July compared to its value at the end of last year. What’s more, Russia’s income is not only imperiled by falling world oil prices, but also by the dire impact of Russia’s wildfire crisis, which has severely undermined Russia’s agricultural base.
The dictator Putin, and Russia itself, stand exposed. On the one hand the Putin economy is crumbling and on the other, as we report in today’s issue, the crude KGB regime is quickly resorting to the most barbaric levels of violence in order to keep the lid on dissent, just as in Soviet times. It didn’t work then, and it won’t work now. Russia is headed for another collapse.