Opinion Rouble rubble

Over the past 18 months, Russia’s president, Vladimir Putin, has conducted a muscular and aggressive foreign policy in defiance of the loud condemnation, and increasingly strict sanctions, from the West. He has annexed Crimea and continued to covertly stoke separatist sentiment and conflict in eastern Ukraine. In the Middle East, he has propped up ally Bashar al-Assad’s government in Syria, again much to the displeasure of the United States, and cultivated a newfound cosiness with China. All the while, his approval ratings have remained at 80 per cent or thereabouts — numbers most leaders can only dream of. But while Putin has been seemingly running strategic laps around the West, a strange thing has happened: Russia’s economy has imploded.

The rouble is in free fall against the dollar. An emergency meeting of the central bank to try to stanch the bleeding by embracing shock and awe tactics — raising interest rates 6.5 percentage points to 17 per cent in one swoop — appears to have been unsuccessful, with the currency still volatile. This dramatic fall is linked to Russia’s busted manufacturing sector and its over-reliance on oil and gas exports to drive growth, which is hurting at a time when the price of oil has also seen a dramatic decline. Because of its overdependence on its massive energy reserves, the Russian economy is the first victim of falling oil prices.

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This crisis poses a major challenge to Putin, whose popularity is partly dependent on providing stability and prosperity. But those who see the success of sanctions — and the undermining of Putin’s supposed geopolitical nous — in the rouble’s collapse might want to consider that domestic opinion is still firmly behind the Russian president, who has been adept at portraying the West as the source of all of Russia’s troubles. This may change as the crisis deepens, but there is little to indicate that Putin will modify his strategy in the face of domestic pressure. He is more likely to look for another foreign policy adventure as a distraction. As US President Barack Obama prepares to authorise more sanctions, he must account for the eventuality that Russian bellicosity will continue, even in the face of economic catastrophe.