For most countries, the economic slowdown in China and the accompanying slump in commodity prices represent something between nuisance and pothole. For Russia, they are a catastrophe.
Russia’s currency and economy, already squeezed by Western sanctions, have been sent into virtual free fall by slumping oil prices. The IMF now puts Russia’s long-term potential growth at 1.5%. I personally think it’s just 1%, astonishing for a country whose standard of living is barely 40% that of the U.S.
Russia is indeed skating on thin ice: Cheap oil, Western sanctions and years of mismanagement have sent its economy into a deep freeze. Now everyone is wondering when the ice will crack.
Inflation has soared to 15%, the ruble is trading near record lows, consumer and business sentiment is on the slide, and its companies are shut out of financial markets in the US and Europe.