PUTIN'S RUSSIAN RULETTE
Even as Western sanctions over Ukraine bite, crashing oil prices are hitting Russia's economy and government finances.
OPEC announced on Thursday that it will leave production unchanged, despite hopes from some members to cut output to push prices. Instead, oil prices have plunged further, with U.S. crude tumbling below $70 a barrel.
A Russia oil tycoon on Lukoil's board predicted that OPEC's action will drive out unprofitable U.S. shale plays, reducing supply and boosting prices. Indeed, U.S. shale stocks plunged Friday. While U.S. marginal production could be affected down the road, Russia's economy is in trouble.
The Russian ruble has tumbled vs. the U.S. dollar amid growing concerns about the Russian economy. Capital is streaming out of the country while foreign investment is drying up. Russia's central bank spent a substantial sum in a futile attempt to defend the currency.
Russia's GDP is still rising, at least in rubles. But pricey imports and soaring inflation are starting to hit Russian businesses and citizens.
There are concerns about dollar-denominated borrowing by Russian businesses and banks. That in turn, could spur President Vladimir Putin to provide bailouts, especially to state-run enterprises.
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