Oil prices sustaining Russian aggression
Oil is still trading above $100 a barrel, but the recent trend is sharply downward from the July peak of $140.
By Martin Hutchinson

Russia’s central bank intervened to support the rouble last week, as foreign analysts estimated $21 billion had been pulled out of Russian securities following its incursion into Georgia.

The central bank sold $3.5-4 billion in reserves to stop further depreciation of the rouble. With nearly $600 billion of currency reserves, Russia can afford to support the rouble. It can ignore foreign bleating in the short term. Once oil prices drop, life will become tougher for Russian consumers. That’s when the West will have some leverage.

Moscow’s stock market has fallen 25% since July. Since less than 1% of Russians own stocks, this may not matter domestically. As a result, so long as oil prices remain high, Russia’s aggressive foreign policy and poor governance record have few economic, or political costs.
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What's even more interesting is Russia's "breakeven point" on oil prices. They don't get top dollar for their crude (it's not "sweet" enough), so their overall 'bundle' price is likely under $100 a Bbl., and their "break even price" is probably above $60 a Bbl. by now, so they don't have enough to go around (increasing consumer spending, increased government spending, and greatly reduced access to external capital), with the result that spending on infrastructure has to stagnate, because there's just not enough capital - they will be tapped out. And if oil production falls, which appears to be happening, they'll be in a world of serious hurt.

The marketplace is extremely unforgiving, particularly these days.

Ask yourself a question - Putin is one very, very smart operator. Methinks he can do the math as well as anybody, and better than most. He's got a society which has a full stomach of rising economic expectations, and so far the meal's been pretty good. Now they are expecting the main course - where's it going to come from? Maybe his "stepping down" was a classic example of being "Time to get out when the getting's good."

Thoughts?