Russia Rouble Hits the Dust

Just look at this graph of that covers the last 15 years. If you are selling oil and gas then who is to worry? Both fossil fuels are traded in US dollars, so when you convert them back to Roubles the money is flowing in. Unfortunately for ordinary  Russians very few of them get direct benefits from these. money flows – in fact quite the opposite. Prices of imported goods soar and travel abroad get really expensive. 

When we in Europe buy large amounts of fossil fuels from Russia the revenues basically go into the pockets of a few big Russian companies that are either controlled by the government or are close to it. The government takes its generous share, and can afford to support the fishing expeditions of men in green – and these are not the sustainable kind…

Exporting goods and services to Russia is also becoming expensive because of the fall of the currency. Who can afford to buy imports when they cost three times more than 15 years ago! Foreign companies with assets in Russia should also be concerned now that their value has fallen  so much…

The dramatic fall of the Rouble is not the result of speculation by foreigners, but the result of disastrous economic policies of the government. It is not helped when there is a capital flight from Russia of large amounts of money by wealthy Russias, who buy expensive homes in Europe and in other western countries. It is doubtful that any bank or hedge fund in the western world is speculating against the rouble for fear of being accused of money laundering and of other dirty schemes.

We should be very concerned about our dependency with fossil fuels especially when we know the expression “Out of the frying pan into the fire” – hot oil is inflammable…

The serious situation with the new Russian activities around Ukraine, Syria and Iran also needs attention. It is therefore important to see that our President is talking with Putin, and that Joe Biden is seeking a dialogue with the Russians. Political instability in Russia is also a real threat to world peace when they such  huge European neighbour. Will the general population sit back for ever and see their standard of living fall further?

Graph: from ECB website

Cartoon: from Puck by Louis Dalrymple urging American intervention in Cuba in 1898

 

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