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Leonid Bershidsky

Putin Doesn't Care if the Ruble Falls

The ruble's steep drop reflects Russian companies' debt financing needs and the downward trajectory of oil prices. It will only present a danger to President Vladimir Putin's political support if oil keeps getting cheaper.
No Ruble Crisis here.
No Ruble Crisis here.

From a technical point of view, the Russian ruble's drop to more than 40 per U.S. dollar, a full 17 percent weaker than at the start of the year, is an expected result of Russian companies being cut off from Western financial markets and a drop in the price of oil.

On a different level, however, the ruble's downward journey reflects the economic structure that makes it possible for President Vladimir Putin to remain popular. The government isn't interested in defending the ruble, because a weak currency benefits the resource exporters who are the main source of revenues for the Russian government. The price inflation that results amounts to a tax on ordinary citizens to fundPutin's aggressive policies, yet these people are a less important constituency in Russia. And, for now at least, they are happy to pay for the country's international resurgence, such as it is.