Moscow, Dec 17: Russia’s failure to halt the collapse of the ruble on Tuesday may weaken President Vladimir Putin’s iron grip on power in the wake of a full-blown currency crisis.
According to an agency report, a 6.5 percentage point interest rate rise to 17 percent overnight failed to prevent the currency hitting record lows in a “perfect storm” of low oil prices, looming recession and Western sanctions over the Ukraine crisis.
Putin has reportedly blamed the ruble’s crash on speculators and the West, while a presidential spokesman on Tuesday attributed the market turbulence to “emotions and a speculative mood”.
The rouble has reportedly lost 11 percent against the dollar on Tuesday, its steepest one-day fall since the Russian financial crisis in 1998. The Russian currency has fallen 20 percent since the start of the week and more than 50 percent this year.
As Moscow faced up to the brewing crisis, US Secretary of State John Kerry said sanctions could be lifted swiftly if Putin takes more steps to ease tensions and lives up to commitments under ceasefire accords to end the Ukraine conflict.
Speaking to reporters in London, Kerry said: “These sanctions could be lifted in a matter of weeks or days, depending on the choices that President Putin takes.”
President Obama is expected to sign legislation this week authorizing new sanctions on Russia over its activities in Ukraine and providing weapons to the Kiev government, White House spokesman Josh Earnest has reportedly stated.
For the Russian economy, the currency crisis means a deeper recession is more likely next year as high interest rates will crimp growth. For businesses, it means more uncertainty and less access to funding. For the central bank, it means a credibility crisis.
For Putin, it increases the risk of losing two of the main pillars on which his support is based – financial stability and prosperity – and brings an unwelcome policy headache at a time when relations with the West are also in crisis over Ukraine.
Putin, who rose to power at the end of 1999, has enjoyed popularity ratings above 80 percent since Russia reclaimed the Crimea peninsula from Ukraine in March.
The Russian President has no obvious rivals, with critics accusing him of smothering dissent, and much of the state’s big business is in his allies’ hands.
Putin is aware that his predecessor, Boris Yeltsin, resigned early after a financial crisis and that Soviet leader Mikhail Gorbachev’s grip on power slipped as the economy crumbled.
(With Agency Inputs)