So much has happened in the last couple of weeks that we will just have to hit the highlights and spread the topic out over multiple posts.
The first thing to understand is that Russia is under severe economic stress and this seems to be pushing Putin into a very belligerent position. This is becoming obvious in a few ways:
- Russian GDP has been collapsing, dropping 4.6% in reported statistics in the second quarter. This is worse than expected and below what the Economic Ministry had felt would be the “low point.” With little prospect for a rebound as energy prices sink further, things are likely to get much worse in coming months.
- Monetary policy has been in an upheaval with a collapsing Ruble and a dwindling of foreign currency reserves.
- The Russians have had to turn to Hong Kong and Saudi Arabia for financial support.
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