Russia took over Crimea in March, 2014 without firing a shot.
Russia had used a portion of its military to dominate eastern Ukraine.
Ukraine had a GDP in 2013 of 177 billion.
Russia had a GDP in 2013 of about 2.1 trillion (Russia was about ten times bigger than Ukraine, Russia is now half as big as it was on a currency basis)
The USA had a GDP in 2013 of 16.8 trillion. (the USA was eight times bigger than Russia, the USA can gets european allies, Saudi Arabia and others to help. the USA has strong influence over economies that more than triple the size of US GDP)
The United States has been applying economic sanctions to Russia and the United States has increased its crude oil and natural gas production which has been a critical part of lowering energy prices. Lower energy prices and economic sanctions are wrecking Russia’s economy without a shot being fired by the USA.
It shows that the United States is still very powerful if they have an opponent with an economy to crush. Only those like Iran and North Korea or non-state actors who are willing to get by without a real economy can defy the United States. Yes, Russia has an equal number of nuclear bombs but this only matters if the level of conflict is nuclear.
Russia is applying currency controls and trying to hunker down for two years.
[Telegraph UK] The Kremlin will force companies to repatriate earnings, impose foreign exchange limits on citizens, freeze dividend payments and restrict purchases of hard currency by firms unless strictly needed for trade.
The currency has stabilised near 60 to the dollar, but has lost half its value this year. “You don’t get moves of this kind without intervention. They must have spent billions and that means they are depleting reserves at a dramatic pace,” he said.
“This is a full-blown currency crisis. People are lining up at night to convert their roubles into dollars and they are buying anything they can that keeps its value. Putin is trying every trick, but the only trick left is capital controls. They won’t announce it: they will just starting doing it quietly by forcing companies to convert dollars into roubles. It won’t work and will just lead to a vicious circle,” he said.
Eric Chaney, from AXA, warned clients to prepare for a wave of defaults on hard-currency debt as companies struggle to repay $120bn over the next year. They have lost access to global capital markets since the invasion of Crimea. Only those deemed “strategic” will be rescued by the state.
Mr Putin warned his nation to batten down the hatches for a long struggle and acknowledged that sanctions account for 25pc to 30pc of Russia’s economic woes. “These are difficult times. Under the most negative scenario, this situation will last for about two years. If it gets worse, we will have to make cuts.” he said.
Mr Putin said it makes no real difference at this point whether oil settles at $60, or falls to $40. Russia will have to restructure its economy and fall back on its own resources.
Asked if he was at risk of a coup by insiders, said to be losing faith in his leadership, he replied coolly that “there can’t be a palace coup in Russia, because there are no palaces”.
The American Interest has a description of the limited options that Putin has.
If the swap deal is activated for this purpose, it would mark the first time China is called upon to use its currency to bail out another currency in crisis. The deal was signed by the two central banks in October, when Premier Li Keqiang visited Russia.
“Russia badly needs liquidity support and the swap line could be an ideal tool,” said Bank of Communications chief economist Lian Ping.
Li Lifan, a researcher at the Shanghai Academy of Social Sciences, said the swap would not be enough for Russia even if it is used in its entirety. “The PBOC might agree to extend something like 15 billion yuan initially as a way of showing China’s commitment to Russia.”
Any deal with China (or India) would require that the party bailing out Russia somehow make the agreement iron clad so that any bailout money does not disappear.
SOURCES – Wikipedia, South China Morning Post, Telegraph UK, The American Interest, American Enterprise Institute
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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