The Russian bear probably wishes it could go into hibernation. Early. Sanctions, collapsing oil prices, the country’s main export, and high debt levels are taking a toll on the country’s economy in the wake of President Vladimir Putin’s actions in Crimea, and the longer the situation continues, the more the results are seen in sectors from foodstuffs to military contracting—not to mention the currency.
Despite his swagger, Putin faces a tough job—some of it of his own making. And some of the actions he and his government are taking to cope with economic chaos are actually making things worse. For instance, sanctions imposed by Europe and the U.S. made life tough enough.
But then he doubled down, imposing his own countersanctions, which cut off supplies of various goods, handicapped numerous sectors within Russia’s economy as Russians spent less and probably made older Russians remember the long lines and empty shelves of shops under Communism.
In addition, foreign investment dried up in all sorts of areas, making it tough for money to continue to flow unobstructed and business to continue as usual. Monetary strategy from Moscow has not improved the situation, leaving Russia—and many of its investors—between a rock and a hard place.
Here’s a look at five of the present problems facing the Russian economy.
1. Russian bonds:
Falling oil prices have made investors wary, since so much of Russia’s economy, and the value of its currency, is dependent on oil profits. In late 2014, Moscow had to cancel five bond sales in a row; although it had to cancel another sale in January, things had been looking up as the price of oil recovered some ground.
However, August didn’t start out well—either for oil, which hit levels not seen since 2009, or for bonds, which pretty much went begging after investors demanded a higher premium than the finance ministry was willing to pay. As a result, although two auctions saw bids on nearly all the 15 billion rubles ($236 million) in floating-coupon bonds, the auctions resulted in sales of 2.84 billion rubles, just 19% of the total, after the finance ministry decided to bow out on issuing the rest till a lower premium becomes acceptable to the market.
2. Ruble rubble:
Pity the poor ruble. Down in value along with the spiraling price of crude, despite a brief recovery earlier in the year, the currency has managed to erase any gains it made during 2015. With the price of oil continuing to fall—it’s lost half its value from 2014’s high—and economists predicting that Russia’s already troubled economy ain’t seen nothin’ yet, the ruble is in tatters.
Considering that earlier in the year it was the best-performing currency, that’s saying something. Russians are definitely not happy about it, because that means they’re able to buy less and less of any imports still being allowed into the country. And under Putin’s countersanctions, that’s not all that much.