Will the Kremlin Net Billions from the Crisis in Ukraine?

Will the Kremlin Net Billions from the Crisis in Ukraine?

Secretary of State John Kerry has cited the declining Russian stock market and the sliding ruble as examples of the costs the Kremlin is paying for moving Russian forces into Ukraine.  But some in Moscow are asserting that the crisis may be GOOD for the Russian economy.

“A cheaper ruble and more expensive oil could actually go a long way in improving Russia’s economy, possibly offsetting other potential aftershocks of the Ukraine crisis,” writes Anatoly Medetsky in the Moscow Times. He points out that higher oil prices help the Kremlin because it is so dependent on energy exports for cash. And a weaker ruble will help make Russian companies more competitive in international markets. He argues that the crisis will actually net the Kremlin billions of dollars.

According to Oleg Kuzmin an economist with the investment banker Renaissance Capital in Moscow, a drop of 1 ruble in the exchange rate against the dollar adds $5 billion of revenues to state coffers. Furthermore, if the average oil price goes up $1 per barrel, that means 60 billion rubles more in revenue for the Kremlin.

Others argue that the situation will not be so rosy for Russia, claiming that a declining stock market and possible economic sanctions will more than offset any economic gains that come from the crisis. 


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