|December 19, 2014 | 16:50 GMT|
Russia’s deteriorating economic situation has struck another blow to Russian President Vladimir Putin and his ability to maintain a firm hold on the country and the government. Uncertainty in the Russian economy continued for another day Dec. 17 as the Russian government was forced to step in to stabilize the ruble after the currency plummeted 20 percent the previous day. The fall in the ruble’s value came after the Central Bank of Russia raised interest rates from 10.5 percent to 17 percent — the largest interest hike since the devastating 1998 financial crisis that led to Russia’s massive defaults. These developments in what was already a weakening economy increased pressure on and within the Kremlin, spawning rumors throughout Russia about the cause of this instability and about what could come next.
Before the past few frantic days, the Russian economy was already in a sharp decline caused by several factors. Russian industrial growth and production began stagnating in 2013, and the Russian-supported conflict in Ukraine had soured investor sentiment and prompted economic sanctions from the West. Moreover, oil prices fell below the government budget’s forecast of $93 per barrel for 2014 and $80 per barrel for 2015.
Fissures and disagreements have formed within Putin’s top team on how to manage the current economic crisis, just as Putin is already losing the confidence of Russia’s security chiefs. Because of the failure to predict a change in Ukraine, Putin has already purged factions within the Federal Security Service. Moreover, in recent weeks, Nikolai Patrushev — head of the Russian Security Council and former Federal Security Service chief — has faced public criticism and allegations of corruption from opposition factions led by Alexei Navalny. This could signal even greater pressure among Russia’s security elite, one of Putin’s primary sources of power and stability. With his supporting factions in disarray, Putin is facing another test of his ability to retain the confidence of the people and those inside the Kremlin.