Russia's Ruble Crisis Is Following The Same Pattern That Destroyed The Soviet Union
The currency's fall has crossed the line from a headache to a full-blown crisis. A massive interest hike last night from the Central Bank of Russia (from 10.5% to 17%) barely held off the ruble's fall for a couple of hours.
It's raising memories of previous collapses in Russia, like the 1998 financial crisis. But for some, it's more like the 1980s oil glut that eventually brought down the Soviet Union.
Here's Yegor Gaidar writing for the American Enterprise Institute seven years ago. He was Russia's acting Prime Minister between 1991 and 1994, years of extreme economic pain for Russia.
He describes the starting point of the USSR's collapse:
Sound familiar?
It should. OPEC, the group of oil producing nations, failed to agree to a cut in output (the usual response to falling prices) this November. Statements from the Saudi oil minister and other officials have suggested that the country, and the other gulf states, are happy to let prices slide. That leaves countries like Russia in a perilous position.
In the late 1980s, the Soviet Union was forced into an embarrassing scramble for money. It tried to make deals with a number of banks but the funding offered was far smaller than the country required. Food shortages worsened and Moscow needed the help of western governments, for which the USSR effectively had to allow eastern European countries to assert independence.
Writing in 2007, Gaidar warned against the consensus that oil prices would stay high:
Russia today isn't the same top-down, command and control economy that it was in the 1980s, but the dynamic hasn't changed entirely. The country is still hugely dependent on oil, particularly in terms of tax revenues and exports.
And Gaidar thinks the collapse of the Soviet Union is still relevant for modern Russia: