In a country hugely dependent on oil, a slump in the oil price can derail the whole economy. In Russia, oil and gas revenues have made up more than half of government earnings since 2012 – a trend that is likely to reverse in 2015. And, while the Russian rouble has recovered from its huge slumps in December 2014, it is still trading under value. Russia is in recession, and economic growth is not expected until 2016 or 2017.
The contraction in the oil price, which began in July 2014 and really gained momentum between October and January 2015, saw oil halve in value from a high of $115 a barrel of Brent crude oil on June 19, to about $50 a barrel in January. In the same period, the rouble devalued from Rbs33.80 per $1 on July 9, 2014, to Rbs69.20 per $1 as of January 31, 2015. A significant 6.5% hike in the key interest rate followed, as did a troubling few weeks for the banking sector (see article on the Russian banking sector and interview with the governor of the National Bank of Russia).
