(NaturalNews) As global oil prices collapse, the Russian economy — 50 percent of which is dependent upon energy exports — is continuing to slide as well, with the country’s currency, the ruble, taking it on the chin.
As the ruble slide extended in recent days, Russia’s central bank boosted interest rates to 17 percent in a bid to prevent further loss of value. But such moves weren’t enough to prevent Russian citizens from panicking somewhat as scores headed for banks and for stores to stock up on whatever they could, while they could.
As reported by The Associated Press, Russians bought at frantic paces big-ticket items, among other goods, in a bid to get them before inevitable inflationary pressures in the form of rising prices put them out of reach.
The AP further reported:
As the Russian authorities announced a series of measures to ease the pressure on the ruble, which slid 15 percent in the previous two days and raised fears of a bank run, many Russians were buying cars and home appliances — in some cases in record numbers — before prices for these imported goods shoot higher.
Swedish furniture giant IKEA had already issued a warning to Russian consumers that it would have to jack up prices in the coming days, resulting in weekend-like crowds at one Moscow store in the middle of the week.
Other shops that sold a range of goods were also reporting record sales, but the rush on product led some to shut off operations for a time out of fear of not knowing how far the ruble would sink. Among the local shops were some global corporations like Apple, which ended online sales for the time being.
“This is a very dangerous situation. We are just a few days away from a full-blown run on the banks,” said Russia’s leading business daily Vedomosti, in an editorial, the AP reported. “If one does not calm down the currency market right now, the banking system will need robust emergency care.”
One shopper at IKEA in her 30s, Alyona Korsuntseva, spoke about the current unease over the Russian economy was reminiscent of the 1998 crisis when the ruble fell after the government’s sovereign bond default.
“What’s pressuring us is the fact that many people (back then) rushed to withdraw money from bank cards, accounts,” she said. “We want to safeguard ourselves so that things wouldn’t be as bad they were back then.”
Shoppers were scooping up durable goods as well, because they were seen as better investments than most Russian stocks. Also, most Russians cannot afford to purchase land or other real estate.
The AP report continued:
Earlier… the ruble suffered catastrophic losses as traders continued to fret over the combined impact of low oil prices and Western sanctions over Russia’s involvement in Ukraine’s crisis.
How low will it go?
As consumers fretted, there were signs that the ruble’s freefall was reaching a low point and that recovery was coming, at least in the short term. But other analysts believe Russia’s ruble problem goes much deeper than just a slide in oil prices or Western sanctions.
Colin Chilcoat, writing at OilPrice.com, wrote December 18:
The ruble is dying, and fast. In what is now being dubbed ‘Black Monday’ the ruble’s value to the dollar dropped nearly 15 percent. …
Still, the Russian economy’s troubles are deeper than that and President Vladimir Putin will be hard-pressed to find an easy out. With a recession looming, state energy companies are struggling to stay afloat, if not directly contributing to the country’s woes.
On the year, Chilcoat says, the ruble is off 55 percent against the world’s reserve currency, the U.S. dollar. New lows each day “harkens back to the period of hyperinflation that characterized post-Soviet Russia. Then, as now, citizens are seeing their material wealth disintegrate amid rising costs domestically,” he wrote.
See his full report here.