China, a closer ally of Russia ?

Beleaguered Russia faces a crossroads

by EIJI FURUKAWA

Vladimir Putin's willingness to give ground and seek harmony with the West may determine not only the future of Russia but also global security down the road.

Nine months after the annexation of most of the Crimean peninsula from Ukraine by Russia, plunging crude oil prices are squeezing Moscow. The nation relies on revenue from petroleum and gas for half of the federal budget.

Although Putin says that the country is resolved to fight any attempt to destroy the country, prices in the country continue to surge at the pace of over 10% due to the significant depreciation of the ruble.

Economic sanctions by the Western countries are also weighing on government-owned oil major Rosneft. The cash-strapped company asked in October for financial assistance of 2 trillion rubles ($33.1 billion) from the federal government to survive the sanctions.

In a bid to protect the nation's currency, the Russian central bank said Tuesday that it would raise its key interest rate to 17% from 10.5% just before 1 a.m. in Moscow. However, the move could not stop the plunge of the currency, which temporarily dropped to almost 80 rubles against the dollar, which must have infuriated Putin.

The attempt to shore up the currency may also have an adverse effect on the people of Russia. It could accelerate the business slump in the country, further squeezing the nation's consumers. Vladimir Kolokoltsev, minister of the interior of the Russian Federation, who was concerned about a renewed anti-Putin movement at home, said the government was ready to use its internal troops and contain such a move.

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Read more: asia.nikkei.com