For a country only a generation removed from communism, Russia has embraced capitalism whole heartedly. Today, one can see Louis Vuitton ads in Red Square, the once symbolic bastion of the Soviet Union. The marketing of consumer products was once considered anathema to the very principals of communism; they now represent the philosophical changes in Russian society in terms of the free market. However, these changes are not reflected in its foreign policy or its pseudo-democracy. The relative stability of the current government compared to the immediate post-communist era still cannot insulate Russia from the threat of an economic bloodbath lead by the declining price of oil.
Boris Yeltsen’s tenure as Russia’s first democratically elected leader was characterized by ineptitude and corruption. The collapse of the Soviet Union and along with hyperinflation exacerbated the problem making the transition from communism to capitalism an arduous one. People saw their savings wiped out as the ruble collapsed leading to wide spread poverty. The derisive term the “Wooden Ruble”, coined to describe its meagre value only furthered the lack of trust in Russian markets (Kitroeff and Weisenthal , 2014). In the 16 years since, Russia has risen to new heights under Vladimir Putin. Economic prosperity is evident in Russia and is driven in large part by the oil and gas industry which accounts for two-thirds of their exports (Matlack, 2014). The recent volatility of ruble and falling oil prices have many Russians feeling that history is repeating itself.
The dramatic fall of the Russian ruble over the course of the last two days has sent the Russian government and markets into a tailspin. The Russian economy has suffered in recent months due to geopolitical issues, economic sanctions, and the price of oil collapsing. Yesterday, the value of the ruble dropped 19 percent making it the worst single-day drop since 1998(Kitroeff and Weisenthal , 2014). Its rapid decline eerily echoes the 1998 crises which decimated the Russian economy and became an enduring part of Yelsten’s legacy. Images of people lining up at banks yesterday conjured images of the Soviet Era bread lines. In response, the Russian Central Bank announced that it would provide additional currency funds in order to stabilize the domestic market (Zmeyev, 2014).
Putin has declined to accept responsibility placing the blame on foreign governments and markets trying to undermine Russia’s interests’. The use of Cold War rhetoric adds another troubling dimension in search of stability in the world markets. The strength of Russia’s economy will determine how Putin will proceed with his foreign policy ambitions.