A Kremlin Made of Sand

In the short term, Russia's most serious risk stems from a near-fatal dependence on the price of oil. Twelve years of Putinism have moved Russia perilously close to being a petrostate, with all the political, economic, and social niceties those are known for. According to UBS analysts, a $10 change in oil's per-barrel price changes the price for balancing the budget by 1 percent of Russia's GDP. Last September, Alexei Kudrin, then finance minister and deputy prime minister, estimated that if the price falls to $60 a barrel, Russia's economy would register zero growth or even contract. To balance the national budget in 2004, Russia needed oil at $27 dollars a barrel. Last year the break-even point was $115. Thus far, the projection for this year is $117.