January 18, 2016

TRAMPLED BY A UNICORN:

Did Putin's Diplomatic Coup with Iran Hurt Him More than It Helped? (Rob Garver, January 18, 2016, Fiscal Times)

A report released over the weekend found that Iran has materially complied with all of the requirements of the agreement the Islamic Republic worked out with the United States and other world powers to dismantle much of its nuclear infrastructure. Nuclear materials have been shipped overseas, out of the reach of any elements within Iran interested in building nuclear weapons. A key reactor's core was filled with cement, ruining it for any future use. [...]

Now, here comes Iran, loosed onto the international oil markets for the first time in a generation. Iran sits on about 10 percent of the world's proven oil reserves, and its ability to add more supply to an already-saturated market is more bad news for Russia.

The oil markets, to be sure, have largely priced in the lifting of sanctions on Iran, but what's not clear is whether the full impact on Russia's currency, the ruble, has been felt yet. The ruble, which as recently as two years ago traded near 30 to the dollar, is now as weak as it has ever been. It takes 77 rubles to buy one dollar, and the trajectory has been steadily upward since last spring.

The ruble's tumble has multiple reasons, including international sanctions related to Russia's invasion of Ukraine, but the impact on Russian citizens is the same regardless of the cause: their buying power has been dramatically reduced.

The next Russian leader to understand economics will be the first.

Posted by at January 18, 2016 3:11 PM

  

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