Russia’s public finances have been destabilized by the plunge in oil and gas prices, adding to the risk of nuclear war.
If the Russian government cannot sustain a conventional war with NATO forces because it has a budget shortfall, then any war with NATO will go nuclear very quickly. Nuclear weapons are comparatively cheap.
The 60% plunge in the price in oil together with economic sanctions has left the Russian government with shrining reserves and a massive budget crisis.
According to William F Engdahl, Russia’s central bank is adding to the country’s economic woes by charging exorbitant interest rates, undermining investment.
This bank, which was set up after the fall of the Soviet Union, seems to be a private bank like the central banks in the UK, USA and ECB (which gives liquidity only to private banks and not governments).
Engdahl writes that the Russian central bank under chief Elwira Nabiullina is currently charging interest rates of 11% to other banks, choking growth. The bank charged interest rates of 17% during the Ruble crisis in January 2015 when the value of the Ruble plunged and the cost of imports rose.
Nationalising the Russian central bank while introducing strict inflation controls would do much to help the country stabilize by freeing up funds for new factories, new products, for some infrastructure projects vital for growth as well as funds for trade deals with Russia’s neighbouring states.
Having an economically collapsing, unstable Russia on its doorstep is not in the interests of Europe, the UK and USA as NATO forces aggressively drill for a conventional attack. Such a war could go thermal nuclear, chemical, biological in days if Moscow sees NATO battalions advancing towards it and hasn’t got the funds to deploy its divisions.
European countries should start unilaterally lifting economic sanctions against Russia.