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COLLAPSE OF RUBLE THWARTS RUSSIA’S NUCLEAR AMBITIONS

Putin blames oil price for Russia's cash crunch
Dateline: 5 January 2017

The oil price plunge could not have come at a worse time for Russia. Just as Putin was flexing his muscles, taking back Crimea and calling the shots over gas deliveries, the value of Russia’s major export commodities collapsed.

As oil more than halved in value, demand for Russia’s inexhaustible natural gas also dried up. Sanctions against Russia’s involvement in Ukraine were helping EU states to turn to cheap Saudi oil instead.

The ruble took an immediate pounding as Russian oligarchs sought to isolate their wealth from future risk, ironically creating the very situation they feared: a run on the Russian currency.

Now Russia has had to face up to its fate. Without big oil and gas revenues, it can’t afford to bully its neighbours. First it dropped the South Stream pipeline to Bulgaria and offered a deal to Turkey. But as oil and the ruble continued to fall, affordability delayed any construction. Russia was already committed to Turkey’s nuclear power plant, and costs were escalating.

That’s the big problem for Russia. Putin was hoping to rebuild his nuclear arsenal and export nuclear power to South Africa and Asia. Rosatom has 29 projects made attractive with vendor financing. But since oil’s plunge there’s just not enough money coming in, and you can’t cut corners on a nuke.

Putin has desperately turned to China, with its insatiable demand for energy and massive cash reserves. China has its own nuclear resources and is holding all the cards. A bailout for Russia is inevitable, but who would have thought that mighty Russia would become a ‘client state’ of China?

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Despite appearances to the contrary, Futureworld cannot and does not predict the future. Our Mindbullets scenarios are fictitious and designed purely to explore possible futures, challenge and stimulate strategic thinking. Use these at your own risk. Any reference to actual people, entities or events is entirely allegorical. Copyright Futureworld International Limited. Reproduction or distribution permitted only with recognition of Copyright and the inclusion of this disclaimer. © Public domain image.

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