[I]f Russia is rated junk, then its companies will be too -- which will increase the borrowing costs on their existing debt. It could also trigger earlier bond repayments, which, together with the higher interest rates, could, according to one official, cost them as much as $20 to $30 billion. And that's $20 to $30 billion it really can't afford. Russia, as I've said before, doesn't have an economy so much as an oil-exporting business that subsidizes everything else. But it can't subsidize much when prices are only $50-a-barrel.
In his State of the Union address last week, President Obama didn't name names, but he reminded some of his critics in the Republican Party that their praise for Russian President Vladimir Putin was sadly mistaken.
"Last year, as we were doing the hard work of imposing sanctions along with our allies, as we were reinforcing our presence with frontline states, Mr. Putin's aggression it was suggested was 'a masterful display' of 'strategy and strength.' That's what I heard from some folks," Obama said. "Well, today, it is America that stands strong and united with our allies, while Russia is isolated with its economy in tatters. That's how America leads -- not with bluster, but with persistent, steady resolve."
Obama had reason to feel good -- and take a not-so-subtle dig at Putin's GOP fans. Not only is the American recovery gaining strength, but as Matt O'Brien explained yesterday, Russia's credit rating was downgraded this week to "junk" status.
The confluence of economic events unfolding in Russia is amazing: cheap gas, banks in need of a bailout, crashing currency, high interest rates, and an inability to repay debts, all against the backdrop of additional sanctions.
There's no reason conditions are going to improve in Russia anytime soon and Putin doesn't know what to do next.
With these developments in mind, I'm curious: where did all the Republicans go who heralded Putin as a strategic mastermind? Where are the Fox News personalities who liked the idea of Putin leading the United States?
They seem to have fallen quietly lately. Maybe someone should ask them whether they stand by their previous gushing over the Russian autocrat.
Dec. 19, 201405:06