Russia to Halt Ruble Slide, Increase Energy Ties With China: US Expert

Russian ruble banknotes of different denominations
A weakened ruble and sliding oil prices will not undermine Russia's economy, says Marin Katusa, the Chief Energy Investment Strategist at Casey Research. The 'harsh reality' is that the US shale producers have already been hurt much more than the Russians.

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MOSCOW, December 20 (Sputnik), Ekaterina Blinova – A weakened ruble and dropping oil prices will not undermine Russia's economy or trigger riots in the streets of Moscow, believes Marin Katusa, author of the New York Times bestseller, "The Colder War," and the Chief Energy Investment Strategist at Casey Research.

"Russia is not some Zimbabwe-to-be. It's sitting on a surplus of foreign assets and very healthy foreign exchange reserves of around $375 billion. Moreover, it has a strong debt-to-GDP ratio of just 13% and a large (and steadily growing) stockpile of gold… Russia will arrest the ruble's slide and keep pumping oil," writes Marin Katusa in his article "Why Russia will halt the ruble’s slide and keep pumping oil."

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Sliding oil prices will provide Russia with some new opportunities, the author points out. Low oil prices have resulted in boosting energy ties between Russia and its big customers, particularly China. It is expected that Russia and China will switch to ruble/yuan trading, Marin Katusa notes, adding that it will "further undermine the dollar's worldwide hegemony."

"Putin always thinks decades ahead, and any short-term loss of energy revenues will be far offset by the long-term gains of his economic alliances," the investment strategist emphasizes.

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On the other hand, plummeting oil prices will help Russia to overcome the so-called "Dutch disease." Mr. Katusa points to the fact that high oil prices tremendously lowered Russia's manufacturing sector's share in the country's economy in the past 15 years (to eight percent from 21 percent).

Weaker ruble and lower oil prices will trigger the development of Russia's agricultural and manufacturing sectors, deems the expert. In addition, ruble's weakness together with the ban on food imports from the EU will obviously lead to "an import-substitution boom" in the country.

Marin Katusa drew a historic parallel between Russia's Central Bank's decision to raise interest rates up to 17 percent and the similar measures carried out by US Fed Chair Paul Volcker, who fought inflation in the US in the early 1980s. "It worked for Volcker, as the US stock market embarked on a historic bull run," and it will work for Russians, Mr. Katusa stresses.

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"In any event, don't expect any deprivations to inspire riots in the streets of Moscow," writes Marin Katusa, "The people trust [Vladimir Putin]. They'll tighten their belts and there will be no widespread revolt against his policies."

Meanwhile, "the harsh reality" is that the US shale oil producers have been hurt by sliding oil prices much more than Russians. If the oil prices drop further, fracking will become "uneconomic" and many US shale firms will be forced to shut down. It will be disastrous for the US economy, notes the expert, since shale industry's growth "has underpinned 100% of US economic growth for the past several years."

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