RUSSIA ECONOMIC DOWNFALL

Plunging oil prices and economic sanctions have pushed Russia's economy to the brink of collapse. The Russian Central Bank has raised its key interest rate to 17 percent from 10.5 percent, the biggest hike since Russia's ruble crisis in 1998.

The Central Bank has only two options. The first is to allow the ruble to find its own level in the hope that the decline in the oil price will prove temporary ande that rising demand for energy as the global economy recovers will push the ruble against the dollar. The other is to introduce stringent capital controls. Neither option is good as they can stifle borrowing and economic growth, which was already in deep trouble.

Russia has now a collapsing currency, a collapsing economy adn sky-high interest rates. The question is how the Putin government responds.

Russian GDP might shrink by a terrifying 4.5 percent next year if the price of crude oil hands around $ 60 a barrel. A barrel of Brent crude is currently trading at below $ 60 a barrel, compared to a recent peak of $ 115 in the summer.

Latest 16 December 2014 EUR 1= RUB 91.52