Pedestrians walk under a board listing foreign currency rates against the Russian ruble outside an exchange office in central Moscow, on December 17, 2014. Photo: Getty Images
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Rouble trouble: oil's plunge has given Putin a serious headache

The fall in oil's price is being felt keenly in Moscow, where the Putin government is struggling to cope with the knock-on effects.

In June a barrel of Brent crude oil cost $115. On Wednesday it cost less than $59. The plunge is a result of higher global production  mainly due to shale drilling in the US  as well as weaker demand from large economies such as China and Germany.

For most of us lower petroleum prices are a good thing. It is cheaper to fill up our cars and the falling cost of producing goods can spur economic growth. But for some oil-producing countries crude’s tumble is a major headache. Ask Vladimir Putin.

Since the start of his campaign of irredentism in Ukraine in February, Russia’s president has shrugged off the strong criticism of his policies by European and North American leaders. When sanctions were imposed he retaliated by restricting food imports from the West. Thanks partly to the state-controlled media, but also to the rise in living standards and the financial stability under his rule, Putin’s domestic approval ratings remain high.

But the fall in the price of oil, which together with natural gas accounts for more than two-thirds of Russia’s total exports, now threatens Putin’s standing at home. It has already put huge pressure on the Russian rouble, which traded at less than 40 to the US dollar as recently as October. This week the rouble slid to 80 to the dollar – and that was after the central bank raised interest rates by 6.5 percentage points, to 17 per cent, on Monday night. The rouble has since recovered to around 63 to the dollar, but only after aggressive central bank intervention.

The bank’s deputy governor, Sergey Shvetsov, said on Tuesday that the rouble situation was “critical”, the stuff of his “worst nightmares”. Some Russians agreed, rushing to purchase foreign currency and goods before prices increased further. Apple stopped selling iPhones and computers online in Russia because the currency’s volatility made it too difficult to set prices.

Despite the signs of panic, a major financial crisis in Russia may be averted, unlike in 1998 when the currency last collapsed. In recent years the country’s fiscal policy has been relatively prudent, and high commodity prices have enabled the government to amass $400bn in foreign exchange reserves. Sovereign borrowings are modest.

Even so, the mild recession that seemed inevitable even before this week now seems likely to be severe; the central bank has forecast a 4.5 per cent contraction in GDP in Russia in 2015 if oil prices stay at around $60 a barrel. 

And that will make like harder for Putin. Writing in the Financial Times on Wednesday, Sergei Guriev, a former head of the New Economic School in Moscow, said that the Russian authorities had shown little understanding of how to deal with the financial predicament. International markets were witnessing "a gathering storm but no captain", Guriev added, leaving only two certainties: “First, unless sanctions are lifted and the oil price rebounds, the Russian economy will grow much worse in 2015. Second, we can predict that Moscow’s response — in both economic and foreign policy — will be unpredictable.”

Xan Rice is Features Editor at the New Statesman.

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Stephen Hawking's enthusiasm for colonising space makes him almost as bad as Trump

The physicist's inistence on mankind's expansion risks making him a handmaiden of inequality.

“Spreading out may be the only thing that saves us from ourselves,” Stephen Hawking has warned. And he’s not just talking about surviving the UK's recent run of record breaking heat. If humanity doesn’t start sending people to Mars soon, then in a few hundred years he says we can all expect to be kaput; there just isn’t enough space for us all.

The theoretical physicist gave his address to the glittering Starmus Festival of science and arts in Norway. According to the BBC, he argued that climate change and the depletion of natural resources help make space travel essential. With this in mind, he would like to see a mission to Mars by 2025 and a new lunar base within 30 years.

He even took a swipe at Donald Trump: “I am not denying the importance of fighting climate change and global warming, unlike Donald Trump, who may just have taken the most serious, and wrong, decision on climate change this world has seen.”

Yet there are striking similarities between Hawking's statement and the President's bombast. For one thing there was the context in which it was made - an address to a festival dripping with conspicuous consumption, where 18 carat gold OMEGA watches were dished out as prizes.

More importantly there's the inescapable reality that space colonisation is an inherently elitist affair: under Trump you may be able to pay your way out of earthly catastrophe, while for Elon Musk, brawn could be a deciding advantage, given he wants his early settlers on Mars to be able to dredge up buried ice.

Whichever way you divide it up, it is unlikely that everyone will be able to RightMove their way to a less crowded galaxy. Hell, most people can’t even make it to Starmus itself (€800  for a full price ticket), where the line-up of speakers is overwhelmingly white and male.

So while this obsession with space travel has a certain nobility, it also risks elevating earthly inequalities to an interplanetary scale.

And although Hawking is right to call out Trump on climate change, the concern that space travel diverts money from saving earth's ecosystems still stands. 

In a context where the American government is upping NASA’s budget for manned space flights at the same time as it cuts funds for critical work observing the changes on earth, it is imperative that the wider science community stands up against this worrying trend.

Hawking's enthusiasm for colonising the solar system risks playing into the hands of the those who share the President destructive views on the climate, at the expense of the planet underneath us.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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