Sunday, December 14, 2014

Why Russian Crisis of 2014 is Not the Same as Crisis of 2008-2009?

Some consider current crisis in Russia as no different from one suffered during and after financial crisis of 2007-2008. In fact, the culprits are falling oil prices and the total collapse of large financial institutions repeat themselves: oil prices are falling again and Western sanctions against Russia simulate the latter. The effects on Russian economy look like before too: Russian currency - ruble - keeps falling against dollar and Russian economy is heading for recession - just like in 2d half of 2008. But is it really the same kind of crisis for Russia?

This simple comparison bar chart tries to address this question by looking at 3 things: how much oil prices fell, how much ruble lost against dollar, and how much reserves Russia had at the beginning of each crisis.

The crisis of 2014 is still unfolding which makes this chart even more telling. Ruble fall is already far ahead of total loss in 2008-2009 (red bars). At the same time, this year oil prices fell just a fraction of total loss in 2008-2009 (blue bars). To top it off, Russia had 100,000 million USD more in reserves before crisis in 2008 than it had in August of 2014 (green bars). I suspect there are other different things at play in 2014. What are they?

Data (updated on Monday, December 15th):
2014: from June 20th when oil peaked to Monday, December 15th. Reserves Central Bank held in 2014 were the largest on July 1st.
2008-2009: rather conservative dates from July 3d (when oil peaked) to February 18th, 2009 (when ruble began stabilizing along with oil prices). Reserves were largest on August 1st.
Oil prices: for WTI.

1. WTI Daily Prices
2. RUB to USD Historical Exchange Rates Daily
3. USD and Gold Reserves by Russian Central Bank