Union International: Russians buying goods and assets to try to preserve wealth as rouble’s slide deepens.
According to Union International, the continuing slide in global oil prices combined with the effects of international sanctions have sent Russia’s currency into a deep and damaging plunge to a recent low of 72 to the US dollar.
Despite the authorities’ efforts to downplay the crisis and assurance from Russian President, Vladimir Putin, Russians have begun rushing to buy real estate and imported goods like electronics and automobiles in an effort to preserve the value of their money.
Solomon Roth, who heads economic research at Union International said, “People have been buying goods at prices which are effectively guaranteed to rise as the rouble weakens against other currencies in which those goods are priced.”
Tech giant, Apple Inc. revealed earlier this week that it is no longer selling its products on the Russian Apple store because it is unable to price them with any consistency given the pace and scale of the rouble’s decline against the US dollar.
Much of the rouble’s plunge has been attributed to the over-50% fall in the price of oil since June of this year. A glut in supply caused by US shale oil production and a slowdown in Chinese economic growth is widely acknowledged as causing the fall but Union International suggests that international sanctions imposed by the US and the EU over Russia’s involvement in protracted hostilities in Eastern Ukraine are partly to blame.
“Russia needs oil prices at a minimum of $90 a barrel to breakeven in terms of the cost of production and prices are way off that right now but,” explained Roth, “at current levels, a large proportion of the US shale oil producers are going to be experiencing some pain too so we wouldn’t expect prices to remain at these levels for very much longer.”
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