All The Reasons Why The Russian Economy Is Completely Screwed

Reuters/RIA Novosti/Pool/Alexei DruzhininPresident Vladimir Putin

The Russian economy is in dire straits. Growth is flatlining, the government's budget is being squeezed and international sanctions over its role in the Ukraine crisis are combining to squeeze Moscow.

However, the reasons for the country's decline predate its current crisis and have as much to do with long-term trends such as its aging population and declining labour productivity as it does the recent collapse of the oil price (and with it the ruble).

The choices faced by Russian policymakers are stark. They can either attempt to fight the decline by spending the country's precious foreign exchange reserves. Or they can let its currency float free and risk financial instability that could crush businesses.

So far they have opted for the former. The central bank burned more than $15 billion last month in an attempt to soften the ruble's fall. But it has failed to instill confidence either domestically or internationally.