Putin’s Secret Gamble on Reserves Backfires Into Currency Crisis – Bloomberg

As President Putin exulted at the Winter Olympics in Sochi 10 months ago, aides assured him Russia was rich enough to withstand the financial repercussions from a possible incursion into Ukraine, according to two officials involved in the talks.

That conclusion now looks like a grave miscalculation. Russia has driven interest rates to punishing levels and spent at least $87 billion, or 17 percent, of its foreign-exchange reserves trying to prevent a collapse in the ruble from spiraling into a panic. So far, nothing has worked.

Despite the assurances in Sochi, Putin now confronts the nation’s most serious economic crisis since 1998, when Russia’s devaluation and default reverberated around the world. U.S. and European sanctions and, more significantly, plummeting oil prices are eroding the reserves that emboldened Putin to annex Crimea despite an international outcry.

Putin’s Secret Gamble on Reserves Backfires Into Currency Crisis – Bloomberg

Putin’s Year of Defiance and Miscalculation – WSJ

Those calculations turned out to be dead wrong. Broader sanctions choked off Russia’s access to Western capital and technology, tipping the economy toward recession. Then came a second blow that neither Western governments nor Russia could have anticipated: The price of oil—the lifeblood of Russia’s economy—plunged 40% since midsummer, magnifying the effect of sanctions and sending the ruble into a tailspin. The slide turned into a full-on currency crisis on Tuesday as the ruble dropped as much as 20% against the dollar.

As the problems intensify, Mr. Putin’s miscalculations have restricted his options. After largely ignoring the economic costs of the conflict for most of the year, freezing out liberal aides who tried to warn of the impact, he has begun trying recently to win back the confidence of business and revive the economy, people close to the process say. Mr. Putin is expected to be questioned about the ruble crisis during his annual news conference on Thursday.

Putin’s Year of Defiance and Miscalculation – WSJ

The worse Russia’s economy gets, the more dangerous Putin becomes – Vox

Actually, it’s the opposite. The odds are that Russia’s freefalling economy will make Putin even more aggressive, more unpredictable, and less willing to compromise. The weaker that Russia becomes, the more dangerous it will get, and that’s terrible news for everyone, including the US.

It is precisely because the cratering economy is weakening Putin that it will force him to bolster his rule, which he will almost certainly do by drumming up nationalism, foreign confrontations, and state propaganda. Russia, already hostile and isolated, is likely to become even more so, worsening both its behavior abroad and the already-significant economic suffering of regular Russians. The country’s propaganda bubble will further seal off Russians from the outside world, telling them that Russia’s decline is the fault of Western aggression that they must rally against.

In all, this effect is starting to look something like the North Koreaification of Russia. That does not mean that Russia is about to become or will ever be as isolated, hostile, or aggressive as North Korea, but it only has to edge a little bit in that direction to bring terrible consequences for the world and for Russians themselves.

The worse Russia’s economy gets, the more dangerous Putin becomes – Vox

Russia’s game in the Baltic Sea region: A Polish perspective | European Council on Foreign Relations

In the Baltic states, Russia’s goal is to undermine local trust in NATO’s collective defence, to destabilise internal politics, and ultimately to cause the countries to give in to Russian interests. In Sweden and Finland, Russia’s aim is to politically and militarily “neutralise” the two countries – that is, to stop them from joining or cooperating with NATO. Russia’s overarching goal is to intimidate the people and convince both elites and societies that it is better to compromise with Russia than to risk a state of permanent instability or even an open military conflict. Moscow wants to make the West feel threatened, as was very well illustrated by the title of the Valdai Club meeting in October 2014: “The World Order: New Rules or No Rules?”.

One rationale behind Russia’s behaviour is the relative weakness of the West and the chance that Russia perceives to exploit this weakness. In the US, Russia sees decreasing military capabilities and a declining political will towards engagements abroad. In Europe, Moscow notes the political and economic crisis, the divisions between the EU member states, the decline in defence budgets, and the unwillingness of postmodern societies to face up to conflict.

Russia’s game in the Baltic Sea region: A Polish perspective | European Council on Foreign Relations

Details About the Dec. 7 Israeli Strike on Syrian Sites

In Dimas, the Israeli strike hit some containers inside one of the warehouses at the airport, which is a small training facility not for commercial or military use. The source revealed that the targeted containers were part of a large number of similar containers kept in a number of warehouses, and that the strike hit a specific warehouse to destroy specific ones.

The target containers had reached the training airport no more than two or three days prior to the operation. The diplomatic source saidd that the intelligence upon which the Israelis based their strike was “very accurate,” including the target’s time of arrival and precise location. According to the information available to him, the containers had been filled with two types of weapons made not in Iran, but probably Russia, and were to be transferred to Lebanon.

Israeli strike targets Lebanon-bound weapons in Syria – Al-Monitor: the Pulse of the Middle East

Thriving on chaos, Putin will continue to lash out, destabilizing the old world order

It’s much easier to predict what Russian President Vladimir Putin won’t do in 2015 than what he will. Putin will not end Russia’s occupation of Crimea. For that matter, he’s unlikely to end Russia’s brazen yet brazenly denied military intervention in eastern Ukraine. And he probably won’t try to repair Moscow’s relationship with Europe and the rest of the West. Beyond that, it’s a mug’s game. Putin’s aggression in 2014 completely overturned widely held assumptions regarding Europe’s post-Cold War order. Treaties can’t be trusted. Borders don’t seem secure. It’s no longer obvious that the Cold War itself is a thing of the past.

Balazs Jarabik, a visiting scholar at the Carnegie Endowment for International Peace, worries that unless Russia and Ukraine can agree on a way to supply Crimea, Putin may escalate his military intervention to create a land bridge linking Crimea to territory held by pro-Russian rebels in eastern Ukraine. Such a move would also take Russian troops to within approximately 300 km of Transnistria, a pro-Russian breakaway region of Moldova. Pressing across southern Ukraine to reach Transnistria and link it by land to Russia would be tempting.

There are those in NATO capitals who hope he might still be persuaded otherwise. They will probably be frustrated. “I think Putin will at least keep everyone jittery,” says Maria Lipman, a visiting fellow at the European Council on Foreign Relations. “He’s the manager of uncertainty.”

Putin: Master of destruction

Wall Street bets on Russia and Venezuela defaults

Wall Street is betting that Russia and Venezuela are getting closer to defaulting on their debt.

Plunging oil prices have slammed the economies of both countries, which are highly dependent on oil revenue.

On Wall Street currently, the cost to insure Russia’s five-year bonds have surged to the highest levels since 2009.

The fears stem from the fact that the Russian government gets half of its revenue from oil and gas exports. Recently, the ruble has gone into a tailspin and the Russian central bank has hiked interest rates five times this year in an attempt to prop its currency.

Wall Street bets on Russia and Venezuela defaults

How ISIS Originated Inside an American-Run Prison in Iraq

In the summer of 2004, a young jihadist in shackles and chains was walked by his captors slowly into the Camp Bucca prison in southern Iraq. He was nervous as two American soldiers led him through three brightly-lit buildings and then a maze of wire corridors, into an open yard, where men with middle-distance stares, wearing brightly-coloured prison uniforms, stood back warily, watching him.

“I knew some of them straight away,” he told me last month. “I had feared Bucca all the way down on the plane. But when I got there, it was much better than I thought. In every way.”

The jihadist, who uses the nom de guerre Abu Ahmed, entered Camp Bucca as a young man a decade ago, and is now a senior official within Islamic State (Isis) – having risen through its ranks with many of the men who served time alongside him in prison. Like him, the other detainees had been snatched by US soldiers from Iraq’s towns and cities and flown to a place that had already become infamous: a foreboding desert fortress that would shape the legacy of the US presence in Iraq.

Isis: the inside story | Martin Chulov | World news | The Guardian

Shale Oil’s Relentless Production Is Breaking OPEC’s Neck – Businessweek

‘The Saudis’ refusal last month to take one for the team is historic, says Michael Wittner, head of oil research at Société Générale in New York. “That is such a tremendous, dramatic change,” he says. “It’s hard to think of a way to exaggerate how fundamental it is.”’

Theories as to why OPEC didn’t reduce quotas at its meeting in Vienna on Nov. 27 are as cheap and abundant as crude in North Dakota. One holds that the Sunnis of Saudi Arabia want to hurt the Shiites of Iran, who need high-priced oil to finance their government. Another, expressed by Russian President Vladimir Putin, is that the whole thing is a conspiracy to undermine Russia, the world’s biggest oil producer. Yet another is that the Saudis hope to drive oil prices below where it makes sense for American shale producers to invest in new production. But shale producers have lowered their costs so much that in key fields they can make profits at $50 to $70 a barrel. That’s above core OPEC members’ exploration and production costs but below what many need to cover their government spending. “If my calculations are correct, this will go down as one of the worst commodity trading decisions ever,” Wilbur Ross, billionaire investor and chairman of WL Ross (IVZ), wrote in an e-mail.

Shale Oil’s Relentless Production Is Breaking OPEC’s Neck – Businessweek

BBC News – Russia Baltic military actions ‘unprecedented’ – Poland

Poland says the level of Russian naval and air force activity in the Baltic Sea region has been “unprecedented” this week.

Defence Minister Tomasz Siemoniak said most of the activity was in international waters and airspace and Sweden was the country most affected.

Nato partners of the Baltic states, including the UK, have military jets on an air policing mission in the region, monitoring the Russian planes.

Fighting in Ukraine has raised tension.

Mr Siemoniak said Russia was “not preparing to attack” but it was testing Nato defences, which “does not serve to build good relationships and trust”.

The three small ex-Soviet states in the Baltic – Estonia, Latvia and Lithuania – joined Nato in 2004.

Speaking on the Polish news channel TVN24, he said there was no need to put the Polish army on a state of high alert.

BBC News – Russia Baltic military actions ‘unprecedented’ – Poland

Monitoring emerging risks.