screen shot 2014-11-18 at 8.34.45 amLast Friday, Bloomberg reported that “President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential ‘catastrophic’ slump in oil prices.” Nevertheless, he claimed that Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events. Russia is the world’s largest energy exporter. So Putin’s assurances that Russia can absorb the oil shock are hard to believe. Russia’s non-gold international reserves have dropped from $457 billion at the start of this year to $383 during October. The ruble has plunged 30% since the start of the year. To stem the drop in reserves, Russia’s central bank on November 10 allowed the ruble to float freely in the market. I wouldn’t rule out a debt default crisis if the price of oil continues to fall. In that event, Russia might have to spend more of its reserves to stop the crisis. In other words, catastrophic outcomes are still possible for Russia. More