Looking for His glorious appearing! Titus 2:13

Now, with economic growth slipping close to zero, Russia is reeling from sanctions by the U.S. and the European Union over its land grab in Ukraine

The decline in oil prices may be depriving Russian President Vladimir Putin of his biggest ally.

Oil has been the key to Putin’s grip on power since he took over from Boris Yeltsin in 2000, fueling a booming economy that grew 7 per cent on average from 2000 to 2008.

Now, with economic growth slipping close to zero, Russia is reeling from sanctions by the U.S. and the European Union over its land grab in Ukraine, and from a ruble at a record low. Putin, whose popularity has been more than 80 per cent in polls since the annexation of the Crimean Peninsula in March, may have less money to raise state pensions and wages, while companies hit by the sanctions also seek state aid to maintain spending.

“His ratings remain high but for a person conducting such a risky policy, Putin has to understand the limits of patience for the people, business and political elite,” said Olga Kryshtanovskaya, a sociologist studying the country’s elite at the Russian Academy of Sciences in Moscow. “Putin is thinking hard how not to lose face while maintaining his support.”

Brent crude is down more than 20 per cent from its June high, cutting billions of dollars in tax revenue from Russia’s most valuable export. The budget will fall into deficit next year if oil is less than $104 a barrel, according to investment bank Sberbank CIB. At $90, close to the current level, Russia will have a shortfall of 1.2 per cent of gross domestic product.

The country has spent about $6 billion on currency interventions this month trying to keep the currency afloat. Russia’s largest oil company, OAO Rosneft; gas producer OAO Novatek and the largest lender, OAO Sberbank, are among companies targeted by the sanctions.

Bigger Threat

The curbs will subtract 1 per cent to 1.5 per cent from GDP and are a bigger threat than oil prices, according to Alexei Kudrin, the finance minister from 2000 to 2011 who steered Russia’s accounts back to surplus.

“The sanctions are having an across-the-board impact,” Kudrin said by phone. “It isn’t just about the loss of money but the worsening investment climate, rising capital flight and a slide in the currency.”

Russia faces weak growth even if the EU sanctions expire next year as expected, Charlie Robertson, the chief economist at Renaissance Capital Ltd., said by phone. The International Monetary Fund earlier this month reduced its 2015 forecast for Russia to 0.5 per cent from 1 per cent in July.

Contraction Foreseen

“Growth is virtually nonexistent this year and isn’t terribly much better next year,” Robertson said Oct. 10, adding that the economy could contract 1.7 per cent in 2015 if crude averages $80 a barrel.

Putin, 62, a former KGB colonel, has criticized the U.S. and Europe for expanding the North Atlantic Treaty Organization up to Russia’s borders, and he has vowed to keep neighboring Ukraine out of the Cold War-era military alliance.

Top Kremlin officials said after the annexation of Crimea that they expected the U.S. to artificially push oil prices down in collaboration with Saudi Arabia in order to damage Russia, according to Khryshtanovskaya. Putin’s spokesman, Dmitry Peskov, didn’t respond to a request for comment on this issue, nor did he respond over four days of calls requesting comment about oil’s importance to Putin.