Moscow Times: Oil Crash Is Crushing Russia

The impact of oil prices on the Russian economy is well known. After crude fell 50 percent last fall, the Ministry of Economic Development forecast a 3 percent GDP contraction this year, along with 12 percent inflation. The crash in oil prices will not only test President Vladimir Putin's domestic support. It will upend Russian foreign policy, challenging the modernization of the country's armed forces while diminishing its influence in Asia and Europe.

Russia doesn't just need petroleum to fuel its tanks and planes, but to pay for them as well. Because oil and gas revenues comprise half the federal budget, defense spending is tethered to energy prices.

The slump comes at a particularly inopportune time for the military. Even if its resources were not being consumed in eastern Ukraine, Russia's ongoing initiative to improve its armed forces is extremely costly, with defense expenditures set to soar 44 percent from 2013 to 2016.

Shrinking energy revenues are now curtailing those ambitions by constraining the budget. According to Finance Minister Anton Siluanov, the crash will deprive the Kremlin of $180 billion in 2015 alone.

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