The Russian economy has been slammed by a combination of free-falling oil prices and debilitating western sanctions. Financial experts believe the northern superpower is now only days away from total economic collapse.

In June of this year the global price of oil was $US 114. Since then the price has plummeted by almost half to just under $60 this week.

Oil is one of Russia’s and Iran’s major exports. Drops in the price of oil are reflected in drops in the value of the rouble. As the rouble becomes progressively weaker the Russian economy loses purchasing power in international markets. This drives up prices in the economy and can lead to profiteering, hyper-inflation, and the total collapse of the economy.

And this is a real threat right now in Russia.

Russia’s Central Bank has tried everything it can to prevent a sell-off of its currency. But this week the rouble hit a historic low of 80.1 to the US dollar.

Currency exchanges and retail stores are reporting panic buying as consumers attempt to swap their fast depreciating roubles for real goods or more stable currency.

Should the price of oil remain below $60 a barrel Russia’s economy is expected to contract by an unimaginable 5 per cent in 2015. The Russian GDP is expected to lose 2 per cent for every $10 lost on the price of oil, should prices continue to fall.

At the same time western sanctions against Russia, for its part in the war in Ukraine, is preventing the refinancing of loans to foreign capital markets. This incentivises Russian businesses to sell-off their own currency in an attempt to pay off these debts before they become unsustainable (and contribute further to the weakening of the rouble).

Russia’s leading business newspaper said in an editorial on Wednesday, “This is a very dangerous situation. We are just a few days away from a full-blown run on the banks. If one does not calm down the currency market right now, the banking system will need robust emergency care.”

Many are blaming the US for conducting an ‘economic war’ against the already alienated Russian president Vladimir Putin. It is being argued the US and Saudi Arabia are working together to keep oil production artificially high and thereby keep prices low.

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