Russia, the 20th largest economy in the world, has been hit hard by economic sanctions due to involvement in the Ukraine crisis. That, combined with a drop in the value of the ruble and low worldwide oil prices, has led to a $234 billion drop in the value of the Russian stock market.
Apple is now worth more than every publicly traded company in Russia combined — and with enough money left over to buy every single Russian a new iPhone.
Bloomberg, the original source of the calculation, reports:
The value of Russian equities has slumped $234 billion to $531 billion this year, while Apple gained $147 billion to $652 billion, according to data compiled by Bloomberg. The technology company’s innovation and brand value attract investors, while Russia’s political conflicts, sanctions and the threat of economic stagnation next year make them nervous, according to Vadim Bit-Avragim, a portfolio manager who helps oversee about $4 billion at Kapital Asset Management LLC in Moscow.
Apple, on the other hand, happens to be the most valuable company in the world. It’s also gone up in value significantly this year. According to the Telegraph, Apple “has added $147bn to its market cap this year and was worth $652bn as of November 12.”
And in case you’re thinking Russia’s financial troubles are just western propaganda, think again — Russia’s central bank has taken steps to slow the damage, and cut growth forecasts to zero while warning of recession:
The central bank slashed its growth forecast for next year to zero and warned of near-recession conditions until late in the decade. It said capital outflows would reach $128bn this year.
Russia has significant cash reserves, but it’s going to be hard to endure sanctions while the price of oil is so low. Russia brings in quite a bit of revenue selling oil to the world market, but has put all of its eggs in one basket so to speak. The Telegraph writes that since the year 2000, exports other than oil have fallen from 21% to just 8% of GDP.
Oil prices have been dropping since June, which Putin accuses Saudi Arabia and the United States of orchestrating. It’s doubtful it’s that simple, although Saudi Arabia, unlike Russia, Iran, or a few other oil produces, does have the cash reserves needed to weather an extended drop in oil prices.
And the United States actually benefits from a drop in gas prices, despite being an oil producer. Although we’re drilling more oil than ever before, thanks to fracking and pipelines to the Gulf Coast’s refineries, our consumers spend so much on gas that a drop in prices amounts to a stimulus, putting more money in the pockets of American consumers. Unlike other oil producers, our economy is not dependent upon oil exports.
Lending some credence to accusations of western collaboration with Saudi Arabia to keep prices low, thus indirectly sabotaging the Russian economy, is Saudi Arabia’s recent sale of oil to Asia at the lowest price in six years. Combined with increased US drilling, that dropped the worldwide price for oil. When other Organization of Petroleum Exporting Countries (OPEC) member states, including Ecuador, Venezuela, Iran, and Libya requested OPEC slow production to increase price, Saudi Arabia declined.
In any case, Russia’s economy isn’t in good shape, and it’s not likely to improve soon. Sanctions from the United States and allies will continue for the foreseeable future, and the price of oil might drop even further. Putin’s cold-war reminiscent blustering may score big points at home, but at what cost?