Russian Implosion
Russia has taken a $12 billion hit to its foreign exchange reserves since the last week of December-and a whopping 28% loss in its reserves since August of last year.

The Central Bank of Russia has devalued the ruble four of the last five days at a rate of 1% a day. The ruble is a managed float and the central bank has been allowing a more and more rapid depreciation since December.

Since the middle of December, the ruble has lost 18% of its value against the dollar-and a total of 39% from its post 1998 Russian financial crisis peak. After exhausting $6 billion of foreign currency reserves to defend the value of the ruble, speculation is that the bank will step away and let a market-driven devaluation take place. Goldman Sachs predicts another 14% decline is in the cards.

What’s the problem in Russia?

The largest net exporter of oil behind the Middle East, Russia has taken a 76% haircut in oil revenues due to the plunge in the price of crude. Equally as bad, as a former high growth emerging economy, the global aversion to risk meant foreign capital headed for the exit doors and fast– collapsing the Russian stock market 78% in just 5 months.

The exposure of European banks to Russian debt makes the ongoing problems in Russia a problem for the euro. The IMF estimates that exposure at $1.6 trillion – including Russia, Ukraine, the Balkans, and Central Europe.