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Lower Oil Prices Drain Value Of Russians' Money


We are reporting this morning on an unexpected holiday gift, the low price of crude oil. The cheaper prices we're seeing at the pump mean the equivalent of a small pay raise for many consumers, as we'll hear in a moment. Airlines, they are thrilled with the cost savings. But they're not passing that on to passengers. We begin our coverage by checking in on a place that is not celebrating, Russia. That's where the price of crude oil could mean the difference between prosperity and recession, and the economy right now is struggling. Our colleague, Corey Flintoff, is on the line from NPR's Moscow bureau. Corey, good morning.

COREY FLINTOFF, BYLINE: Good morning, David.

GREENE: I know Russians are getting ready for this holiday season. I mean, what is the mood at a time when the economy really is struggling?

FLINTOFF: I think people are really trying hard to keep up their spirits. But, you know, the mood here is definitely nervous. The low oil price might be a gift for people in the United States, but Russia's economy is really dependent on selling oil and gas. So people here know that the falling oil prices really drained away the value of their money. The ruble lost about 45 percent of its value this year. So they're being really cautious.

GREENE: And when the ruble loses value - I mean, take me into daily life in Russia. How does that really hit as people are getting ready for a holiday season?

FLINTOFF: Higher prices, for sure - prices have been going up for a lot of the ingredients for holiday celebrations - you know, imported foods and wines and, you know, traditional gift items, clothing. Electronic stores are raising their prices for phones and personal gadgets. People who could afford it used to travel to Europe for ski vacations, or they'd go to Egypt for beach holidays. But they're not traveling much this year.

GREENE: OK, so that's one decision that many Russians seem to be making. You know, Corey, it looked really bad there. I mean, the ruble was heading to total collapse, it appeared. It seems to have recovered a little bit this week. What's going on?

FLINTOFF: Well, the government has taken a lot of really drastic steps. And they finally seem to be having some effect. The central bank raised its basic interest rate to 17 percent. And that makes it more profitable for people to keep their rubles in the bank. But there's a downside. And that is that it makes it really hard for Russian businesses to borrow the money they need to operate. Another way to make the ruble seem more valuable is for the government to buy a whole lot of them, basically create demand for them. And the central bank has been doing that. Yesterday, we found out that the government is forcing big, state-owned companies to do the same thing. So that's helping to keep the value of the ruble from falling. The downside to that is that these big companies are sooner or later going to have to buy more dollars to pay off their foreign debts. So all these tactics are just kicking the can down the road. Standard & Poor's, the big rating company, says it's going to decide next month whether it should reduce Russia's debt rating to junk bond status. And that could set off another round in the crisis.

GREENE: All right, a tough time for Russia because of these falling oil prices. Corey, thanks a lot.

FLINTOFF: Thank you, David.

GREENE: That's NPR's Corey Flintoff in Moscow. Transcript provided by NPR, Copyright NPR.