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Deflated by Oil Price's Dive
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But critics say the Kremlin has underestimated the impact of falling oil prices on an economy still reeling from the global credit crunch -- and more dependent than ever on oil and gas, which account for nearly a third of gross domestic product, half of government revenue and two-thirds of exports.
The central bank has already spent billions to support the ruble, and Putin has pledged more than $200 billion to shore up Russian banks and stock markets, which have plunged by more than 70 percent from May highs. In the two weeks ending Oct. 10, the reserves shrank by more than $33 billion, a rate that would exhaust the funds within nine months.
"By itself, the drop in oil prices isn't a major problem, but on top of all the other problems in the economy, it puts even more pressure on the government," said Vladimir Milov, a former deputy energy minister in Putin's government.
If oil prices continue to fall, analysts said, Putin could be forced to choose between making unpopular spending cuts -- the Kremlin recently boosted the military budget -- and using up the reserves, risking a devaluation of the ruble that could cripple Russian firms.
The state-controlled oil and gas firms -- an important constituency for Putin -- had grown especially dependent on foreign credit and now are among the hardest hit in the crisis. The stocks of oil giants such as Gazprom and Rosneft have led the market crash, wiping out hundreds of billions of dollars of equity.
Firms are cutting jobs and suspending projects, and inflation is climbing. But the Kremlin has contained public discontent by limiting television coverage, barring reporters from using the word "crisis."
Meanwhile, Putin and his hand-picked successor, President Dmitry Medvedev, have tried to woo foreign investors back, toning down the defiant, go-it-alone rhetoric used in the aftermath of the Georgian war.
At the meeting last week, Putin allowed that Russia was "entwined with the global economy," a departure from earlier Kremlin assertions that Russia was an island of stability immune to the financial turmoil in the West. But he could not help but point out, as he has done several times in recent weeks, that the United States was the "epicenter" of the crisis and had "infested the entire world economic system."
Correspondents Juan Forero in Bogota, Colombia, and Thomas Erdbrink in Tehran contributed to this report.
