Vladimir Putin Loses his Best Friend ...

... Can you say, EXPENSIVE Oil? ...

The decline in oil prices may be depriving Russian President Vladimir Putin of his biggest ally.

Oil has been the key to Putin’s grip on power since he took over from Boris Yeltsin in 2000, fueling a booming economy that grew 7 percent on average from 2000 to 2008.

Now, with economic growth slipping close to zero, Russia is reeling from sanctions by the U.S. and the European Union over its land grab in Ukraine, and from a ruble at a record low. Putin, whose popularity has been more than 80 percent in polls since the annexation of the Crimean Peninsula in March, may have less money to raise state pensions and wages, while companies hit by the sanctions also seek state aid to maintain spending.

“His ratings remain high but for a person conducting such a risky policy, Putin has to understand the limits of patience for the people, business and political elite,” said Olga Kryshtanovskaya, a sociologist studying the country’s elite at the Russian Academy of Sciences in Moscow. “Putin is thinking hard how not to lose face while maintaining his support.”

Brent crude is down more than 25 percent from its June high, cutting billions of dollars in tax revenue from Russia’s most valuable export. The budget will fall into deficit next year if oil is less than $104 a barrel, according to investment bank Sberbank CIB. At $90, Russia will have a shortfall of 1.2 percent of gross domestic product. Brent for November fell 4.3 percent yesterday to settle at $85.04 a barrel in London, and was down a further 7 cents to $84.97 at noon New York time.

The country has spent about $6 billion on currency interventions this month trying to keep the ruble afloat. Russia’s largest oil company, OAO Rosneft (ROSN); gas producer OAO Novatek (NVTK); and the largest lender, OAO Sberbank, are among companies targeted by the sanctions.

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