I’ve been a bear about Putin for a fair while. While he has played the role of eccentric strongman better than any Bond villain, it’s never been backed by an economic vision. His belligerence on the world stage is a brilliant facade, very successfully drawing the world’s attention from the cracks in the Russian economy.

The fact is, despite a wealth of talent and natural resources, a fortuitous geographic position, and an opportunity for a clean slate after the fall of the Soviet Union, Russia was never able to diversify away from base commodities. As recently as last year oil and gas accounted for half of the federal budget and two-thirds of Russian exports.

But commodities have tanked.

Oil’s role in the Russian budget is the thing to focus on here, as it highlights some of Putin’s biggest missteps – central planning, bullying and too-obvious cronyism. The Russian government is a significant player in the oil industry, often strong-arming companies and assets away from legitimate businessmen (read Bill Browder’s book for more). The government has been systematically scaring away and disincentivising investment, leaving the country without a big industry to fill the void left by commodities. And just think of what Russia has missed out on – Silicon Valley is littered with former residents of the Soviet Union, including founders of Google, Paypal and WhatsApp. And it seems like every other week Russians are caught doing something smart with computers hacking something.

The cracks in the Russian economy can no longer be papered over by staggering oil revenues. The last Russian budget, delivered less than six months ago, was based on oil at $50 a barrel. Overnight, oil once again dipped below $30. Russia, already in a recession, looks like having to make significant cuts in government spending.

And as a report in The Guardian notes, the recession is already biting:

The economic recession has hit consumers the hardest, and 2.3 million Russians fell into poverty in the first nine months of 2015. Inflation reached 12.9% last year, driving a 9.5% decline in real wages. As a result, retail sales shrank by about the same amount, and sectors including automobile sales and construction suffered large contractions. Many are foregoing luxuries like a new car or winter getaway. According to the state statistics service, the number of trips abroad by Russians decreased by 31.4% in the first nine months of 2015.

Other economic indicators published by the state statistics service on Monday showed continuing heavy falls and a deterioration compared with previous months. Retail sales were down more than 15% year-on-year in December, while capital investment fell 8.7% year-on-year.

Emphasis added

Putin is a populist. How long can he remain one in an economy like this?

As usual you should read the entire Guardian article. For the delicious schadenfreude at least.