After a decade of economic expansion, portents of a financial storm are gathering over Russia, from foundering banks to a Moscow skyline of idled construction cranes, The Associated Press reported.
If oil prices keep falling, the question becomes whether the Kremlin, which so confidently went to war with Georgia just two months ago, will have to scale down its ambition of reclaiming a big role on the world political stage.
A stunning stock market collapse has sent the benchmark stock index down 73 percent from its May peaks, and shown how shallow are the roots of Russia`s boom.
Six months from now, warn investors, things could look very bleak.
"Things are going to crash. Of the high-end restaurants, you`re going to have the vast majority of them closing. If you`re stuck in traffic, just refer to it as pre-crisis traffic. In six months, it`s going to be a different story," said James Fenkner, director of Red Star Asset Management.
In a little over eight years, the filtering down of oil cash has transformed Moscow from one of the grimmest capitals in Europe to one of the glitziest, with marble-floored shopping malls and upmarket boutiques.
The Kremlin has used its economic triumph to political advantage, dictating terms in energy spats with its European customers, sending its warships and planes across the globe, going to war with Georgia and lecturing the West about its shortcomings.
But the climate is changing, and analysts say the economy may force the Kremlin to act more cautiously.
"We`re likely to see some posturing, but also less likely to see any real confrontation," said Sam Greene, an analyst at the Carnegie Moscow Center. "They don`t want to risk making the business climate worse."
The war, combined with concerns about Kremlin interference in business, hammered Russia`s markets. But it was sliding oil prices and foreign bank failures that finally triggered the biggest stock plunges here in a decade. Some $33 billion left the country in August and September, said Finance Minister Alexei Kudrin.
Cranes stand idle around Moscow, industries have slashed production and many companies have laid off staff. High-end retailers are already noticing a slowdown in trade. At the same time, inflation is in double digits.
Lending has all but frozen up. Despite government pledges to pump billions of dollars into banks, many companies find credit either inaccessible or too costly.
"The absence of lending puts companies into a very difficult situation, which in turn will lead to an enormous amount of real estate not being completed," said Nikolai Koshan, head of the Association of Russian Builders. "As a result, we will have ... a huge army of bankrupt companies."
The pain is already felt on the street. Yana Ryzheva, a 20-year-old student, was one of 150 people fired from a Web publication on Thursday. It`s "practically impossible to find another job," she said. "People are being cut everywhere."
Analysts particularly fret about the depth of the problems in the banking sector. They are facing a collapse of confidence, with the state swooping in to rescue troubled lenders.
Russians generally are not panicking; this is not 1998, when Russia defaulted on its sovereign debt and many lost their savings.
A number have switched their savings from private banks to the more solid state-controlled lenders.
Some Moscow jewelry stores report brisker sales. "We have buyers who are acquiring large diamonds without settings, with seven-figure price tags, seeing them as movable property," Denis Adamsky, director of Moscow Jewelry Plant, was quoted by the RBK business newspaper as saying.
Oil prices may make things worse.
Russia`s benchmark Urals crude dropped to $65 a barrel Friday, a critical level. Russia`s budget assumes $70-a-barrel of oil. If prices stay low, that would not just end Russia`s recent big budget surpluses; it would damage the case for long-term investment here.
The government insisted Friday it has no plans to cut spending on major domestic programs — housing, railroads, airports, pipelines — but some analysts say it will have no choice.
Otherwise the crisis could erode Russia`s mammoth funds — international reserves worth some $530 billion, a $140 billion reserve fund and a social security fund of nearly $50 billion.
Already they have spent billions of dollars defending the ruble.
A short crisis, not too deep, could benefit Russians, who have plenty of cash to buy assets at bargain prices around the world, said Andrew Kuchins, director of the Russia and Eurasia program at the Center for Strategic and International Studies in Washington.
But if oil falls below $50 a barrel for a long time, "the Russians will burn through their pile of cash pretty fast," he said. "Already their reserves have fallen from $600 billion to $530 billion in just two months, and many of their largest energy companies are heavily indebted."