Russia is bleeding cash at an alarming rate.
After almost two years in recession, the country's rainy day fund has shrunk to just $32.2 billion this month, according to the Russian Finance Ministry. It was $91.7 billion in September 2014, just before oil prices started to collapse.And it's getting worse. Analysts expect the fund will shrink to just $15 billion by the end of this year and dry up completely soon after that.At the current rate, the fund would be depleted in mid-2017, perhaps a few months later," Ondrej Schneider, chief economist at the Institute of International Finance, wrote in a note this week.The government's reserve fund is designed to cover shortfalls in the national budget at times of low oil and gas revenues.Russia's 2016 budget is based on the assumption the country would be able to sell its oil for $50 per barrel.The central bank still has $395 billion in international reserves, down from $524 billion in October 2013. The bank burned through more than $140 billion in foreign currency reserves between 2014 and 2015, trying to defend the ruble from collapsing.The strategy didn't work and the bank slowly abandoned it. The ruble dropped to the lowest ever in January, when it was trading at 82 rubles per U.S. dollar. It is now trading at 65 rubles per dollar.The slump in oil prices has hit Russia at the time it was already suffering because of economic sanctions imposed by Western countries over its role in the crisis in Ukraine.They've cut off Russia's most important companies from European financing, banned imports of certain products and froze funds of key officials.Russia retaliated by imposing import restrictions on European food products. That caused a headache to European farmers, but also pushed Russian inflation to double digit levels.