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, whosepopularity 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,” saidOlga 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 20 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, close to the current level, Russia will have a shortfall of 1.2 percent of gross domestic product.

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

David Fuller's view

The long-term contracts with China may be a lifeline for Putin but Xi Jinping is setting the terms and they are not going to favour Russia.  

Russia has one of the world’s weakest stock markets but the Ruble trend, shown inversely against the US Dollar is the most revealing.  It has been in freefall and is only slightly steadier today.  The Ruble is very unlikely to firm until Brent crude oil experiences a clear upward dynamic.  That may not be far off as crude oil is accelerating lower in climactic activity not seen since 2012.  Might oil then bounce back as quickly as we saw two and a half years ago?  Not to the same extent, in my view, given weak demand, additional oil production, and competition from both natural gas and renewable forms of energy.