Pedestrians pass illuminated signs advertising foreign exchange rates for dollars, rubles and euros on a street in Moscow on March 17, 2014. Russian stocks have slumped 14% this month as the Ukraine crisis intensified
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March 18, 2014 4:50 AM EDT

With the ruble sliding, stocks tumbling and forecasters warning of a recession, a Russian official wasn’t exactly breaking news when he acknowledged signs of an economic “crisis.” It was surprising, however, to hear an official using the C word in public.

“The economic situation shows clear signs of a crisis,” said Deputy Economic Development Minister Sergei Belyakov at a Moscow business conference on Monday. According to Reuters, it marked the first official acknowledgement of serious trouble since Russian troops amassed along the Ukrainian border in early March.

While Belyakov avoided explicit references to the Ukraine crisis, his comments clashed with the official narrative of Russian resilience. Most officials have shrugged off threats of international sanctions from Europe, the U.S., and, as of today, Japan.

Deputy Prime Minister Dmitri Rogozin asked “Comrade @BarackObama” if “some prankster” helped draw up a list of sanctioned officials. Putin adviser Vladislav Surkov called the sanctions “a big honor for me,” according to ABC News.

Whether the laughter will continue will depend in part on the market’s reaction to the international squeeze on Russian assets. The uncertainty alone caused Russia’s MICEX Index to drop 7.6% last week, and according to Bloomberg, the ruble has dropped faster than all but a handful of currencies this year. But Russian equities hardly budged with the announcement of more sanctions on Monday, suggesting that investors might be in a holding pattern.

Russia’s economy could stabilize if sanctions deliver more bark than bite, or better yet, negotiators defused the crisis. Nonetheless, forecasters are revising their growth estimates downward. VTB Capital predicted Russia’s annual growth would flatline at 0.0% on Monday, joining a growing chorus of downward revisions. The smart money is riding on more trouble to come.


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