Ruble freefall bolsters Ted Cruz call to press Russia

June 12, 1987: "Mr. Gorbachev, tear down this wall!"

NEW YORK – The contention last week by Sen. Ted Cruz, R-Texas, that now is a particularly opportune time to return to the Cold War foreign-policy tactics of President Reagan has been reinforced by the sudden, dramatic fall of the Russian ruble.

In a speech delivered to the Heritage Foundation in Washington, D.C., Cruz urged President Obama to take a page out of Reagan’s playbook and use the current surge in U.S. oil production to depress oil prices worldwide in an effort to weaken economically both Russia and Iran.

Reagan used falling oil prices to apply economic pressure against the Soviet Union, which helped bring about the downfall of the communism in Moscow and across Eastern Europe.

On Tuesday, before the opening of the New York Stock Exchange in New York, Forex Capital Markets, a major foreign exchange broker in the United States, suspended trading in U.S. dollar measures of currency conversion to the Russian ruble as entered into a free fall. Most banks in other Western nations followed suit, closing trading at noon, Eastern Time.

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The ruble dropped to a record exchange rate low of 80 to the U.S. dollar yesterday in wild trading that saw the Moscow Exchange limit trade after the currency lost more than 10 percent of its value.

With Brent oil dropping below $60 a barrel for the first time since July 7, 2009, precipitating the dramatic fall of the ruble, the Russian stock market plummeted 15 percent.

The board of directors of the Bank of Russia responded with an emergency intervention, raising a key interest rate to 17 percent from 10.5 percent.

The cause of the crisis in Russia has been the dramatic surge in U.S. oil production spurred by technological innovations in drilling shale oil, including horizontal drilling and hydraulic fracking that have caused U.S. oil production to surge to 8.9 million barrels a day, a level not seen since March 1986.

Russia is particularly vulnerable to dramatic drops in the price of oil, because approximately 45 percent of the government’s revenue derives from oil taxes.

Currently, House Speaker John Boehner, R-Ohio, is pushing President Obama to sign legislation passed last week by Congress imposing harsher economic sanctions on Russia in retaliation for its continued intervention in Ukraine.

Russian Foreign Ministry spokesman Alexander Lukashevich has criticized the new legislation as “confrontational,” acknowledging new sanctions would compound Russia's economic vulnerability.