It was another rough day for Russian markets, as the RTS slumped 14 percent to 549.43 and the Micex down to to 513.62, which is the tenth consecutive weekly decline. Our devaluation prediction from Sunday did not pan out, but it certainly feels close. Anders Aslund explains why in the St. Petersburg Times:

Putin is correct when he claims “that our economy is rather well prepared for lengthy external shocks.” But that is not enough. Thanks to Finance Minister Alexei Kudrin’s extraordinary steadfastness, Russia has maintained a large budget surplus and held huge reserves at the outset of this crisis. But $70 billion of the reserves have already fled the country and more will follow. A crucial shortfall is that the government exploited the 1998 financial crisis to establish a dominance over the banking system by strengthening the position of five state banks, which still hold 45 percent of Russia’s banking assets. The problem with state banks is that they are inefficient. Therefore, the country suffers from very poor financial intermediation. Putin seems set to aggravate this problem.