MOSCOW (AP) — With its economy spiraling toward recession following Western sanctions and a dramatic fall in the price of oil, Russia took another step Tuesday to shore up the value of the ruble, which has been one of the world's worst-performing currencies this year.

Russia's energy-dependent economy has suffered a severe economic shock over the past few months, largely because oil prices have tanked — the benchmark New York rate has fallen by around a half since June to stand at not much more than $55 a barrel.

Because the Russian economy remains hugely reliant on energy revenues, that spells trouble. Credit rating agency Standard & Poor's put the country on notice that it may face a downgrade following "a rapid deterioration of Russia's monetary flexibility and the impact of the weakening economy on its financial system."

S&P said it plans to make an announcement by mid-January. Any cut from the current BBB- would push Russia's debt rating into so-called "junk" status.

Russia's woes could also pose problems for the global economic recovery. It is one of the major uncertainties heading into 2015, particularly for the 18-country eurozone.

In a move Tuesday to contain the ruble crisis, the government instructed five of the country's biggest state-controlled exporters to reduce their foreign currency assets to October levels and to not raise them again until March. The companies targeted were gas giant Gazprom, oil companies Rosneft and Zarubezhneft and diamond producers Alrosa and Kristall.

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A client speaks on the phone in a car dealership in Moscow, Russia, Tuesday, Dec. 23, 2014. Followin …

On Tuesday, the ruble was steady as it has been for the past few trading sessions, floating around the 55 mark against the dollar, a big gain on last week when the ruble plunged at one point to near 80 against the dollar.

With Russia heavily dependent on imports, jittery consumers rushed to buy cars and emptied shelves at electronics and home appliances stores to pre-empt the price rises. Others besieged bank offices to withdraw their deposits and buy dollars or euros — the panic that raised the threat of a full-fledged banking crisis if it's not contained quickly.

John J. Kirton, professor of political science at the University of Toronto, said the EU economies would face a drop in their exports to Russia and could also be hit by its banking crisis.

"I think there is a clear and present danger, today or tomorrow, because of a financial crisis that is already under way in Russia and that is affecting Europe in ways we don't yet understand," he said.

In response to the falling ruble, Russia's central bank last week increased its key interest rate to a whopping 17 percent. Though that may help ease the selling pressure on the ruble by encouraging traders to hold onto the currency in anticipation of big returns, it is going to hobble Russian businesses and households if maintained at that level for too long.

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Clients watch cars in a dealership in Moscow, Russia, Tuesday, Dec. 23, 2014. Following the collapse …

Russian Prime Minister Dmitry Medvedev promised that the interest rate will be reduced once the ruble stabilizes, but acknowledged that the country faces the risk of a "deep recession."

Medvedev said Russia's current economic difficulties were exacerbated by Western sanctions, pointing that "a number of countries are effectively hampering the development of our economy."

"There are hopes to turn Russia into a pariah and reduce it to lower ranks in the ratings," Medvedev said. "This will never happen."

The U.S. and the European Union have slapped a series of sanctions on Russia over its annexation of Ukraine's Crimean Peninsula and support for a pro-Russian insurgency in eastern Ukraine. The closure of Western capital markets for Russian companies and banks has been particularly painful, raising pressure on the ruble.

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John-Thor Dahlburg in Brussels and Vladimir Isachenkov in Moscow contributed to this report.

Russia seeks to protect ruble from recession

The government hopes to contain the economic shock by issuing orders to its five largest exporters.
Lays blame on U.S., others

Jerusalem (AFP) - Israeli authorities gave final approval on Wednesday to the construction of 380 new settler homes in two areas of annexed east Jerusalem, a local official said.

"The municipal commission has given construction permits for 307 homes in Ramot and 73 in Har Homa," Yosef Pepe Alalu, a Jerusalem city councillor with the opposition Meretz party, told AFP.

He said local officials were taking advantage of attention focusing on Israeli elections due in March to expand settlements.

"This kind of decision distances us from any chance of reaching an agreement with the Palestinians," he said.

Despite repeated warnings from Washington that it is fuelling tensions, Israel has approved a series of plans for new settler homes in east Jerusalem in recent months.

Israel seized east Jerusalem during the 1967 Six-Day War and later annexed it in a move never recognised by the international community.

It refers to the entire city as its "united, undivided capital", and does not view construction there as settlement activity.

The Palestinians want the city's eastern sector as capital of their promised state and vehemently oppose any Israeli attempt to expand construction there.

Tensions between Israelis and Palestinians have boiled over in recent months with frequent clashes between security forces and stone-throwing protesters, and a series of deadly "lone wolf" attacks on Israeli civilians.

Foreign Minister Avigdor Lieberman insisted last month that Israel would never consider the building of Jewish settlements in Jerusalem as "settlement activity".

Prime Minister Manuel Valls said on Tuesday that more than 1,000 troops were deployed in public places, including the Champs-Elysees in Paris and main shopping districts in other French cities, in response to a spate of lone wolf attacks that have rocked the republic.

Late on Monday, a man rammed a van into a crowded Christmas market in the western city of Nantes, wounding 10 shoppers. One of the victims, a 25-year-old man, later died of his wounds. The assailant survived and is being questioned by police.

That attack came a day after a man shouting "Allahu Akbar" ["God is great"] injured 13 in a similar attack in the eastern city of Dijon.

On Saturday, an attacker in the city of Joue-les-Tours in central France, also yelling "Allahu Akbar," was shot and killed after stabbing three police officers.

"What we are seeing with events in Dijon and Nantes is that they are creating copycat reactions," Valls said on Tuesday after ordering the deployment of 300 additional troops in addition to nearly 800 already deployed.

France is already on high alert after calls earlier this year from militants to attack its citizens and interests in reprisal for French military strikes on Islamist strongholds in the Middle East and Africa.

Thirteen people were injured in Sunday's attack in Dijon

'Highest' threat ever faced

Prosecutors have opened a terrorist investigation into Saturday's attack in Joue-les-Tours after a written "religious testament" was found in which the suspect invoked the Arabic word for God, "Allah," to give him strength.

However, authorities are not treating the other two other incidents as terrorism, disclosing that both attackers had suffered from mental health problems.

Valls said on Monday that France had "never before faced such a high threat linked to terrorism."

This comes as the far-right National Front political party has accused President Francois Hollande's Socialist government of trying to play down any threat posed by radical Islam in France. Headed by outspoken Islam critic Marine Le Pen, the National Front has redoubled its own calls for deportations of radical preachers and a tightening of border controls.

Federal Interior Minister Bernard Cazeneuve said this week that authorities had made 118 arrests in its efforts to crack down on nationals who are leaving France to fight alongside jihadists in Iraq and Syria and return home as potential threats to security.

glb/lw (AFP, Reuters)