President Vladimir Putin. Reuters/RIA Novosti/Pool/Alexei Druzhinin The Russian economy is in dire straits. Growth is flatlining, the government's budget is being squeezed, and international sanctions over the country's role in the Ukraine crisis are combining to squeeze Moscow.

However, the reasons for Russia's decline predate the country's current crisis and have as much to do with long-term trends like an aging population and declining labor productivity as with the recent collapse of the oil price (and with it the ruble).

The choices faced by Russian policymakers are stark. They can either attempt to fight the decline by spending the country's precious foreign exchange reserves. Or they can let the currency float free and risk financial instability that could crush businesses.

So far they have opted for the former. The central bank burned more than $15 billion last month in an attempt to soften the ruble's fall. But it has failed to instill confidence either domestically or internationally.