MatthewLynn

screengrab from Russian television

Russian President Vladimir Putin can’t stay in power forever.

LONDON (MarketWatch) — It is a long time since anyone harbored any illusions about the Russian President Vladimir Putin. It is has been clear to everyone that he is a traditional Russian autocrat, running an authoritarian regime, and is intent on expanding Moscow’s power wherever possible.

The crisis in the Ukraine has revealed that Russia is corrupt, dangerous, bullying and dictatorial. The Russian stock market has tumbled, the ruble is a free fall, and the central bank has been forced into an emergency hike in interest rates to try and shore up the currency.

True, there are plenty of problems in Russia. The economy has been stifled by greedy officials and exploitative oligarchs. It may well face sanctions over its seizure of the Crimea. It could easily get dragged into a costly war in eastern Ukraine. And oil and gas — its two key industries — are under pressure from the development of shale gas.

How Ukraine and Russia Arrived at the Brink

Russia has taken advantage of the new, weak government in Kiev by swiftly moving its troops into the Ukrainian province of Crimea. James Marson explains the events that led to this standoff.

And yet everything has its price. Russia was already the cheapest significant stock market in the world going into this crisis — and it just got a whole lot cheaper.

Russia may be in a bad way right now, but it remains a huge country, rich in natural resources, with a well-educated work force. Moreover, foreign military adventures have a way of rebounding on the leaders who launch them. This summer, Putin will have been in power for 15 years, a long, long innings even by Russian standards. The best thing that could happen to the Russian economy is Putin’s departure — and it would be foolish to assume that it will never happen.

In reality, for contrarians, or anyone who likes a bargain, this crisis is making Russian stocks look very, very cheap.

The crisis in the Ukraine has worsened by the day. What started as a popular protest at an authoritarian government, by demonstrators angry that the nation was staying close to Russia rather than moving closer to Western Europe, had turned into a battle over its independence. Russia has long regarded the Ukraine as part of its sphere of influence. It looks certain to take the Crimea back — it only lost the region in the 1950s, when Ukraine was independent in name only — and may well take eastern sections of the country as well.

There is little that Europe or the U.S. can do about that, other than protest. The British might have gone to war over the fate of the Crimea in the 1850s but no one is likely to repeat that in this century. The rest of the Group of 8 may refuse to attend a summit in Sochi later this year, although Putin is hardly likely to be quaking in his boots at that. Sanctions may be imposed, although unless Germany decides to stop piping in Russia gas, and freeze through the rest of the winter instead, they will not have very sharp teeth.

There will be plenty of condemnation, but if that made much difference then Putin would have been out of power a long time ago.

In fact, the Russian economy is already suffering.

The ruble USDRUB, +1.36%  has been sinking on the foreign-exchange markets, and on Monday morning the central bank lifted interest rates in an attempt to shore it up. Moscow’s Micex index RU:MOEX  tumbled by 11% on Monday, the biggest one-day drop in five years, worsening an already dismal performance. It has dropped from 1800 last May to just 1300 now, and is no higher than it was all the way back in 2010.

The central bank hiked interest rates by the most since the financial crisis of 1998, amid signs of capital fleeing the country. None of that is going to help an economy that was already slowing down. The Finance Ministry has already cut its growth forecast to only 2.5% this year. Even that modest target may well not be met.

For what is meant to be an emerging market, those are terrible figures.

Even so, everything is worth buying at some level. And while Russia has plenty of problems, the Moscow index is pricing in everything short of Stalin crawling out of his grave and re-occupying his office in the Kremlin.