Russia Says the Oil & Gas Price Crash Will Cost It Only $40bn (It’s Budget Surplus Last Year Was $30bn)
The US was meanwhile is readying a $1.5 trillion bailout and was on track for a greater than $1 trillion deficit even before the crash
Editor’s note: Russia has a problem; the oil has hit $26. Russia also has well over $500 billion in non-dollar reserves. I know whose bond I’d rather own right about now.
Russia’s revenues from oil and gas will be US$39.5 billion (3 trillion rubles) lower than planned, due to the tumbling oil prices, Russian Finance Minister Anton Siluanov said on Wednesday, adding that Russia’s budget will be in deficit this year.
The coronavirus pandemic and the lower economic activity, coupled with oil prices half the level before Russia and Saudi Arabia broke up the OPEC+ production cut deal two weeks ago, will weigh on Russia’s budget this year, which will tip into deficit.
Russia’s economy is not going as well as one would have hoped, the finance minister admitted today, saying that the oil price factor alone is set to reduce the country’s budget income by nearly US$39.5 billion compared to earlier estimates.
In case of budget deficit, Russia will use reserves from the National Wealth Fund (NWF) [It’s nice to have reserves.], Siluanov said on Wednesday.
According to analysts at Gazprombank, cited by Reuters, the fund has enough reserves to compensate for lower budget revenues due to low oil prices for more than five years.
Last week, a day after oil prices collapsed in the worst drop in nearly three decades—courtesy of the renewed Saudi-Russia rivalry on the oil market – Russia’s Finance Ministry said that Moscow had enough resources to cover budget shortfalls amid oil prices at $25-30 a barrel for six to ten years.
The price of the Russian export grade Urals dropped far below $42.40 a barrel as oil prices tumbled by 30 percent after Saudi Arabia launched an all-out price war with Russia following the collapse of the OPEC+ group.
The $42.40 Urals price is the price at which Russia’s budget is balanced, the Russian Finance Ministry said last week, noting that the country’s NWF had as of March 1 liquid assets worth US$150.1 billion, or 9.2 percent of Russia’s gross domestic product (GDP).
Lower oil prices are likely to persist for some time, considering the huge demand destruction in the coronavirus outbreak and the coming flood of extra supply on the already oversupplied market as both Russia and Saudi Arabia pledge to boost supply in the new feud between the former allies.
Source: OilPrice.com
I wish there would be some recognition of the difference between foreign currency and gold reserves, and Russian ‘budget’. Russia can create any number of rubles that it wants. And, in fact what is holding Russia back is the lack of local money. Russia needs to run a budget deficit, in rubles to put those rubles in the hands of the private and government business sector. Russia is much too conservative here. Bragging about a budget surplus is stupid, that guarantees slow or no growth. This does not mean following the West into massive money printing (which the status of the dollar allows Washington to do), but lower interest rates, a reasonable fiscal deficit would allow Russia to grow much faster than she is doing. Learn something from the Chinese for God’s sake.
Where I live, they are paying you to pump gas from their pumps. God bless America, Land that I Love….
Oil prices may go down to close to zero if nobody is going to work! We’ve arrived at the Stone Age without WW3!
the world is in reset.
RU has shown the world how it adapts to sanctions.
It can now show the world how it adapts to lower oil prices.