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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Russia Has No Plans To Further Privatize Oil Industry

Moscow

Russia does not plan to privatize its oil sector, Kremlin spokesman Dmitry Peskov told media, after former Finance Minister Alexey Kudrin insisted that the oil industry must be privatized fully in the next seven to eight years.

“The oil sector should be fully privatized in the next 7-8 years, no state companies are required there now as the statehood brings more harm than benefit to those companies,” Kudrin said at the St. Petersburg International Economic Forum this week, adding that the oil industry did not need the help of the government to deal with the problems it encounters. Kudrin also noted that state ownership brought more harm than good to oil companies in Russia.

Peskov, however, said that although Kudrin’s opinion is a “well-known expert point of view” and although he “defends it reasonably enough,” it is not the only opinion on the table, and for now Moscow has no plans to privatize any state-owned companies.

Oil revenues are a key contributor to the Russian budget, although estimates vary about exactly how much the contribution is as part of the budget. According to the country’s Finance Ministry, these constituted around 40 percent in 2016, down from about 50 percent back in 2014. The decline came on the back of the oil price crash, but oil revenues remain vital for the federal budget.

This means that the Kremlin has no interest in privatizing its oil industry, all the more so now that prices have improved and are likely to stay much higher than the base-case scenario stipulated in this year’s federal budget: US$40 per barrel.

In fact, thanks to this oil price recovery, the World Bank forecast that Russia will swing into growth this year, with GDP rising by 1.3 percent this year and by 1.4 percent next year and 2019.

By Irina Slav for Oilprice.com

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