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Economy Minister: Russia Adapted To Low Oil Prices, Sanctions

With oil at $40 per barrel, last year Russia had a current account surplus and a small budget deficit, which points to the fact that the country’s economy has adapted well not only to the low oil prices, but to the sanctions as well, Economy Minister Maksim Oreshkin said at the World Economic Forum in Davos on Thursday.

“What we prefer to do now is to focus on our own problems, the country’s structural issues, and we don’t think much of the sanctions,” Russia’s news agency TASS quoted Oreshkin as saying.

The not-so-good results over the past couple of years were consequences of Russia’s decision from the end of 2014 to adjust its economy to the new reality of low oil prices and sanctions, the minister noted.

Russia needs long-term market stability and a stable development of the oil market, not high oil prices, TASS quoted Oreshkin as saying.

In an interview with Bloomberg at the WEF today, posted on the Russian economy ministry’s website, Oreshkin said that Russia’s budget was drafted at a $40 oil price assumption. High oil price helps, but it “doesn’t matter” as much for Russia as it does for other world exporters, the minister said.

Russia’s budget for this year is also based on oil at $40 per barrel. Finance Minister Anton Siluanov said in December that under the three-year budget plan, Russia should break even in 2019, as long as oil prices stay between $40 and $45.

At the end of November last year, the International Monetary Fund (IMF) said that Russia’s economy had “absorbed the shocks from oil and sanctions, and there are signs of a nascent turnaround”. The IMF went on to add:

“The recovery should be on a stronger footing in 2017, with the economy forecasted to expand by 1.1 percent due in part to higher oil prices.”

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In its World Economic Outlook (WEO) from earlier this month, the IMF said, referring to the developments in the second half of 2016: “Activity in Russia was slightly better than expected, in part reflecting firmer oil prices.”

By Tsvetana Paraskova for Oilprice.com

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