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Energy Minister: OPEC+ Deal Has Brought Russia $120 Billion  

Russia’s budget has received an additional US$120 billion since Moscow’s cooperation deal with OPEC started two years ago, Russian Energy Minister Alexander Novak told local business daily Kommersant in a wide-ranging interview published on Tuesday.

Discussing the initial and the latest deals between OPEC and the cartel’s Russia-led non-OPEC partners, Novak said that although the specific price of oil is not as important for Russian companies as it is for other countries, low oil prices create other challenges for Russia’s state budget. A slump in oil prices could affect the ruble-U.S. dollar exchange rate and the inflation rate, as well as create uncertainties about the economy and budget plans, Novak told Kommersant.

“Over the two years in which the OPEC+ deal has been in force, Russia has additionally earned US$120 billion, according to the lowest end of estimates,” Novak said.

Therefore, it is important to assess the results of the deal looking at the impact they have on Russia’s economy as a whole, the energy minister said.

Speaking to Kommersant, Novak reiterated that Russia would gradually reduce its production level until it reaches its 230,000-bpd share of the cuts. Russia and its partners have agreed that due to the technological and geological characteristics of Russia’s oil industry, production can’t and won’t be cut outright by 230,000 bpd in January, Novak said, but noted that Russia would begin reducing output as early as next month.

Earlier in December, Novak said that Russia planned to reduce its oil production by 50,000 bpd to 60,000 bpd in January as part of the new OPEC+ deal.  

Asked about how long the latest OPEC/non-OPEC deal would last, Novak told Kommersant that he couldn’t make a specific forecast as the partners would continue to assess the situation on the oil market.

However, it is “important to understand that cooperation will continue, one way or another,” Novak said, noting that the production cut deal has proven effective.  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on December 26 2018 said:
    While the overwhelming majority of OPEC members need an oil price of $100 a barrel to balance their budgets, Russia’s economy can live with an oil price of $40 or less. This has become possible as a result of the extensive diversification of the Russian economy ordered by President Putin in the aftermath of the imposition of US sanctions on Russia as a result of its annexation of the Crimea in 2014.

    And while the economies of OPEC members are dependent on the oil export revenues to the tune of 85%-90%, Russia is one of the world’s top industrial powers, the world’s top exporter of nuclear reactors, the second biggest exporter of weaponry, the top exporter of wheat and also a world leader in IT.

    Still, a slump in oil prices could adversely affect the exchange rate of the ruble against the US dollar, inflation and also budget plans according to Russia’s oil minister Alexander Novak.

    However, Russia’s cooperation with OPEC to stabilize the global oil market and bolster oil prices has earned it not only economic and geopolitical dividends but has also earned the Russian budget an additional US$120 bn in the last two years.

    Moreover, the Russian-Saudi cooperation has enabled Russia to enhance its influence over the global oil market and to become quintessential in the energy world. Russia’s influence on OPEC and its policies and decisions is now far bigger than the overwhelming majority of OPEC members.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Vladimir on December 26 2018 said:
    Mr. Novak is correct. During those two years oil prices rose from $50 to $80/bbl and back to $50. Prices for next year depend on Putin's behavior as he gathers the Red Army to invade Ukraine. The easiest way for NATO to fight a war with Russia is to crush oil prices and the Ruble to put the Russian people into holodomor. The trading desks of US Treasury, Goldman Sachs, US Federal Reserve, and ECB have unlimited capital and algorithms to move prices wherever they please. Putin has an 80% unfavorable rating among the cold and hungry Russians. Putin may believe that expanding the Russian border would appeal to Russian patriotism and boost his popularity. The hungry Russians know Putin is the cause of their poverty.

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