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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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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.