Russia is successfully weaning itself off oil revenues, President Vladimir Putin said today during an annual end-of-the-year news conference, as quoted by RT.
"This means that, while we're not completely there, we are nonetheless starting to get off the so-called oil and gas needle," Putin said, adding, "If someone still wants to consider us as a gas station, then this has no real basis."
According to Investopedia, Russia's oil and gas exports account for 60 percent of total exports, and revenues from the oil and gas represent about 30 percent of GDP. While the number is a lot lower than the portion of oil revenues in GDP of most of the world other large oil exporters, it still makes up quite a large portion of budget revenues.
Be that as it may, Russia is preparing for a future with a lot less oil consumption, according to Deputy Finance Minister Vladimir Kulychev.
"The peak of consumption may have already passed," Deputy Finance Minister Vladimir Kolychev told Bloomberg in an interview earlier this month. "The risk is rising in the longer term."
To prepare for this decline in demand, the Finance Ministry is studying several scenarios for oil demand development over the long term, with different levels of demand decline, Kolychev said.
For now, it appears there is no clear plan for an energy transition, although Moscow earlier this year released a roadmap to a hydrogen economy, in which zero-emission hydrogen will feature prominently in Russia's energy export mix. According to the roadmap, Gazprom would begin producing clean hydrogen in four years, and Novatek, the LNG major, is also planning hydrogen projects for a less oil-dependent future.
Russia's oil industry is far from dying, however. Last month, state giant Rosneft announced the start of its massive Vostok project in the Arctic, worth $111 billion. Plans are for Vostok to produce 100 million tons of oil annually at full operation.
By Irina Slav for Oilprice.com
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He achieved that in a record time by extensive and determined diversification of the economy in the aftermath of the 2014 oil price collapse and the imposition of US sanctions on Russia over the annexation of the Crimea.
Russia’s economy is one of the most advanced and diversified economies in the world. The country is now not only self-sufficient in food production but is also a major exporter of food stuffs and also the world’s largest exporter of wheat. It is also the world’s top exporter of nuclear reactors and defence equipment. Major exports of scientific instruments, space vehicles, machinery and others contribute 40% to total Russian exports.
Russia’s estimated GDP in 2020 at $4.1 trillion based on purchasing power parity (PPP) is the world’s fifth largest. Public debt is estimated at less than 10% of GDP and is among the lowest in the world compared with the United States' $27 trillion or 25.6% of GDP. The IMF expects Russia’s economy to grow at 3% in 2021and 2.5% in 2022.
This is a far cry from when the late US Senator John McCain in an insulting remark described Russia as a gas station masquerading as a country. President Putin is now saying that “if someone still wants to consider us as a gas station, then this has no real basis."
Still, Russia’s oil industry is going from strength to strength. Russia’s oil giant Rosneft announced last month the start of its massive Vostok project in the Arctic, worth $111 bn. The Vostok project is expected to add 2 million barrels a day (mbd) to Russian oil production at full operation.
Russia released earlier this year a roadmap to a hydrogen economy in which
zero-emission hydrogen will feature prominently in its energy export mix. According to the roadmap, Gazprom would begin producing clean hydrogen in four years, and Novatek, the LNG major, is also planning hydrogen projects for a less oil-dependent future.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London