The Cost Of The Oil Price War Is Growing For Russia

Russia's economy needs about a trillion rubles, or roughly $12.7 billion a month over the next few months to emerge stable from the coronavirus pandemic and the oil price crash

Russia's economy needs about a trillion rubles, or roughly $12.7 billion a month over the next few months to emerge stable from the coronavirus pandemic and the oil price crash, the chairman of a business organization told TASS.

"The way I see it implies that we should maintain GDP and spend several trillion rubles to stabilize the [economic] situation. For now, we can talk of about one trillion rubles a month," Alexey Repik, chairman of Business Russia, told the news agency in an interview.

He added, however, that Russia's debt load is much smaller than that of other economies, so recovery should be relatively smooth.

Russia's debt to GDP ration is indeed among the lowest in the world, at 19.48 percent, according to data from the International Monetary Fund. In comparison, China's debt to GDP level is 54.44 percent, and Japan's is the highest in the world, at 234.18 percent of GDP.

Following the oil price crash from earlier this month, Russia's Finance Ministry said Moscow had enough resources to cover budget shortfalls amid oil prices that are between $25 and $30 a barrel for six to ten years. The Russian budget, according to the ministry, was balanced at a price for the Urals blend of $42.40 a barrel. Still, the country's sovereign wealth fund had, as of March 1, assets worth over $100 billion, equal to 7.3 percent of GDP and enough to compensate for lower oil revenues due to the drop in oil prices, the finance ministry said.

Last week, Finance Minister Anton Siluanov said Russia's revenues from oil and gas would be US$39.5 billion (3 trillion rubles) lower than planned due to the tumbling oil prices. Admitting that the economy was not doing as well as it could be, Siluanov said the oil price fall alone would cost the Russian economy $39.5 billion this year.

At current oil prices, the Russian economy will tip into a deficit, although a moderate one, at 0.9 percent, Siluanov said separately.

By Irina Slav for Oilprice.com

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