Russia Gambles with the Price of Oil

When the Russians fell out with the OPEC cartel (the Saudis) over the future price of oil, they had not thought through the larger economic repercussions for their own economy were the Saudis to retaliate dramatically with unilateral measures directed at them to expand output. As a result the sudden, precipitate drop in prices by 24% that has now occurred turned out to be much faster and greater than anticipated. The headline in the leading financial newspaper Vedomosti predicts: ‘”Tomorrow there will be panic on the Russian market”. Analysts and economists on the crash of the rouble.’

Nezavisimaya gazeta goes on to point out why. At $30-34 a barrel for oil, which surely cannot meet the costs of production estimated at $42 a barrel, the Russians will see their foreign exchange receipts under threat, a major fall in the price of the rouble, and further capital flight. And if the purpose of all this is to punish American shale oil companies for U.S. obstruction of the completion of the Baltic gas pipeline or the U.S. sanctions directed at Rosneft Trading for its relationship with outcast Venezuela, there is no guarantee that those companies will not take the blow on the chin and re-emerge into profit as they did in 2015-16.

In other words, Moscow is gambling with its own already uncertain economic future in pursuit of damaging American commercial and geopolitical interests. Is this not yet another own goal for the Kremlin?


«Завтра на российском рынке будет паника». Аналитики и экономисты об обвале рубля

Евро – 85 рублей, доллар – 74

09.03.2020 20:49:00

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