By E. Gurkan Abay
ANKARA
The Russian economy can cope with pressure caused by the decrease in oil prices, experts said Wednesday.
Oil prices have reached a two-year low costing around the mid-$80s per barrel. The prices have been affected by low oil demand due to the slow global economic growth.
“In first nine months of 2014, crude oil and oil products contributed to more than 55 percent of the total exports of Russia,” said Marcel Salikhov, the head of the economic department at the Moscow-based Institute for Energy and Finance.
He stressed, however, that there is no immediate danger for the Russian federal budget.
Salikhov underlined that Russia has an accumulated surplus for 2014 totaling around $30 billion, and said the Russian reserve fund and the National welfare funds also have around $200 billion in their reserves.
“So it hurts, but Russia can cope with prices at $80-90/barrel,” he said.
Oil and gas revenues provide more than half of Russia’s federal budget revenues. Major taxes on the oil sector, such as export duties, are directly linked to global oil prices.
“Russian oil producers are isolated from the full impact of oil price swings and will likely be able to maintain stable production,” Artem Konchin, a senior oil and gas analyst at UniCredit said.
“The weakened ruble (due to sanctions) helps them on capital and operational expenditure, offsetting the weaker netbacks,” Konchin said.
Konchin pointed out that Russian oil producers have a low operating cost base and the majority of operating costs are given towards government-imposed taxes which fluctuate depending on oil prices.
Oversupply causes drop in oil prices
Matthew James Bryza, the former U.S. ambassador to Azerbaijan and Senior Fellow at the Washington based think-tank Atlantic Council, said that the reason for the decrease in oil prices is oversupply.
Bryza, stressing that the economic growth in Europe, China and U.S. is slow, said there is no big global economic growth in the short-term that will stimulate more oil demand.
The expert added that oil prices could continue to go further down to $60-70 per barrel.
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