Russia’s budget could receive more than $ 65 billion in extra revenue this year thanks to rising oil prices, boosting the Kremlin’s economic position as the country faces potential US and European sanctions threats. Ukrainian crisis.
Prices will have to stay around current levels of $ 90 a barrel this year to boost revenue by as much as economists estimate, according to Bloomberg. With oil at $ 100, which some analysts say may not be the limit, the total would be close to $ 73 billion, bringing Russia’s dollar-denominated total revenue close to recent highs. about a decade ago. Bloomberg Economics predicts that unexpected profit could reach $ 80 billion with oil at $ 100 a barrel.
In ruble terms, the profit could be even higher, as the currency has weakened against the dollar amid fears of new sanctions due to the Ukrainian crisis. Russia has been expecting an excellent year for oil and gas revenues this year in rubles, with gains of 9.5 trillion. in the budget, with the price of oil at $ 62. Higher gas prices, thanks to continued tensions with the West, could further increase the amount.
“Russia’s fiscal position is so volatile that even with more modest oil prices, it is difficult to put the current situation at risk,” said Sofya Donets, an economist at Renaissance Capital in Moscow.
The oil recovery is a big change from just two years ago, when prices collapsed at the start of the coronavirus pandemic. Oil prices have reached record levels in recent weeks, most recently in 2014, when the United States and its allies imposed sweeping economic sanctions for the first time to punish Moscow for annexing Crimea to Ukraine. Now the West is threatening to impose new sanctions if Russia invades Ukraine, something the Kremlin says it has no plans to do.
Under the legal framework, most of the unexpected amount will go to the National Welfare Fund, most of which is held by the central bank in gold and foreign exchange as part of its reserves. But some of the money could be used for infrastructure and investment projects to help sustain growth. The Russian government currently plans to spend about $ 2.5 trillion. rubles from the fund for projects in the coming years.
“Higher oil means more intense debate over National Welfare Fund spending,” Donets said. January”.
It is noted that after the first waves of Western sanctions, Russia has begun to reduce its dependence on oil and gas revenues. This year’s budget targets 38% of revenue from these sources, up from more than 50% a decade ago. Any unexpected profit from higher prices, however, could increase the share.
At the moment, US crude for March delivery rose 0.87% to $ 90.44 a barrel, while Brent for April delivery gained 0.59% to $ 92.09 a barrel.
Source: Capital
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