Russian economy may lose up to $140 billion because of oil prices and sanctions


Russian economy may lose $40 billion because of Western sanctions and 90-100 billion dollars more because of declining oil prices, Finance Minister Anton Siluanov said at the International Financial and Economic Forum.

"What do we have in terms of economy? We lose about 40 billion dollars a year because of political sanctions and we can lose about 90-100 billion dollars a year from the reduction of oil prices by 30 percent," he explained.

The minister said that since the beginning of 2014, oil prices have fallen by 30 percent. The Russian ruble has lost 30 percent of its value in 2014 as well. 

Siluanov noted that the Russian economy faced two major challenges: lower oil prices and the geopolitical situation. According to the minister, the decline in oil prices has had a much greater impact on the economy than the restrictions that Western countries imposed on Russia.

"Speaking of geopolitics, the inflow of capital from developed countries are decreasing. Investment resources are declining as obstacles have been put up for capital inflows. But if we look at the volume of capital flight that we have had in the country before - about $100 billion, and this year - $130 billion, then the main outflow of capital occurs through the conversion of savings, primarily of the population and economic agents, as the convert rubles into a foreign currency at a time when the exchange rate experiences volatility," the minister said, RIA Novosti reports. 

Oil prices of Brent oil started sliding in mid-June. In the beginning of the summer of 2014, Brent oil was traded for $115 per barrel, but then prices went 30 percent down. On November 21, on ICE Futures, Brent oil rose to $80 per barrel for the first time since November 13, 2014.

Russian President Putin believes that lower prices on energy carriers primarily affect those who introduce restrictions for that.

"Our modern world is interdependent. It is not the fact that the sanctions, the sharp fall in oil prices, the devaluation of the national currency will lead to negative results or catastrophic consequences only for us. This will not happen," he said in an interview with TASS.

"This, in particular, is due to the fact that in the United States, they started producing shale oil and gas. The States largely provide themselves with their own raw materials. Not completely yet, but significantly. What is the profitability of this production? It varies in different regions of the United States from $65 to $83 per barrel. Now the price for a barrel of oil has fallen below 80. Shale gas production becomes unprofitable. Maybe the Saudis want to "kill" their competitors deliberately," suggested Putin.

Earlier, Saudi Arabia Oil Minister, Ali al-Naimi, denied information about the "war of oil prices," which Saudi Arabia was supposedly waging.

Russia is among the countries, for which the risks associated with the fall in oil prices are moderate, Business Monitor International (BMI), a division of Fitch rating agency said. The group of such countries also includes Ecuador and Mexico.

Meanwhile, it was reported that the Russian authorities may offer OPEC to cut the national annual oil production by 15 million tons. In return, Moscow expects that the organization will use a mechanism of quotas to reduce annual oil production by 70 million tons of oil. 

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Author`s name Dmitry Sudakov