The oil market meltdown in recent days could pose risks to the Russian economy, Russia’s Central Bank Governor Elvira Nabiullina said on Tuesday.
The escalation of the tariff wars could negatively affect Russia’s economy, TASS news agency quoted the governor as telling Russian lawmakers in parliament today.
“The main channel of influence may lie through fluctuations of oil prices, a decline of oil prices,” Nabiullina was quoted as saying.
“If the escalation of the tariff wars continues, this usually leads to a decline in global trade and the global economy and, possibly, demand for our energy resources. Therefore, there are risks here,” the central bank governor noted.
As the international oil benchmarks slumped by about $10 per barrel in just a few days, the price of Russia’s flagship Urals crude grade tumbled and is close to the $50 per barrel threshold for the first time in nearly two years.
As the price of the flagship Russian crude was in freefall in lockstep with the international benchmarks, the Kremlin commented on the oil market rout on Monday.
The situation on the global oil market is extremely turbulent, which is related to the U.S. decision to impose tariffs on the majority of countries, Russian news agency TASS quoted Kremlin spokesman Dmitry Peskov as saying. The Russian authorities are keeping a close eye on the oil market selloff, Vladimir Putin’s spokesman added.
“We are monitoring closely the situation, which is currently extremely turbulent, tense and emotionally charged,” Peskov said at a press briefing.
The Russian authorities are doing everything possible to mitigate the fallout of the global situation on the Russian economy, he added.
Proceeds from oil and gas sales are the most important cash stream for Russia’s federal budget.
Russian revenues from oil and gas plunged by 17% in March from a year earlier, according to data from Russia’s finance ministry. The April revenues are set to be much lower than last year and compared to March, if Brent prices hover around the current levels in the low $60s for the whole of April.
By Charles Kennedy for Oilprice.com
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1- The oil and gas export revenue amounts to under 15% of Russia's GDP.
2- The Russian budget is based on a Brent crude oil price of $40 a barrel.
3- Russia's economy, the world's fourth-largest after China, the US and India all based on purchasing power parity (PPP) is too big to be seriously affected much by a drop in the oil price.
4- Oil prices will soon recover from the impact of Trump's tariffs unless the tariffs push the global economy to recession reducing demand for oil
5- OPEC+ will reverse its decision to roll back some of its production cuts in May if the Brent crude remains at the current level.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert