Russia generated USD 1.6 trillion from oil and gas exports in the last decade

Russian news portal today quoted the International Energy Agency’s October report that reviewed its average daily oil demand forecast for 2012 from 90.5 to 89.7 million barrels per day. The correction is a consequence of International Monetary Fund’s lower global GDP growth estimate, which was reduced from 3.5 to 3.3 percent for 2012 and from 3.9 to 3.6 percent for 2013. Sergei Ulatov, Senior Economist with the World Bank in Russia, stated that the price of oil is expected to be around USD 105 per barrel in 2013 and fall below USD 100 in 2014. Such prices should allow the Russian central government budget to remain balanced until 2015, after which it should experience a small deficit. FBK, an accounting and business consulting company, forecasts that the price of oil in the upcoming year will be around USD 90 per barrel, which will not allow for any GDP growth in Russia and will lead to a central government budget deficit of approximately USD 17.5 billion. According to Igor Nikolaev, Head of the Strategic Analyisis Department with FBK, in the period between 2001 and 2010 Russia generated revenues of approximately USD 1.6 trillion from the sale of oil and gas (USD 855 billion from oil exports, 354 billion from gas exports, and the balance from the sale of oil derivatives). This represents a five-fold increase compared to the preceding decade. Where did that money end up represents a heavily debated issue. According to Nikolaev, one part of it ended up in the central budget, 50 percent of which consists of oil and gas related duties; another was invested in infrastructure projects, such as the preparation of the Olympic Games in Sochi in 2014; the balance left the country due to the undeveloped business environment.

In the meanwhile, the Government is working out a plan to reduce the possible negative impact of lower oil prices. Yulia Voitovich, an analyst with the independent research agency “Investcafe”, provided an example of a budget rule that limits the budget expenditures in accordance with average oil prices. The Russian Ministry of Finance expects that the reserve fund should suffice to compensate any budget shortfalls for at least two years if the price of oil drops to USD 60 after 2016, or four years should the price fall to USD 80. The Russian Ministry of Economy is more optimistic and expects that a crisis, if it comes, will last a year and a half at most.

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