The current crude prices are acceptable for the Russian economy, Russian President Vladimir Putin said after the price of oil dramatically fell to the lowest point in more than a year.
“Today it is difficult to predict how long-term this trend [the drop in oil prices] will become, but in any case, we need to be prepared for different scenarios,” the Russian leader said during a meeting with finance and energy officials as well as the heads of Russian oil and gas majors on Sunday.
Putin said that although last week was the worst for global markets since the 2008 financial crisis, Russia has enough reserves to stay afloat even if the situation continues to deteriorate. The country’s gold and foreign currency holdings currently stand at $563 billion, including $124 billion held by its sovereign wealth fund.
The Brent and WTI benchmarks suffered their biggest weekly percentage decline in years, driven down by fears that the novel coronavirus could further affect energy demand and result in a global economic slowdown. Brent fell below $50 per barrel for the first time since July 2017 before slightly rebounding at the end of the trading week at around $50.5. At the same time, WTI futures tumbled to $44.95 per barrel, their lowest since January 2019.
Earlier this week, Russian Finance Minister Anton Siluanov, who was also present at Sunday’s meeting with Putin, said the Russian economy will be safe even if oil prices further drop by up to 40 percent.
“Even with an oil price of about 30 dollars per barrel... we will finance our spending for four years without problems,” the minister said.
However, that situation should not last too long, as production costs at many oil fields, including shale, is higher, Siluanov noted. He added that a base price of $42 per barrel would be better for Moscow as it would allow the government to balance the budget.