Low oil prices are hurting Russia badly.
The country’s budget is partly dependent on oil revenues and, with oil prices down more than 60% from 2014 highs above $100 a barrel, Russia has been dipping into its emergency fund.
But there is not a lot left. In fact, Russia is running out of money.
Last week, Russia’s finance ministry revealed that the fund designed to cover shortfalls in the country’s national budget shrunk to £23 billion ($30.6 billion), from £67 billion in 2014.
According to a report by the International Institute of Finance, Russia’s budget was a little too optimistic about the average price of oil in 2016.
Here is the IIF (emphasis ours):
“The federal budget was based on a $50/barrel price of oil, while the average price in January-August has been only $42.70.
“The budget also implausibly assumed a 1% real GDP growth this year, while the economy has been in recession. The impact of lower oil prices was especially painful. Export duties on oil fell to 1.1% of GDP in January-July, from almost 2% last year and 4% of GDP in 2011.”
Here is the chart from the IIF:
And this is oil’s fall. Prices have dropped from over $100 per barrel highs in June 2014, to around $46 per barrel. At one point this year, the oil price was flirting with the $20 per barrel mark:
The IIF said that the economic damage caused by sanctions and cheap oil amounts to a “lost decade,” and the country needs real change to kickstart growth.
Here is the IIF again:
“With real GDP growth averaging only 0.3% since 2008 when oil process peaked at $130/barrel, the Russian economy has already experienced a lost decade. It needs to implement radical changes if it is not to repeat weak performance in years to come.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.