Vladimir Putin said Friday that the global economy would collapse if the oil price was allowed to remain at around $US80 a barrel for too long.
At a press conference following talks on the Ukrainian crisis in Milan, Italy the Russian president warned that prices as low as $US80 a barrel would cause US oil production to crash as well as putting pressure on the rest of the global economy.
$US80 a barrel would not be in the interest of any major players. This level is not in anyone’s interest. The global economy would suffer.
Oil prices below current levels present a particular pressure for the Russian government, which had budgeted on the basis of $US90 a barrel. The collapse in the oil price has also hit the ruble, with the Russian central bank having burned through $US13 Billion of foreign exchange reserves in an attempt to prop up the currency.
Putin attempted to dismiss concerns surrounding the currency saying:
Russia is among the world’s leading countries in terms of foreign exchange and gold reserves. We have enough to adjust the rate of the ruble if necessary.
However, this argument has previously been dismissed by Elvira Nabiullina, the head of Russia’s central bank, who said Monday that if currency markets continue to turn against the ruble the bank “won’t be able to restrain them.”
Acknowledging the problems that falling oil prices pose to his government’s budget plans, Putin said that if they remained depressed Russia “may need to adjust our budget” but stressed that social spending would not be cut.
“We will not have to sacrifice that,” he said.