Rosneft, Russia’s biggest oil producer, reported a net profit of just 1 billion rubles ($US23 million) in the third quarter, down from 172 billion rubles ($US3 billion) in the previous quarter.
The company, which is headed by close Putin ally Igor Sechin, has been hammered by a combination of international sanctions and a huge rise in the value of its foreign currency debt. Its net debt position reached a staggering 1.77 trillion rubles.
As a testament to its recent struggles, Rosneft had earlier seen a request for 2 trillion rubles from the state National Wealth Fund to help it weather current market turmoil turned down. Last week Russia’s Finance Minister Anton Siluanov said the scale of the request was impossible to meet without putting huge strain on the country’s reserves.
The overall volume of the Fund is a little more than 3 trillion rubles and there is not enough unused, inactive capital to meet the request. Therefore, undoubtedly, the offer [from the government] will differ significantly from the request.
Rosneft’s woes show just how damaging sharp falls in the ruble can be for the Russia’s vital commodities sector. With the currency hitting yet another record low Thursday, the central bank now faces the difficult decision of whether to raise rates in an effort to stem capital outflows at the risk of damaging the country’s fragile economy.
The bank’s board is due to meet Friday, when it will attempt to balance the demands of an economy that is seeing 8% inflation and flagging growth. The board’s decision could mean the difference between the country falling into a recession or avoiding an even worse slump.