Putin Orders New Budget With $41 Oil

Russia’s prime minister is not betting on a rebound in oil prices this year. From Moscow Times (hat tip reader Nivethan):

Prime Minister Vladimir Putin on Monday ordered changes to this year’s federal budget to take into account the sharp drop in global oil prices, a decision that could pave the way for further spending of the Reserve Fund.

The Finance Ministry must base the budget on the price of $41 per barrel, or less than half of the $95-per-barrel estimate that is a cornerstone of the existing budget…A Finance Ministry spokesman said the prices were for Russia’s main Urals blend…The Urals price averaged $42.90 in the first 16 days of this month, Economic Development Minister Elvira Nabiullina said…

The Kremlin’s top economic adviser, Arkady Dvorkovich, said in an interview published Monday that the government expected a budget deficit of at least 5 percent of the year’s gross domestic product….

The budget deficit could range from 5 percent to 7 percent of GDP, said Yelena Lebedinskaya, a budget analyst at the Economic Expert Group, a think tank….

The government will finance most of the deficit by dipping further into the Reserve Fund that has been sponging windfall oil and gas revenues since 2003, Lebedinskaya said. The fund held 4 trillion rubles as of Jan. 1, or $137 billion, the Finance Ministry reported last week.

“There will be borrowings, but they won’t be large,” she said.

Some of the Reserve Fund has already been slated for spending. In November, Kudrin announced that the government would spend 1 trillion rubles this year from the financial safety cushion as a result of the global economic crisis…

She added that Russia’s relatively low sovereign debt allowed the government to indulge in borrowing on the market despite the high cost of doing so in an economic crisis that sent the rates soaring

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  1. Bob_in_MA

    The big devaluation has to make $41 bbl a lot more palatable. Going forward, it could also be a boon to Russian agriculture.

  2. Max

    Russians are very experienced in handling economic crises, they still remember 1998. I would not worry about Medvedev/Putin more than about G.Brown or Obama.

  3. Anonymous

    On the bright side (for Putin), his country was incredibly wrong with their previous prediction/budget, so who’s to say that they have suddenly begun to grasp this whole “global commodities” thing? Better to be safe than sorry, I suppose.

  4. Anonymous


    “widespread protests” there were no protets to speak of excepted for those paid for by the importers of Japanese 2nd hand cars. Yes these protestors were paid for like the orange protestors in Kieve.

    “Putin’s popularity was rapidly plummeting” actually his ratings have remained at 83% and probably increased after the gas settlement.

    There are no siloviki excepted that imagined by Western Press. Putin is in control and will finish the job he has started which is to free Russia from military/economic servitude to Anglo/Saxon(neo-con) interests. Is this not clear enough from every word and action the man has taken over the past 8 yers?

  5. Patrick

    Meh, it’d be cool if oil waited until ’10 to pop, that’d let me rake the trend on gold and then get into oil fresh. However, that’s wishful thinking, as the inflation unwinds I imagine oil will appreciate, and then Russia will be left with an unconscionable thing: a conservative public budget. Imagine that.

    Maybe the Russians are right up there with the Argentines for crisis savvy temperment.

  6. Anonymous

    This is kinda telling when a former communist country is more fiscally disciplined than the leaders of the free market.

  7. Anonymous

    Excellent investment for the next 10 years: long Russia short UK-US and ignore FT,the Economist.

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