News / Europe

    Falling Oil Prices Prompt Russian Economic Fears

    Henry Ridgwell
    LONDON - Oil prices have shown a steady fall in the last few months, prompting fears that the Russian economy, which relies heavily on energy exports, could suffer.  Meanwhile, new sources of oil are coming on line and helping to drive down the price at the pump.

    Khanty-Mansiysk in Siberia - home to around 70 percent of Russia’s developed oil fields and the source of much of the country’s wealth.

    Russia produces more than 10 million barrels of oil per day - making it a major energy player.

    Stephen Tindale, an energy economist at the Center for European Reform, said, “Almost half of the Russian government’s revenue comes from various taxes on oil and gas exports.”

    Tindale says that leaves the Russian economy highly vulnerable to a fall in oil prices. “It would mean their budget was well out of balance and so would be very serious, short-term, for Putin and the Russian government," he said.

    In recent weeks, oil prices have begun falling - from around $125 per barrel in March to around $100 by June.

    For an explanation we have to look back to why prices were high at the beginning of the year, says Paul Stevens at Chatham House, an independent policy institute in London. “Oil demand was beginning to pick up again, supply was being constrained, we had lost Syria, we had lost Yemen, we had lost South Sudan, Libya was still off the market to a certain extent," he said.

    Stevens says demand is now falling, thanks to fears about the world economy - and that could be bad news for Russian exporters.

    In addition, Iraq has seen the opening of new oil fields like this one in West Qurna in April. which was developed in partnership with Russian giant Lukoil.  Its vice president, Sergei Nikiforov, said, “Today, Iraq and Russia inaugurated the giant oilfield of West Qurna, one of the largest fields discovered in the world.”

    Stevens at Chatham House says developments like this are offsetting the impact of recent geopolitical upheavals. “The supply side has also improved, partially because Iraq has been coming on but more importantly because other OPEC members, particularly Saudi Arabia, have been increasing their production, in part in an effort to offset the loss of Iranian production because of the embargo," he said.

    While the short-term outlook may be for a slow decline in oil prices, Stevens says a single event, such as an Israeli attack on Iran over its nuclear program, could see prices rocket towards $200 a barrel.

    You May Like

    Vietnam Urges US to Lift Lethal Weapons Ban Amid S. China Sea Tensions

    US president’s upcoming visit to Vietnam underscores strength of relationship, and lifting embargo would reflect that trust, ambassador says

    Are US Schools Turning a Blind Eye to Radical Qatari Preachers?

    Parade of radical Islamist clerics using mosque at Qatar’s Education City draws mounting criticism for American universities that maintain satellite branches there

    Why Islamic State Is Down But Not Out

    Despite loss of territory, group’s ferocious attacks over past three months seen as testimony to its continued durability and resourcefulness

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: HJRR from: USA
    June 13, 2012 1:07 PM
    Russia needs another kick in the pants. The fall of the USSR was in large part due to the collapse of oil prices and the cost of their war in Afghanistan. They were bankrupt politically, militarily and economically. Today, again they are dependent on oil exports and the only way for true reform in RUSSIA is for their to be another collapse in oil revenues to the state. Then and only then will the people get off their oil-drug-fix and be forced to make major reforms to their economy, their government and the whores they export to the world.

    by: Mike
    June 11, 2012 5:01 PM
    In Russia, nothing is being done to get off the oil needle. The whole economy is tied to the sale to West energy. This policy led to the fact that Russia has become economically dependent country - Russia buys food abroad, the citizens of Russia prefer to buy Japanese, American and European cars, Russia complete zero in electronics, which is purchased only at the West and in China, Russia does not have a competitive industry for the production of clothing and shoes, and they are also buying in the West. In short, if tomorrow, for whatever reason, Russia will stop all of this to buy abroad, shelves of Russian stores will return to its original state - shelves will be empty again like in USSR ...
    That is why Putin and his company, like air need high oil prices. They are a small decline has already caused nervousness in the Kremlin. If prices drop to $ 60 a barrel Russia's current budget would be impossible. That is why the civil war in Syria and a possible military strike on Iran in the interests of the ruling elite of Russia. Any tension, and especially the war in the Middle East will lead to a sharp rise in oil prices.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Displaced By War, Syrian Artist Finds Inspiration Abroadi
    X
    May 02, 2016 1:36 PM
    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video Kurdish Football Team Helps War-Torn City Cope

    With the conflict still raging across much of Turkey’s predominantly Kurdish southeast, between the rebel PKK and the Turkish state, many Kurds are trying to escape the turmoil by focusing on the success of their football team Amedspor in Diyarbakir. The club is increasingly becoming a symbol for Kurds, not only in Diyarbakir but beyond. Dorian Jones reports from southeast Turkey.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.

    Special Report

    Adrift The Invisible African Diaspora