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Russia May Be Forced Into Production Cuts Says Deputy PM
Submitted by Andy Tully via OilPrice.com,
The 7-month-old plunge in oil prices will force Moscow to cut its budget for 2015 by 10 percent, perhaps even 15 percent, a senior Russian government official told a panel discussion at the World Economic Forum in Davos Switzerland.
Russia, the world’s largest producer of crude, traditionally has relied heavily on oil revenues to run its government, but Deputy Prime Minister Arkady Dvorkovich said Jan. 21 that it is easing that reliance by tapping its currency reserves to make up for some of the revenue shortage.
“A few years ago we decided to establish a macro framework [of financial reserves] where dependence on oil price is lower than before,” Dvorkovich said. In 2015, though, Moscow decided that the reserves also should be used to shore up the stability of Russia’s banks because “no one expected prices to go down so sharply,” he said.
To keep from spending more money than it has, Russia plans to “reduce the budget by maybe 10 to 15 percent,” Dvorkovich said. His words elaborated on those of Russian Finance Minister Anton Siluanov, who said a week earlier that Moscow was prepared to “make decisions on optimizing expenditures.”
Oil now costs around $50 per barrel. Moscow’s preliminary budget for 2015 had been predicated on revenues from oil at $100 per barrel.
Russia also faces unexpected inflation. Deputy Economic Development Minister Alexei Vedev said Jan. 14 that inflation for the current year would reach its peak of between 15 percent and 17 percent in March or April. That’s as many as seven percentage points higher than the Russian Central Bank had forecast as recently as December 2014.
Part of that problem is the erosion in the value of Russia’s currency, the ruble. It was down 41 percent against the US dollar during 2014 as a result of the plunge in oil prices, the flight of capital from Russia and economic sanctions imposed by the European Union and the United States over Russia’s treatment of neighboring Ukraine.
In Davos, Dvorkovich said a return to stable oil prices would help restore the ruble to a more realistic value.
In fact, Dvorkovich said, Russia may find itself reducing oil production by as much as 1 million barrels per day, but he stressed that such a cut would not be made in coordination with OPEC. Instead, he said, low prices may simply make some Russian oil projects temporarily unprofitable.
Oil output in Russia averaged 10.6 million barrels per day in 2014 – a post-Soviet high – but the drop in prices and the Western sanctions have threatened this important source of government income.
“If the oil [price] stays at $50 for a long time, of course some projects will become less attractive and a small output decline may start. But we will not cut production on purpose,” Dvorkovich told Reuters on the sidelines of the forum. “We could lose at maximum a 10th of output but more likely 300,000 to 400,000 [barrels per day]. There are no grounds for a bigger decline.”
In fact, Dvorkovich confidently told Reuters that Russia could balance its budget regardless of the price of oil, which he said will probably remain low for a long time.
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Russia seeks further SCO expansion
But then again, it may not, hedge accordingly bitches!
Print money to fund economic activity, keep the oil to yourselves. Fund production and R&D to replace all imports. Become self sufficient. Become strong. Fund your own future through money printing. Make the Ruble non-convertable.
.
Russia seeks oil price expansion...
putin back of now?? haha
full power ahade, this ecb qe is in for clo market. someone shit in bed at night
just look how putin ease oil price dive with collapcing ruble. and oil sector get payment in usd. and usd go stronger and rubel lower much lower
did you read about putin big dick swing
here it is deal with cbr and rosneft
http://time.com/3634708/ruble-collapse/
OT, sot of:
Game changer: Russia prepares to develop Gaza gasWith everything that’s happening in the world today, from Iraq to Syria to Ukraine, Saudi Arabia and Iran, this has to be the most exciting and volatile period in the history of mankind.
The timeline of when gas was discovered and everything that happened in between is very interesting and well worth examining. But suffice it to say that the amount of gas in question is substantial and will no doubt cause Israel and the US much consternation. ......
http://shareverything.com/2015/01/23/game-changer-russia-prepares-to-dev...
Putin lost his queen. Back to playing checkers. My guess though is that they will actually increase production in order to try to maintain their income. Let's see.
He has not. He has merely realised that his big cup sized bra that he uses for underwear isn't big enough to carry his balls anylonger so he's gone to purchase a wheelbarrow.
Checkers? Nah...
"If your opponent has an exposed king it is frequently worth sacrificing a pawn to be able to bring your rooks into the game, especially if your opponent's rooks are languishing in the corner. Kasparov has made a career out of such sacrifices." - Neil McDonald
To reference "No More Banksters" link--
“Admission of new members to the Shanghai Cooperation Organization (SCO) has been high on the agenda of its upcoming summit, Russian Foreign Minister Sergei Lavrov said Wednesday.'The SCO enlargement would be the main item on the agenda of the organization's summit in the Russian city of Ufa in summer,' the minister told a news conference.” “'Iran has applied for admission to the SCO. This is realistic enough,' he said, adding that Iran may become a member if progress would be made in solving the Iranian nuclear issue, as the SCO membership criteria include the absence of any UN sanctions on a candidate state.The Ufa summit will prioritize the applications of India and Pakistan for full-fledged membership in the SCO, Lavrov noted, saying there is rather broad consensus on the two countries' membership.” “China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan are full members of the SCO. Afghanistan, India, Iran, Mongolia and Pakistan participate as observers while Belarus, Turkey and Sri Lanka are dialogue partners of the bloc.” Exactly who is playing checkers?You must be thinking US announcements if you are expecting the exact opposite of what is announced. Russians don't roll like that.
Not in the slightest. Russians seem to be playing a strategic game and can well-afford to keep oil in the ground, sacrificing but some short-term cash-flow. While they are seemingly telegraphing a very plausible long-term move, it might not be too surprising for them to take a sudden advantage of this "watch-the-birdie" moment.
Russia has caught USA with pants down repeatedly over the past few years (Syria, Iran, etc.). Not pandering to the dictates of an election-cycle, it seems that Russia (and China) are well- contented to playing the long-game.
I don't think for a second that a resurgent Russia can best serve my interests (though mostly because of restrictions created by my homeland's government), but I do admire her play and hold her in due respect-- it seems foolish not to.
Even the bears are dancing and celebrating in Russia....
Bear Caught on Camera 'Dancing' in Russia's Far East (Video)
Though I disagree that Russia will cut production because this just came on WSJ. Even if they have to cut a bit, it will be ok, but it will all be at the cost of EU and the worsening disaster in Ukraine and the further flaming of a cold war which, except for the US and NATO rekindling it, would never have had been reignited after a gap of 25 years.
Russia, OPEC Jostle to Meet China Oil Demand
"But Chinese customs data released Friday show that China’s crude imports from some big OPEC nations have plummeted, while imports from Russia surged 36% in 2014. "
"And the rise in Chinese imports of Russian crude will continue. The flow of Russian crude to China will surpass 50 million tons annually by 2020, from more than 30 million tons in 2014, forecasts Wood Mackenzie’s Mr. Gupta."
In fact, Dvorkovich said, Russia may find itself reducing oil production by as much as 1 million barrels per day, but he stressed that such a cut would not be made in coordination with OPEC.
“If the oil [price] stays at $50 for a long time, of course some projects will become less attractive and a small output decline may start. But we will not cut production on purpose,” Dvorkovich told Reuters on the sidelines of the forum.
That's some double plus good doublespeak there
$50 oil based on inflation is the historical norm, $100 oil is the aboration
One word: Peak Oil.
It's "aberration".
sorry got it confused with 'adoration'
"To keep from spending more money than it has, Russia plans to “reduce the budget by maybe 10 to 15 percent,” Dvorkovich said."
WTF is that? Who in government talks like this? Get that fucker a nail gun pronto. Holy Shit!
They must mean 10-15% reductions in the expected rate of increase. Actual cuts would be.... well, it's sheer insanity, as all sane people know.
I know unreal right? :). Actual evidence of fiscal responsibility is just complete madness in this upside down world.
It's a long term strategy, certainly more than 2years down the line and it is what you would expect a sane person with precious natural resources would do in a market that is glutted with cheap yet precious natural resources: Hold on to them until you can sell at a better price, reduce production to avoid adding to the glut. Down side is cash flow, but the Russians may not have long to wait.
Reducing oil production? Looks like saudis know what language they understand.
$40 oil does all kinds of interesting things. Iran and Russia will be forced into a corner. Saudis will have trouble meeting their generous welfare costs. If oil continues in it's slump, I expect one or more nations will do something drastic to push the price back up. I don't think $200 oil is out of the question if a broad mid east war erupts.
Yup. Buy on dips because this wont last long.
Lets see what kind of price pop they get...
How Low Oil Prices Are Turning U.S. Into Another Russia
Russia may also be forced into an all out war:
http://russia-insider.com/en/2015/01/23/2700
When that happens, The Brotherhood ought to pay a visit to the Kagans, and the Nulands, and the Kristols, and Perles and Feiths and Cheneys and Woolseys and NYT editorial board, and the rest of the Globalist, neocon, Ziopaths who view unending war as a foreign policy.
http://russia-insider.com/en/2014/12/18/2020
The US can not win a land war in western Russia. It is already absurd that the US, which goes around invading and causing coups at will, is sanctioning Russia for not allowing the putsch puppet regime in Kiev to take over Crimea and eject its Black Sea Fleet, or over Russian willingness to provide some means of defense to the Eastern Ukes whose President, democratically elected, was deposed by a coalition of street nazis and Zionist Jews.
More absurd, is that otherwise intelligent people KEEP buying into this Russia is the aggressor bullshit - that's the power of having a mass media firmly in the hands of .gov and Zionists.
Robert Parry does some fine work providing an alternative perspective. You need people like him, added to RT's lies, to get CNN and Fox lies in proper perspective.
Pay particular attention to the last few sentences in the article :
Clearly the oil prices plus sanctions are having a troubling effect.
This script (sanctions, etc) was successfully used against Japan 70+ years ago to force Japanese to make the first move towards hot war. They did not have nukes though...
Can we call 15-17% inflation "hyperinflation?"
No, It's just high levels of negative deflation.
No
is that serious question?
In fact, Dvorkovich said, Russia may find itself reducing oil production by as much as 1 million barrels per day, but he stressed that such a cut would not be made in coordination with OPEC. Instead, he said, low prices may simply make some Russian oil projects temporarily unprofitable.
And that my friends was Washington's London's and Tel Aviv's plan all along...
Wouldn't it be a real "game changer" if Saudi Arabia decided to part present company and started making trade deals outside the reservation now that "The King" is dead?!!!!...
Putin knows the Russians and the Russian economy can wait-out U.S. shale and the house-of-cards U.S. financial system all during this mounting crisis.....
Once it's over, and U.S. shale is nothing but a burned-out crater, and the U.S. financial system has crashed again a la 2008 but much worse, Russia will benefit tremendously on the recovery side of things.
"."
LOL
http://asiatikistic.blogspot.com/2015/01/the-now-descredited-western-mai...
Putin's been played like a fiddle on oil prices. But it's not all his fault. Circumstances demand he can't just cut off the gas to Western Europe and tell them to go screw themselves. RUSSIA DESPERATELY NEEDS THE INCOME FROM THOSE GAS SALES. And he can't cut oil production either if that production is even marginally profitable. But if, and I repeat IF, the Russians would actually be willing to cut their budget by 10% to 15% it would show me and a whole of lot other people that the Russians are ten times more resilient than Americans will ever be. If the U.S. cut its spending by that amount I would want to be long fire hoses, plate glass windows and body bags.
I dunno that he was played like a fiddle. Maybe.
But I think what it really is is that such absurd, arrogant tactics by the US and its duckling states were forseeable - but Crimea, and not allowing the ethnic Russians in E. Ukraine to be slaughtered by a coalition of ultra nationalist / fascist Ukrainians, and Jewish oligarchs is of more value.
Besides, the short term sets up the longer term in a better way. Naturally, a huge part of this equation is China, and they certainly have their own problems, but I'm pretty sure "The Grand Chessboard" is available in Mandarin.
You make an excellent argument in favor of Putin's policies and you might be right. I still think he sits by himself at times late at night and keeps going over and over in his mind "I can't really trust the Chinese with Russia's future......there's GOT to be a way I can make nice with Western Europe and not have to sell out to the Yellow Peril. And when Obama's gone I'll have a chance to reset with the U.S. irregardless of who is the new President. Gotta keep this thing afloat for just a couple of more years and there will be opportunities to settle things down. And those fucking Chinese......I'll keep an eye on them." Putin's a smart guy. Obama's a dumb ass. Xi is a crafty bastard. And Western Europe is desperate to survive its out-of-control social spending and immigration problems. I think we all agree on one thing: nobody in their right mind wants to see things end up in a major war.
you think?
For almost a year now, we've seen the leaders of Western Europe, like gauleiters following Hitler down the center aisle at Nuremberg, hanging on the lips of the Great Negrocity.
While China has signed deals and proposed yet others worth a trillion USD.
And you have Putin up late, mulling and fretting about who his friends are.
That my friend is fuzzy logic. Thankfully, there's a pill for that.
Wonder why this discussion in Davos on what would happen if Russia weredenied SWIFT would have bad ramifications for U.S. Russia relations leading to war?...
Who cares about SWIFT when 25,000 to 30,000 ethnic Russian and Ukrainians have been slaughtered over the past 11 months in an instrumented coup by the Western banks that have made it far worse through the use of sanction freezing billions of Russian funds abroad already?!!!
Russia and China already got there own payment system underway???...
This guy Kostin is an IMF/EU plant!
Articles written with the words 'may', 'could', possibly' and the like are propaganda
ExxonMobil Joint Venture With Russia’s Rosneft Begins Production Offshore Russia
Greece’s Aegean Marine Petroleum Starting Operations in Russia
Texas-based Schlumberger Buys 45% Stake In Russian Oil Driller
U.K. Partnered With Russia in Over $1.4 Billion in Energy Deals Since 2010 – Report
Rosneft Buys 49% Stake in Petrocas Energy For Georgian Access
India Increases Oil Ties With Russia’s Rosneft
Russia Oil Output Hits Post-Soviet High
Italy’s Finmeccanica Enters Partnership With Russia’s Rosneft For Helicopters
Poland Now To Build Helicopters With Russia
British Petroleum To Be 20% Owner Of Russia’s Taas-Yuriakh Neftegazodobycha
Russia could be in motion to actually cut its OWN oil production depriving Europe. But then, permit a small leakage to flow to Europe - - keeping Europe as a 'friend', but forcing its enemies to pay a much higher price.
Just a placeholder post for you Russkys.
There once was a country named Russia
Which was both a ha-ha and a guffaw
Try as they might
To reach for the heights
The last millennium was their final hurrah
Like I said, a placeholder, not a post to waste time on.
Just came by to tell you Russkys that Russia remains the most barbaric nation-state of the 21st century, a condition of which, I know, you are immensely proud.
Not only have you no shame, you have no talent either.
Good one, bid. btw, I liked "Not only have you no shame, you have no talent either". Will that be the title of your autobiography, the title being, naturally, what your father kept telling you.
Of all forms of poetry, the limerick requires exact rhyming.
Who, but a cro-magnon poet like yourself, would rhyme Russia with guffaw?
Bid, you get the last word.