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Moscow is struggling with the oil price and the ruble crisis

2020-03-10T15:07:31.036Z


The price war for oil with Saudi Arabia plunges Russia even further into the economic crisis. The ruble is rolling towards the abyss with the plummeted oil price. Shares in the commodity superpower are losing massively. And how does the country's leadership react?


The price war for oil with Saudi Arabia plunges Russia even further into the economic crisis. The ruble is rolling towards the abyss with the plummeted oil price. Shares in the commodity superpower are losing massively. And how does the country's leadership react?

Moscow (AP) - After the oil price crash and a massive depreciation of the ruble, Russia is ready for new negotiations with Saudi Arabia on production volumes.

A compromise in reducing oil production is not out of the question, said Kremlin spokesman Dmitri Peskow on Tuesday. A price war had started on the oil market at the beginning of the week.

The background is that last week Russia and Saudi Arabia were unable to agree on extending the previous agreement on reduced production volumes. The economic crisis worsened in Russia.

The budget of the commodity superpower is largely dependent on the dollar revenue for oil sales. It is calculated on the basis of $ 42.4 per barrel of oil. The budget would not be covered with the current oil price. The country must go to its reserves to meet social obligations. All plans and national projects should be fulfilled. This was assured by the government at a meeting in a hurry on Monday when it was a public holiday in Russia.

The Treasury Department in Moscow tried to appease the people who felt reminded of past crises: the reserves were sufficient for six to ten years, even if the oil price was only $ 25 to $ 30. The government emphasized that Russia is well prepared for a price war with Saudi Arabia and that its funding costs are internationally competitive. Nevertheless, the country signaled willingness to negotiate.

"The doors are not closed," said Energy Minister Alexander Nowak in an interview with the Russian state television Rossija 24. Russia was ready to continue its cooperation with the Opec oil cartel and the producing countries united in Opec +. Nowak assumed that it could take months for the oil price to recover. Russia is able to quickly reduce or increase production volumes.

In Russia, the oil price crash caused turbulence. The ruble lost massive amounts against the US dollar and the euro. In January there were 68 rubles for one euro at the exchange offices, more than 80 on Tuesday. The central bank in Russia announced measures to stabilize the currency.

In addition to foregoing dollar and euro purchases, the giant empire also wanted to launch $ 5 billion to strengthen the ruble. The high exchange rates generally lead to massively rising prices for the population - for example for imported goods and goods bought for foreign exchange.

The international stock market crash on Tuesday arrived late on Tuesday due to a non-trading holiday on Monday. At the start, the leading index RTSI lost 9.5 percent and slid more than 16 percent at the top. While the Western European stock exchanges were on a recovery course, the pressure in Moscow also eased with noticeable fluctuations. At times the minus was only 6 percent, but recently again 9 percent. The RTSI was 1146.85 points. He previously had a low of 1,100 points since early 2019.

Amongst the individual values, massive losses in oil and gas values ​​made up for the negative market direction: The papers of the oil company Rosneft dropped by 13.6 percent, those of Lukoil by 12.6 percent. Gazprom reduced their temporary double-digit losses to 3.6 percent recently.

While the government emphasized that it was prepared for the price shock, Russian media criticized "chaos" in Russia. Nobody had prepared people for it, wrote the newspaper "Kommersant". The country's economy has been in crisis for years due to far-reaching sanctions by the EU and the USA against Russia in the wake of the Ukraine conflict. People complain about lower incomes and massive price increases for food, for example.

The situation had recently worsened due to the corona virus. At a parliamentary debate in Moscow, Kremlin chief Vladimir Putin said that a strong president was needed in the country in times of crisis and in the face of external threats. For the first time, he indirectly expressed his willingness to remain in office beyond 2024 by means of a constitutional amendment.

Source: merkur

All news articles on 2020-03-10

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