Russia said it could withstand low oil prices for as long as a decade, setting the stage for a prolonged battle with Saudi Arabia after talks over further production cuts collapsed, leading to the biggest one-day fall in prices since the 1991 Gulf war. Russia’s finance ministry said on Monday that it would draw from its $15obn national wealth fund in order to boost budgetary spending, while oil prices remained at between $25 and $30 a barrel. It said it could maintain that level of budgetary support and cover the lost revenue for the next six to 10 years.
The sudden collapse in oil prices – which fell by as much as 30 per cent on Sunday after Riyadh retaliated against Russia with threats to discount its crude and boost output – pushed the Russian currency to its lowest against the dollar since January 2016. But Russia’s finance ministry appears convinced that it is better positioned than Saudi Arabia to survive the impact of the crude price drop on state revenue. “For now they are counting on this being a temporary scenario. But saying this shows they are ready for anything,” said Sofya Donets, chief Russia economist at Renaissance Capital.
Alexander Novak, Russia’s energy minister, told an emergency meeting of Russia’s top economic officials on Monday that the country’s oil sector had the resources and financial reserves “to remain competitive at any predicted price range and keep its market share”. He added that Moscow would “pay special attention to providing the domestic market with a stable supply of oil products and protecting the sector’s investment potential”.
Russian president Vladimir Putin, who met his top economic officials and oil executives ahead of last week’s meeting with Opec, was convinced to break the deal by Russia’s oil companies, who have opposed the production cuts since they were first agreed in 2016, according to people familiar with the talks.