Oil Price Collapse and War: The Kremlin Faces a Tough Choice.


The Kremlin Prepares to Change Budget Rules Due to Falling Oil Prices
The Kremlin is considering changing its key budget mechanism due to declining oil export revenues. According to Bloomberg, the Russian government may lower the budget rule threshold from $60 to $50 per barrel if oil prices remain low. Discussions on the new measures are still in the early stages, but the main obstacle to their implementation is the need to reduce state spending due to the war against Ukraine.
The budget rule has helped Russia shield itself from oil price volatility by ensuring reserves during periods of high prices. However, over the last few years, the National Wealth Fund has significantly dwindled due to expenses related to the war with Ukraine. The global decline in oil prices also complicates the situation for Russia, which needs budget support from reserves.
Russia is forced to adapt to a new reality as the current threshold of $60 per barrel loses its significance. The Ministry of Finance continues to use reserves to support the budget, which quickly depletes them
In this situation, Russia supported the OPEC+ decision to increase oil production in June. Moscow plans to compensate for budget losses by boosting oil production. Trump's trade wars have also impacted the Russian economy, crashing its growth.
Read also
- Russian drone attack on Odesa: a couple killed, 14 injured, including children
- The vehicle will be added to the database: TCC has started working with vehicle owners and may send summons
- The weather will suddenly turn worse on the weekend: The Hydrometeorological Center has issued a warning
- Fuel stations 'forgot' to lower prices: oil is getting cheaper, while Ukrainians overpay for gasoline
- Nova Poshta announces massive layoffs: what is known about the company's plans
- The compensation program is breaking records: agrarians are massively receiving funds for domestic equipment