Friday, December 19, 2008

More Nasty News For Russia

Russia would come under crippling financial pressure and may need to raise money externally if oil languishes at an average of $30 a barrel over the next two years, the World Bank predicted Friday.

The bleak scenario would mark a rapid unraveling of Russia's oil-fueled economic gains over the past eight years, during which time the government has paid down most of its foreign debt and built up a vast stockpile of international reserves.

"If oil prices in 2009 and 2010 average $30 a barrel, that would be a nightmare scenario for a global economy," Zeljko Bogetic, the World Bank's chief economist in Russia told investors on Friday. "The pressures on the current account and public finances in Russia would quickly rise to a point where the financing constraint would become so sharp that it's possible even to envisage Russia's return from a creditor to international organizations to a borrower."

At $50 a barrel, Russia could drain much of its reserve funds and run budgetary deficits, but would not face a "meltdown" scenario, Bogetic said.

Drop 1991 and 1998 into a blender and...

Actually, I've been told $35 is probably the bottom of the barrel for oil prices, but we'll see. I'm not an expert there. Or most places. I am just able to do most things a little better than average.

Edward Hugh has more on Russia's economic status.

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