President Vladimir Putin has said that Russian companies and the government should take a cautious approach when deciding how to spend windfall gains from higher oil prices resulting from the war in the Middle East.
The spike in oil prices has made Russia a major beneficiary of the war that the United States and Israel launched against Iran on February 28.
"Now that the prices of our traditional exports are rising, but the markets are in turmoil, there may be a temptation to take advantage of the situation," Putin told business leaders in Moscow.
He said this temptation could involve squandering the extra revenue, paying it out in company dividends or, in the state’s case, expanding budget spending.
"We must remain prudent. If the markets swing one way today, they could swing the other tomorrow," he added.
"A moderate degree of conservatism and a moderately conservative approach are needed, both in the corporate sector and in public finances," he said.
Russia’s earnings surge
Russia is earning about $760 million a day from oil exports as the war in Iran drives up global crude prices and boosts demand for Russian barrels, The Telegraph reported, citing data from the Kiev School of Economics (KSE) Institute.
The institute said Russia’s oil and gas sales are expected to nearly double this month, rising from about $12 billion to almost $24 billion, as Moscow benefits from higher prices and temporary US sanctions waivers.
Even if the conflict ends in the coming weeks, Russia’s annual oil and gas export revenues are projected to reach $218.5 billion this year, up 63 percent from a scenario in which Middle East energy supplies remain undisrupted, KSE said. That would amount to an additional $84 billion in windfall revenue.
If the conflict continues for another six months, annual revenues could climb to $386.5 billion, nearly 188% above pre-crisis estimates, according to the same projections.
At a Kremlin meeting on economic issues on Monday, Putin said oil and gas companies should use the additional revenue from higher hydrocarbon prices to reduce their debt to domestic banks.
“Russian oil and gas companies should consider using additional revenue from rising global hydrocarbon prices to reduce their debt burden and pay off their debt to domestic banks. This would be a mature decision,” Putin said.
The report said Russia has also benefited from temporary US sanctions waivers covering some oil cargoes already loaded onto tankers, easing transaction risks for buyers.
Analysts said Russian oil had previously been sold at a steep discount because sanctions raised legal, financial and logistical costs. But the waivers have allowed Moscow to market some crude at closer to open-market prices.
