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EghtesadOnline: President Vladimir Putin’s government is rewriting its budget to prepare for oil prices at $20 a barrel this year despite US-led efforts to get major producers to rein in production.

To cope with lower budget revenues, Russia will ramp up borrowing by about 1 trillion-1.5 trillion rubles ($13 billion-19 billion) this year, according to people familiar with discussions who asked not to be named because talks are ongoing, Bloomberg reported.

The finance ministry estimates the budget shortfall will total 3 trillion-4 trillion rubles ($39 billion-52 billion) this year, the people said, according to Financial Tribune.

Putin has been keen to show that the economy of the world’s biggest energy exporter can cope with the 50% plunge in oil prices this year even as other oil producers struggle. 

President Donald Trump called for a coordinated production cut late Friday, prompting attempts by the OPEC+ coalition to pull together a meeting of its members.

The budget proposals were likely in the works long before Trump’s latest push as Russia’s policymakers adapt to the new conditions. A nationwide shutdown starting this week is adding an extra strain on the economy, prompting calls for increased spending.

“If the forecasts of a 15-20 million barrel reduction in demand turn out to be right, then no production cut will help raise oil prices,” said Kirill Tremasov, head of research at Loko-Invest in Moscow and a former economy ministry official. 

“The Russian government is doing the right thing, preparing for difficult times and a low oil prices. There are no other options,”

The finance ministry did not respond to a request for comment.

 

Budget oil Putin oil prices Vladimir Putin government Rewrite