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[Mictlantecuhtli]

Oil going to these lows is just more fuel on the fire that was already burning in Russia's administration. The panic is about to really set in. Hopefully most aware Russians already exchanged their Rubles for USD. There's no need for people's pensions to get wiped out by a negligent government.

It's exacerbating the situation, definitely. The refinancing of Rosneft and others is coming, too. All denominated in USD.

[mainiac]

How do you think, how much different situation would be if oil price stayed around $100 per barrel?
I suspect that capital flight and no access to new Western loans is more damaging for Russia than current oil prices, am I right?

That's not a question I would want to answer without two weeks or research or five minutes of access to the right database.

[Sergarr]

Panic? About recession? Are you joking?

The panic would set in if there's no food on the shelfs or if there's a serious risk of default or devaluation.

Anything less is just a normal day in Russia.

[Ukrainian Ranger]

General public can be as calm as it wants. But if stock market\Forex players will panic, then results can be far from pleasant.

[Sheb]

It should be noted that while dollar oil prices are plunging, the fall in the rubles, means that rubles oil prices are more or less constant. Doesn't help to pay for imports, but it still helps the state balance its budget. Russia also still has a small current-account surplus, in part due to the reduced imports of food.

[Mictlantecuhtli]

It should be noted that while dollar oil prices are plunging, the fall in the rubles, means that rubles oil prices are more or less constant. Doesn't help to pay for imports, but it still helps the state balance its budget. Russia also still has a small current-account surplus, in part due to the reduced imports of food.

Russia's budget assumes 110$/barrel in their own revenue projections. It's right in their own numbers.

On the other hand...
Crude Oil (WTI)   USD/bbl. 66.46 -7.23 -9.81% Jan 15
Crude Oil (Brent)   USD/bbl. 70.58 -2.00 -2.76% Jan 15
RUB-USD 0.0200 Price of 1 RUB in USD -0.0006 -2.72%

http://www.fxstreet.com/analysis/indices-insider/2014/11/28/05/   

[Sheb]

Yeah, that's what they assume, doesn't need they can't survive without it. Especially if they take other measures (like import bans) to keep a supply of foreign currencies.

[Mictlantecuhtli]

If you tailor your spending to a number that was inflated, it is a pretty big deal when ~20% of your projected future budget has disappeared in a few months with no real chance of it coming back. They've also already done that. It stemmed the selloff a bit. It continues.

[Sheb]

Well, except most of the government's spending is in rubles, and the ruble-denominated oil price hasn't changed much. If you want to look at it this way, the revenue have fallen, but the expenses have fallen too.

[Sergarr]

Oil exports do not constitute 100% of out budget, though. About 30% IIRC.

Also correlation does not imply causation, as demonstrated here.

[Helgoland]

Sheb, are you committing the Money is Wealth fallacy?

[Mictlantecuhtli]

Oil exports do not constitute 100% of out budget, though. About 30% IIRC.

Also correlation does not imply causation, as demonstrated here.

It's actually 50%.

Ruble currently partying like its 0.019987650.

[Sheb]

No, but I'm just pointing out that it doesn't really make sense to look at dollar oil revenues if most of the Russian's government expenses are in rubles/ that the falling rubles means the Russian government's expenses are also shrinking, meaning the loss of revenue from falling oil prices aren't too bad (It's two ways to look at the same phenomena actually.)

Sure, parts of the expenses (including a fair deal of debt servicing, especially private debts) is in dollars or other foreign currencies, so it's still not good news, but the currents sanctions on their own surely aren't enough to crash the Russian economy (it's been slowing down for purely internal reasons for a while though).

[Helgoland]

Let's take pensions as an example: Sure, with a falling rouble the government's spending on pensions will go down - but very soon they'll have to raise the nominal pensions so that the current real pensions are not too far below the old ones. The savings from devaluation are very much temporary.

[ragnar119]

The main problem will be how long will the oil prices be low. Russian does have a back up reserve for things like this (they made budget for 95$), but will they last long enough we will see.

But all this doesnt matter, the most important thing is will the standard of normal people drop because of it. The problems will start middle/end of next year.

The thing I do not like, is I see a lot of countries starting to buy gold, or moving the gold from other countries (like from USA that was the case with germany and few other EU countries). But this is more for EU thread than here.