Business

S&P warns over oil threat to Russian finances

  • 26 March 2012
  • From the section Business
Oil pipeline, Russia
S&P says a fall in oil prices would damage Russia's finances.

Russia's finances would be severely damaged by a sustained fall in oil prices, according to the credit rating agency, Standard and Poor's.

It estimates that a $10 a barrel fall in the price of oil would reduce government revenue by $26bn (£16bn).

The agency says Russia needs an average price of oil of $120 per barrel to balance its budget this year.

S&P used the price of Urals oil in its calculations, which is currently trading at $125 a barrel.

If the price was to fall to $60 a barrel then S&P says it would have to slash the country's credit rating.

S&P says that oil is likely to remain above $100 per barrel but said there is a chance of a steep decline.

"It is worth noting that only slightly more than two years ago the average oil price was actually $60, and one year later the price averaged slightly below $80," said Standard & Poor's credit analyst Kai Stukenbrock.

The rise in oil prices has allowed the Russian government to expand spending.

During his successful presidential campaign this year, Vladimir Putin promised a six year spending plan that will cost around $170bn.

It is estimated that oil would have to hit around $150 a barrel to support that level of spending.