S&P warns over oil threat to Russian finances
- 26 March 2012
- From the section Business
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.