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Low oil prices collapse Russian econ
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Low oil prices collapse Russian econRussia’s economy would die if oil commodities fell By Peter Cooper is Deputy Online Editor at Emirates Business 24/7 on Friday, July 11, 2008 “Russian economy flourishes like UAE’s”wasn’t that really fast turtle dude that you had to race in Mario 64 named cooper? Oh nvm that was koopa… my bad. http://www.business24-7.ae/Articles/2008/7/Pages/RussianeconomyflourisheslikeUAE%E2%80%99s.aspx DP World’s Limitless subsidiary has also said it will build a new Moscow suburb with a local partner to create homes for 12,000 people, and clearly sees Russia as a prime emerging market for expansion. But an earlier property deal in Russia by Limitless was cancelled without explanation. This does remain an emerging market with higher than average risks as BP has found in managing its difficult relationship with joint venture partners recently. But ultimately Russia may prove the best investment in emerging markets at the present time, ahead of China, India and even Brazil. Commodity prices are sky high and keeping the economy red hot at a time when the European Union looks set to join the UK and US in recession before long. The big question is how long commodity prices can stay up when the consumer economies are heading down? For all its foreign exchange reserves and consumer strength, the Russian economy is quite highly geared to expansion and would take a commodity price fall badly. But OGK-1 could still prove a very good deal for Dubai and another Madame Tussauds rather than a John Laing Homes, although this is likely best seen as a long-term investment in a country that is in the process of achieving a permanent upward shift in its standard of living. High oil prices key to Russian economy By Megan K. Stack and Borzou Daragahi, Los Angeles Times Staff Writers July 17, 2008 “Nations with vast oil wealth gaining clout” http://www.latimes.com/news/printedition/front/la-fg-oil17-2008jul17,0,6710073.story A nine-year run of growing oil revenue has restored Russia to a strength it hasn't experienced since the Soviet heyday. No longer a broken country fumbling for footing, Russia is now a major player on the world stage. Ten years ago, Russia was swamped with debt. Today, it sits on the world's third-largest monetary reserves, topped only by China and Japan. The government has unveiled popular initiatives to boost pensions and improve benefits for veterans. New President Dmitry Medvedev promised to focus on socioeconomic woes that beset ordinary Russians. Low oil prices collapse Russian econOil prices likely to remain high this is key to Russian economy Dr. Vladimir Kvint is president of the International Academy of Emerging Markets 01.08.08, “Russia's Surging Economy” Forbes.com Dr. Vladimir Kvint is a U.S. Fulbright Scholar and the chair of the Department of Financial Strategy at the Moscow School of Economics. How do you stop a baby from falling through a manhole? Put a javelin through its head. http://www.forbes.com/2008/01/08/russia-economy-projections-oped-cx_vkv_0108russia_print.html Which takes us to another key trend of 2007 that is likely to continue in 2008--a steady increase in oil prices, with an impact felt across the Russian economy. Certainly the increased world price of crude brought a steady inflow of foreign currency to Russia, as oil accounts for 34.5% of Russian exports. Natural gas accounts for 12% of Russian exports, although this number is declining slightly. Despite growing prices for natural resources and raw materials, Russia's positive trade balance has shrunk, because imports are increasing faster than exports--which may be a dangerous trend, and likely to continue in this year. It seems that Russia is incapable of substantially increasing the production, and consequently, the volume, of exports of natural resources. The solution to the shortage is the rising price of oil and gas. Russia would defend high oil pricesRussia would defend high oil prices because of their abundant oil supply Dave Ernsberger Asia director of global energy information provider May 30, 2008. “No end in sight for fairy-tale oil rally, says top analyst,” How do you drown a dumb blonde? Answer: scratch and sniff at the bottom of the pool. The Platts Petrochemical Report, Pg. 1 Vol. 27 No. 22 No end seems to be in sight to a rally in crude oil prices that has started to resemble more closely the themes from children's story books than the conventional wisdom of pricing economics that underpinned the market for the past 20 years, a top oil analyst with Purvin & Gertz told Asia's largest petrochemical industry gathering May 27. Speaking in Singapore at the 2008 APIC Marketing Seminar, Purvin & Gertz senior vice-president John Vautrain described the ongoing surge in oil prices as "the first energy crisis of the 21st century." His consultancy is expected to shortly revise its own crude price forecast out to 2012 from an existing $60/barrel or so to closer to $80/b. Fundamentally, supply has been extremely slow to respond to the fact that oil prices have surged five-fold in the past decade to more than $130/b in recent days. "Just like 'Alice Through The Looking Glass,' we have to run as fast as we can just to stay still. Getting ahead is exceptionally difficult, and it seems not to be happening," said Vautrain, referring to the 1871 children's novel by UK author Lewis Carrol, famous for its surreal descriptions of time and space. "Nobody really knows what is going on, to be perfectly honest," said Vautrain, echoing most analysts' comments for 2008 so far. Russia acting like 'de facto member of OPEC' But Vautrain, an analyst with Purvin & Gertz since 1981 and now based in Singapore, pointed the finger squarely at Russia for the most recent bout of fear that supply won't keep up with demand in coming years. "Nowadays, Russia acts like a de facto member of OPEC," said Vautrain, adding that Russia had as much interest in defending high oil prices as the cartel of oil exporting nations that has officially distanced itself from having any policy at all on oil prices -- but which is broadly presumed to be benefiting from, and therefore disinterested working too hard to stop, the current rally. "They're focused more on achieving state control" than raising production, said Vautrain. Russia had been widely expected to increase production more this decade, supporting "non-OPEC" production and export forecasts. "We believe that Russia has a lot more oil, and could produce it," said Vautrain. Low prices means Russia sells arms to terroristsLow prices will result in Russian arms sales to terrorists Michael G Gallagher, PhD degrees in the field of international studies 2007 http://www.atimes.com/atimes/Global_Economy/IH28Dj02.html Russia, without the massive cash flow provided by its oil and natural-gas reserves, would be forced to rely for its continued economic existence on the far skinnier profits generated by other raw-material exports and its none-too-competitive factories. Sliding incomes could drive the Russians to peddle their military hardware at fire-sale prices in trouble spots around the world. Relations depend on oil coopUS-Russian relations depend on oil cooperation By Joe Barnes, Amy Jaffe & Edward L. Morse staff writers for Saudi-US relations information service January 6, 2004 “Special Energy Supplement: The New Geopolitics of Oil” http://www.saudi-us-relations.org/newsletter2004/saudi-relations-interest-01-06.html U.S.-Russian cooperation on energy in general and oil in particular has been high on the agenda of Bush-Putin summits that began in the summer of 2001 and culminated in the creation of a U.S.-Russian Energy Dialogue after the two Presidents met in May 2002. Given Russia's surprising accommodation to America's need for Central Asian bases to serve as a "staging area" for the campaign in Afghanistan, expectations were high that a new "axis of oil" between Moscow and Washington could be formed-with Russia supplementing, if not displacing, Saudi Arabia. Oil key to economyRussia's economy depends on oil By Ed Bentley staff writer for the Moscow News Weekly 06/06/2008 “Russia’s Roaring Economy not out of the Forest” http://mnweekly.rian.ru/business/20080606/55331949.html Russia has been accused of being dependent upon its natural resources for growth. The World Bank and IMF claim that the energy sector makes up approximately twenty percent of GDP. The economy is therefore vulnerable to changes in this sector, although an oil price decrease looks unlikely, and the government has recognized the necessity of diversification. Russian oil is on the brink Platts news service 11 Jul 2008 Severodvinsk, Russia (AFP) “Russian oil sector at 'critical juncture': Putin” http://www.platts.com/Oil/News/8876533.xml?S=printer& "The oil sector has reached a critical juncture," Putin said after visiting the Sevmash shipyard in Severodvinsk where Russia's first Arctic oil rig is under construction. He said tax cuts approved this year had already given oil companies more money to spend on development and added that the government was considering additional tax breaks for companies operating in oil-rich regions of Siberia. The government will also ease bureaucracy for companies opening new oil fields and develop infrstructure in remote areas to encourage investment. "Our energy policy will be clear, transparent, liberal. We do not plan any economic egoism. We will take into account the legitimate interests of our partners but we will also defend our national interests," he added. "We have no doubt that now, in the medium-term and in the long-term, we will completely cover the growing demand of the Russian economy and fulfil our obligations to our foreign partners," he continued. Russia is the world's second largest producer of oil after Saudi Arabia but the country has struggled to boost production to meet growing global demand despite record-high oil prices. Russian oil is particularly susceptible to declining oil prices By Joe Barnes, Amy Jaffe & Edward L. Morse staff writers for Saudi-US relations information service January 6, 2004 “Special Energy Supplement: The New Geopolitics of Oil” http://www.saudi-us-relations.org/newsletter2004/saudi-relations-interest-01-06.html Second, Russian oil is relatively expensive, with much of the planned expansion in production slated for geographically remote and geologically challenging fields. This makes Russia's continued production expansion far more vulnerable to a sharp and sustained decline in oil prices than Persian Gulf production. Saudi Arabian oil, in contrast, is among the cheapest in the world to produce-allowing the Kingdom, at least potentially, to weather price declines with less pain.
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