Russias government is expecting that the iran oil

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Unformatted text preview: 2012, High Oil Prices Bode Well For Russian Government High oil prices mean more cash flowing into the Russian government. The country is dependent on energy exports to keep its budget surplus in tact. Oil futures cracked $100 a barrel this week, before settling at $99.56 for the May contract for WTI crude. Still, prices like that bode well for Russia’s public coffers. International Monetary Fund’s Moscow representative, Odd Per Brekk, said in an interview with Russian newswire Ria Novosti that high oil prices actually opened a “window of opportunity” for the country to take measures to strengthen and protect its economy from the ongoing problems facing Europe, it’s biggest oil and gas customer. To take full advantage of this opportunity, Brekk said, the Russian government must undertake a complete economic transformation – keeping inflation at 3%-5%, cutting budget expenses, improving the financial sector and reducing its dependence on commodities materials. One way to do it is to use their oil wealth as a means to justify reform. Current geopolitical events are supporting high oil prices, mainly problems in Libya and Syria, and a new oil embargo against Iran. Ria Novosti also noted in its report that Iraq was contributing to high oil prices as well. As U.S. troops head home, some oil firms are looking at the security risks there and wondering if it is worth maintaining current projects. Russia’s government is expecting that the Iran oil embargo will contribute to a 10%-15% rise in oil prices , including the possibility of Iran closing the Strait of Hormuz, an important oil route in the Middle East. 146 Oil DDW 2012 1 Oil Key – Russia Budget 147 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Taxes on oil and natural gas provide half of Russia’s government revenue Kramer 3/17/12 Andrew E. Kramer, 2012, Putin’s Big Promises Need Fueling By Higher Oil Prices, _r=1 Most of Mr. Putin’s spending promises came at least partly in response to the street demonstrations by young and middleclass protesters in Moscow and other big cities challenging his authority in the weeks leading up to the March 4 election. His apparent aim was to shore up support from the rest of Russia: poorer and rural parts of the country, and from state workers and the elderly. The repercussions of his campaign promises, and an earlier commitment on military spending, could be felt for years to come, giving price swings in oil a bigger role than ever on the Russian economy. Taxes on oil and natural gas sales provide half of Russia’s government revenue. Each increase in the Russian budget equivalent to 1 percent of the gross domestic product requires a rise in the price of oil of about $10 a barrel on global markets — which is how Citigroup arrived at the $150-a-barrel figur...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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