During his annual Direct Line, Russia’s President Vladimir Putin said he sees little probability of coordinated oil price movements in an attempt to influence Russia. He noted that only Saudi Arabia is capable of doing so, but such efforts would backfire.
Putin stressed that the country’s budget is calculated proceeding from the price of 85-90 U.S. dollars per barrel. In case it falls below this level, it may damage the Saudi economy. Meanwhile, for Russia this level is not critical.
The president added that other large market players will not back such a sharp decline. He gave an example of OPEC and the USA where shale oil and gas reserves are actively developed. Putin noted that cheap oil may derail the whole sector due to its high production costs.
Saudi Arabia, like Russia, is one of the leading oil producers in the world. According to estimates, it extracts from 9.5 to 10.5 million barrels daily. It is believed that the Kingdom’s capacities vary from 1.5 to 2 million barrels a day.
Recently, the Western countries have been discussing the opportunity of tighter sanctions against Russia amid Crimea’s issue and political stand-off in the Eastern Ukraine. As of today, the sanctions include visa bans and restrictions on transactions execution for some Russian and Ukrainian senior officials and businessmen. The sanctions were also imposed on the Rossiya Bank whose owners are close friends of Russia’s President, including Yuri Kovalchuk and Gennadi Timchenko.
Some believe that artificial drop in oil prices caused by Saudi Arabia in the middle of 1980s was the reason for deep Soviet system crisis and, as the result, collapse of the Soviet Union. There is another view suggesting that prices fell due to objective reasons.