Russia: Oil Prices Sink to <$90 Per Barrel

An already shaky Russian economy has been made worse by plummeting oil prices that could cause the Russian economy to recess by 1.2%. Sberbank CIB, Russia’s most important lender, estimates that if the price of crude remains around $90 per barrel that it will shrink, and additional estimates show that if the price of crude drops below $90 and touches $80 per barrel that the economy will further recess. The price of Russian crude is not related to the production thereof. Indeed, Russian oil production has almost never been higher, though the demand for Russian crude following sanctions has dropped rapidly, generating ripples across Central Asia.

The Kremlin is almost certainly sensitive to the impact dropping oil prices will have on the Russian economy, as it currently derives more than 50% of total government revenues from the sector, though sanctions are expected to be more damaging over the long term. Talks to remove sanctions have yet even to be discussed among European and American leaders,  though it is unlikely that such a move will be made in the near or medium term, especially on the American side, where lawmakers will be obliged to risk political damage by formally requesting to repeal the sanctions.

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