Russian economy can survive for a long time with oil at $20 per barrel

Despite efforts by Russia to gradually cut its reliance on oil, a lengthy energy market turmoil could be challenging for the country’s economy and could even result in a major economic crisis.

Oil has continued its dramatic fall this week, dropping to more than an 18-year low on Wednesday amid global recession worries and low demand. Both US West Texas Intermediate (WTI) and international benchmark Brent slightly rebounded on Thursday, trading at $22.55 and $27.65 respectively. 

The key issue now is not how low can crude prices plunge, but for how long this situation persists, Aleksandr Bakhtin, investment strategist with Premier BCS said in an interview to RT. 

“If the price of oil rebounds to some adequate levels of around $40-50 [per barrel] in half a year, then we dodge that bullet,” he said. “If it is a prolonged crisis for one year or two with extremely low oil prices, it will be a great challenge for Russia.” 

According to the strategist, extremely low crude prices are $20 dollars per barrel, but even under those circumstances the Russian economy can keep afloat up to one year due to its vast gold and forex reserves as well as the holdings of its national wealth fund. But after that, with reserves exhausted, the country may face a “serious economic crisis.” 

The recent oil price crash pushed the Russian ruble down to nearly a four-year low. While some are already claiming that the ruble will hit 100 against the dollar, this forecast is completely wrong and premature, according to Aleksandr Belchuk, Doctor of Economics, professor at Russian Foreign Trade Academy.

“It is unlikely that our currency [the ruble] will fall further in the immediate future,” he told RT, as he believes that oil prices that have pushed the ruble down cannot stay at such lows for a long time.

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