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Tuesday, 28 September 06:10 (GMT -05:00)

Stock and commodities markets

Russia Is Still Dependent On Crude Oil

Is the Russian economy getting rid of its dependency on crude oil? Even though Russian politicians say that’s really the case, famous Russian economist Igor Nikolaev tried to find out the truth backed by figures.


In his blog, the economist wrote that there are only few factors testifying in favor of quitting the commodity-based economic model. One of the key ones of them is the share of oil products in Russia’s export. According to Rosstat, this was 61,6% as of the first 8 months of the year.

For the sake of comparison, this is much less than the 2013 record of 67,6% but more than over the last 2 years – 58,8% and 53,5% in 2015 and 2016 respectively. On top of that, the current figures are not that different from the average figures taken for the period of 2003 – 2015, which 62,2%.


Those figures show that there’s been no actual progress so far. This means that the Russian economy is still heavily dependent on the export of crude oil and oil products.


The share of refined products like LNG and oil products in Russia’s export has increased over the last few years. However, this hasn’t had much impact on the bigger picture – the Russian economy still relies on the export of crude oil and natural gas.


Also, it's necessary to keep in mind some other factors. For example, the share of oil-and-gas investments in the federal budget income plunged below 40% in 2016. In 2015, this was 51,3%. Any progress? The whole point is that global oil prices used to be relatively low. The same thing happened in 2009. Back then, the share also plunged below 40% but when the oil market recovered, the share recovered with it. That’s why it’s safe to say that after the current oil price rally above $60/b the share of income from the export of crude oil in the federal budget will grow this year.


At the same time, this means that it’s only thanks to higher oil prices and bigger oil export profits that Russia will manage to keep its federal budget deficit as little as slightly over 2% GDP.


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