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Russia economic crisis

Issued at 2015-02-20



Russia is facing serious economic problems due to the fall in hydrocarbon prices as gas and oil profits represent over 50% of its anual budget. Falling oil revenue and trade sanctions have weakened the country’s currency, the Ruble, and reduced business activity. NATO countries placed trade sanctions on Russia as a result of its support of pro-Russian separatists in eastern Ukraine.

Problems continue to mount for the world’s largest exporter of energy. Russia does not want to use the natural gas pipeline that runs through Ukraine to supply Europe because Ukraine owes US$30- 40B for past shipments. An attempt to put a pipeline to Turkey and avoid Ukraine has been abandoned because the countries involved could not reach an agreement. In addition, a pipeline to supply oil and gas to China has been taken off the table because terms could not be agreed. Russia wanted a take-or-pay agreement whilst China wanted long-term pricing and freedom to buy elsewhere.

The projects are also up in the air because there are insufficient funds to finance them. Some experts believe that Russia may well swap oil for dropping the sanctions. Russia’s currency crisis, however, currently makes Russian SiC one of the least expensive sources in the world. A point of reflection on oil: 75years ago, in the summer of 1940, the US embargoed shipments of oil to Japan. Japan was heavily dependent on US oil and the embargo played a significant role in Japan’s decision to attack the US and invade oil producing islands in the south east Pacific. Do not discount the seriousness of the Russian/Ukraine European oil situation.


Source: SiC&More



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