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Russia resorts to currency manipulation after oil market crash
Russia resorts to currency manipulation after oil market crash

The Russian economy has suffered significant losses due to the price war with Saudi Arabia and a historic plunge in oil prices. Turmoil in the oil market delivered a hard blow to Russia's economy. Notably, it has been in dire straits for a long period and the government simply cannot afford another financial gap. For this reason, Russia’s authorities decided to curb losses with the help of currency manipulations. According to the Ministry of Finance of the Russian Federation, in April, the state budget contracted by 3 billion rubles due to cheap oil.  Economists reckon that in May, the difference between actual and consensus earning may jump to a whopping 190.1 billion rubles. What is more, Russia is losing its share in the oil market as the Saudis have literally flooded the global market with cheap oil, specifically targeting big refiners of Russian oil in Europe and Asia. By such a step, Saudi Arabia managed to squeeze Russia's Urals oil grade out of its main markets. For example, in April, Poland did not buy a single barrel of Russian oil delivered by sea but imported a record 560,000 tons of Arab Light crude. In Russia, almost half the cost of production per barrel is gross tax. However, with oil price less than $44 per barrel, Russia’s revenue from oil sales is likely to shorten significantly. Besides, oil producers are experiencing hard times, and Russia’s economy as a commodity-oriented one has lost its last resource of a stable income. This is why the government decided to take advantage of the weak ruble and sell off part of the foreign exchange reserves to compensate for budget losses. From May 13 through June 4, the Russian Finance Ministry is going to allocate 193.1 billion rubles for the sale of a foreign currency or 11.4 billion rubles a day.


Published: 2020-05-19 10:04:37 UTC
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