Falling oil prices and financial sanctions imposed by Western powers over the Ukraine invasion are going to cost the Russian economy between around $130-140 billion a year—as much as 7 percent of its economy, Finance Minister Anton Siluanov said on Monday, according to World Bulletin.
The sanctions part of Siluanov’s comments are only the latest in a string of alerms by a Russian politicians about the enormous cost to the economy as a result of the sanctions, which severely limit the borrowing powers of major Russian companies. But Siluanov believes the drop in oil prices is a much bigger worry.
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“We’re losing around $40 billion a year because of geopolitical sanctions, and about $90 billion to $100 billion from oil prices falling by 30 percent, ” Siluanov told a news conference.
“The main issue that affects the budget and economy and financial system, this is the price of oil and the fall in monetary flows from the sale of energy resources.”
According to official forecasts, Russia’s gross domestic product will be between $1.9-2.0 trillion this year.
Siluanov’s estimate is based on the economists’ general agreement that every $1 fall in the price of oil is expressed in $3 billion off export earnings. Oil prices have dropped from just under $115 a barrel in June to $80.
Oil and gas account for two-thirds of Russia’s exports.
Natalia Orlova, chief economist at Alfa Bank, sounded a more optimistic note, saying the weak ruble, resulting from the fall in oil prices, should help compensate for the losses by boosting exports and limiting imports.
The ruble has lost 25 percent of its value against the dollar since June.
