Will Cheap Oil Choke the Russian Economy?

Among the many threats facing Russia’s economy, cheap oil could be the biggest of all. Crude prices have fallen more than 23 percent since June, depressing the ruble and knocking a potentially gaping hole in the national budget, which draws 45 percent of revenues from oil taxes.

The Kremlin warned today that it will have to dig deeply into reserves if oil prices and the ruble exchange rate remain at current levels. Covering budget shortfalls over the next three years could deplete half of a $74 billion reserve fund the government created to guard against energy price fluctuations, First Deputy Finance Minister Tatyana Nesterenko told the RIA Novosti news agency. Russia’s draft budget for 2015 is based on $100-a-barrel oil, but crude is now trading at about $88, the lowest since December 2010.