Igor Sechin, chief executive of Russia's biggest oil company, state-owned Rosneft, said something surprising after a meeting this week in which officials from oil-producing countries failed to agree on the need to cut output. Russia will be fine, he said, even if the oil price falls to $60 or less per barrel. How can that be, if, according to a recent Deutsche Bank estimate, Russia needs a price of about $100 a barrel to balance its budget this year?
The answer works for Russia as well as for a few members of OPEC: Budgets are balanced in national currencies, not in dollars, and any country that has the political leeway to devalue its currency as the oil price falls is not particularly motivated to cut production. Russian President Vladimir Putin explained that much in a recent, unusually frank interview with the official TASS news agency: "Look, before we sold $1 worth of goods and got 32 rubles for it. Now we get 45 rubles for the same $1 worth of goods. Budget revenues have increased, not fallen."