Economics

Washington Post: Oil prices collapse will weaken Russia, but not break it up like Soviet Union

3 october 2014 | 17:19

A barrel of crude oil is getting cheaper because of the substantial increase in production in the United States.

 

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The collapse of oil prices will weaken Russia, but it will not collapse like the USSR.
ustoj.com
The crude oil price on the world market continue to fall. This is good for the USA, which became the reason for the reduction in the cost of raw materials, increasing production in Texas and North Dakota. But at the same time, the cost of a barrel of oil has a strong negative impact on the budget of Russia.

This was said today by Stephen Matson on the pages of the Washington Post. The U.S. has almost overtaken Saudi Arabia, producing 8.5 million barrels of oil per day. This is the highest rate since 1986.

"North Dakota is now producing more oil than Libya," the article tells.

And last weekend a tanker of oil went from Alaska to South Korea. This suggests that the ban on the export of raw materials from the USA is in the past. And that is why the price per barrel falls.

This is good for Washington, because the oil exports will provide strong economic growth. However, this is a bad news for countries such as Russia, Iraq and Iran, whose budget and the economy is very dependent on the sale of raw materials.

Sales of crude oil and petroleum products was filled with 46% of the Russian budget for the first 8 months of this year. At the same time when the West is trying to put pressure on Russia penalting for the aggression against Ukraine, the decline in oil prices by 10-20% can greatly affect Moscow," the article says.

However, the history of the 80-ies, when Saudi Arabia collapsed the oil prices in the world and thereby pushed the USSR for disintegration, is unlikely to be repeated.

"This is now not expected, but a price drop would cause difficulties for the Russian authorities," the article tells.

Recall that Western sanctions and the decline in oil prices have cost Russia 4% of GDP.

Source: Washington Post

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