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Russia Counts on Oil Rates Rising for a Better Economy in 2017 | ASHARQ AL-AWSAT English Archive 2005 -2017
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A worker at an oil field owned by Bashneft, Bashkortostan, Russia, January 28, 2015. REUTERS/Sergei Karpukhin/File Photo

Moscow- Russia has relentlessly been seeking ways to counter the economic drawback caused by sanctions imposed by the West as a result of Crimea’s annexation, and a vicious standoff with Ukraine.

Russia’s economy, highly dependent on the oil market suffered as the barrel of oil plunged to all-time-lows over the past period, recording rates as low as $ 27 last January, tightening its grip on Russia’s 2016 budget.

Arguably, balancing the budget for 2016 formed a tough challenge for Russia ever since December 14, 2015. In that day, Brent crude drastically plummeted in global markets registering $ 37.62 a barrel, the lowest on record since 2008.

Consecutively, on that day the Russian Ruble exchange rate collapsed to 70.88 rubles for a dollar, and 77.84 rubles per euro.

Genuinely the Russian government plans the country’s budget for three years ahead of time, but under harsh conditions, the catastrophic decline of oil prices, added to the tightening Western sanctions on Russia, the government was forced to set a one year budget for 2016.

Russian oil production in December stood unchanged at 11.21 million barrels per day (bpd), flat month on month and at its highest in almost 30 years, energy ministry data showed on Monday.

Russia is preparing to cut output by 300,000 bpd during the first half of 2017 as a part of a global pact with OPEC aimed at rebalancing the market.

Oil prices ended at $56.82 last year, more doubling from lows hit early last year.

In tons, production rose to 47.402 million in December from 45.884 million in November.

Given so, the government’s 2016 budget banked on Urals oil projections being at $ 50 a barrel, and the average exchange rate stable at 63.3 rubles for the dollar. Gross domestic production was set to grow by 0.7 percent, and inflation limited to 6.4 percent.

National budget income was estimated at 13.7 trillion rubles, while expenditures are estimated at 16 trillion, with a 3 percent of GDP deficit of 2.3 trillion rubles to be covered by reserve fund savings.

What is interesting is that military, defense and security spending secured a dashing 19.6 percent of total budget spending, over some 3 trillion rubles.

Data the budget was reliant on soon altered as oil dropped significantly, especially that oil and gas revenues constitutes the main source of income for the nation.

For 2016 particularly, it was predicted that the tax and fees on oil production would provide the budget with over 3.6 trillion rubles, as well as another 2.4 trillion in oil and gas exports fees. However, the outlook for both income and spending did not materialize, forcing the Russian government within less than a month to consider budget amendments.