Fall in Oil Prices Poses a Problem for Russia, Iraq and Others 

From Moscow to Caracas, Riyadh to Baghdad, in Tehran, Algiers, Kuwait City and Lagos, officials are confronting the plunge in prices — roughly 25 percent since a peak in June.

A steep decline in oil prices is straining the budgets of major petroleum-exporting countries around the globe, raising a specter of spending cuts in Russia, where the economy is under pressure from Western sanctions, and posing a potentially grave security challenge for Iraq, which is already struggling to finance its fight against the Islamic State.

At a meeting in Moscow this week with a government human rights council, President Vladimir V. Putin pointedly rebuffed a request for increased financing, citing the pinch from declining oil revenues.

“You know that energy prices have fallen as well as for some of our other traditional products,” Mr. Putin said. “Due to that, would we not, on the contrary, reconsider the budget toward reducing some spending?

In another sign of mounting pressure, a spokesman for the Russian state-controlled oil company, Rosneft, accused Saudi Arabia of secretly manipulating prices.

The price of a barrel of Brent crude, a global benchmark, was $83.78 on Wednesday, down from about $115 per barrel since its high in June.

Experts on energy policy say that prices are nearly certain to rebound in response to normal market forces and continued strong demand, particularly in the developing world.

“It depends how long and how sharp the decline, but if oil prices stay around 20 percent lower, that is going to be very challenging for countries that depend heavily on oil to meet their budget requirements,” said Jason Bordoff, the director of the Center on Global Energy Policy at Columbia University in New York. “Many of these countries have implicitly high break-even numbers.”

“If oil prices were to stay in the range they are in now, we’ll see the Russian budget fall into deficit next year; that’s on top of the economic challenges they are already facing from sanctions and the decline in the value of their currency,” Professor Bordoff said. “Iraq has its own set of challenges with skyrocketing public expenditure requirements, large public payroll, food and energy subsidies. They need to rebuild a dilapidated armed forces.”

The major question now looming is if OPEC, led by Saudi Arabia, will cut production and stabilize prices at a meeting next month.

Source: NYT- Fall in Oil Prices Poses a Problem for Russia, Iraq and Others

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