Russia’s economy has not escaped the fallout from US tariffs on countries around the world despite not being hit directly by Donald Trump’s levies. The country was last week left reeling after the price of a key oil export plunged towards the $50 (£38) mark. Kremlin spokesman Dmitry Peskov told the Interfax news agency the Urals crude oil price was being closely monitored in a situation he described as “extremely turbulent, tense and emotionally overloaded”.
Oil revenues play a major part in Russia’s budget, but prices have fluctuated as trade tensions between the US and China have escalated. Just today, Washington confirmed a 145% tariff on Chinese goods entering the US while Beijing imposed an 84% levy in retaliation. Neither side appears interested in backing down. Those trade moves have heightened concerns about demand for oil from the world’s largest and second largest economies. West Texas Intermediate crude oil slipped towards $61 (£47) per barrel and Brent crude dropped 4.35% to $62.62 (£48.30) earlier today (Thursday, April 10). Russian Urals futures stood at $65.49 (£50.53) as of 4pm, climbing from last Friday’s near $50 low.
Reuters data had shown Russian Urals oil prices for cargoes loading from ports in Primorsk, Ust-Luga and Novorossiisk fell to about $53 per barrel on April 4.
Russian government data cited by Bloomberg shows crude prices are “critical” for the country’s federal budget, with some 30% made up of oil and gas revenues from January to February.
Russia’s Finance Ministry said in March it expected the average oil price this year to be closer to $60 per barrel instead of the $70 the country had budgeted for this year, according to Prime newswire.
In that situation, it forecast Russia’s budget deficit would rise by no more than 1% of Gross Domestic Product, according to Bloomberg.
Peskov said late last week that the oil price fall was driven by the US decision to impose tariffs on most countries.
US President Donald Trump has since rowed back on the threat, announcing a 90-day pause to allow for trade negotiations. Mr Trump did not extend the same opportunity to China.
Despite Western sanctions and a price cap aimed at limiting Russia’s earnings, fossil fuel revenues are still a major source of funding for Russian President Vladimir Putin’s war in Ukraine.
Dr Muhammad Ali Nasir, Associate Professor in Economics at Leeds University Business School, told the Express Mr Trump’s tariffs announcement has had a “significant” negative impact not only on financial markets but also on commodity markets, including the oil market.
He explained: “The oil price fell around 15% in response to the announcement of ‘reciprocal tariffs’ because tariffs will lead to a fall in international trade and global economic activity which can significantly decrease the demand for energy, minerals, metals and other communities.
“The Russian Urals Oil price dropped to almost US$50 per barrel. As a large exporter of energy and commodities, Russia will be adversely affected by this situation and has a squeeze on its exports, and government revenues. The Russian Ruble may also face further depreciation.
“However, I do not see that it will significantly affect the Russian war efforts. The Russian economy is already on a war footing and this additional economic pain may not be ample to affect its geopolitical motives.”
