Russia reels from tumbling oil price

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As Russia seeks spending cuts to prepare for a possible low oil price era, Moscow residents express doubt about the future. Joel Flynn reports.

Russia reels from tumbling oil price

Heavy snow has hit Moscow this week – but it’s the economy here that has Russians shivering.

Government spending cuts are looming as the country reels from an oil price way below what it needs.

At the annual Gaidar Forum in the capital, Russia’s finance minister said citizens needed to prepare themselves.

SOUNDBITE: Russian Finance Minister, Anton Siluanov, saying (Russian):

“We’ve limited 2015 spending but will ask parliament to cut 10 percent more – except for defence. This will lead to cuts of almost a billion – but we can also see that this will not be enough either.”

Russia’s budget only balances when oil sells for 82 dollars a barrel – Crude prices have just broken below 30.

With Iran set to add its stockpiles to an already flooded market, many say the only way is to rein in spending.

London Capital Group’s Brenda Kelly.

SOUNDBITE: London Capital Group Head Analyst, Brenda Kelly, saying (English):

“With oil prices where they are, we will more than likely see some fiscal cutbacks from some of the major exporters in a bid to I suppose keep markets on an even keel and ultimately support growth in the very near term.”

This at a time when the country is engaged in costly military operations abroad – notably in the Middle East.

Western sanctions also still hitting Russia’s pockets, imposed over its involvement in Ukraine.

Rosbank’s Yuri Tulinov says the central bank should concentrate on Russia’s domestic market for now.

SOUNDBITE: Rosbank Head Of Research, Yuri Tulinov, saying (English):

“It’s important to focus on the local demand rather than external markets. And finally given how fast the external conditions can change, it’s important to keep the monetary policy flexible, alert and prudent.”

Officials have said that spending cuts will exclude public sector pay and pensions.

Unless the economic climate improves soon, that will be of little warmth to Russians.

Tags : price, Tumbling, from, reels, russia

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