Russia Reduces Dependence on Oil and Gas Exports

Russia reduces dependence on oil and gas exports, said Russian President Vladimir Putin on Friday at the International Economic Forum in St. Petersburg, highlighting payments in national currencies in trade with neighboring countries.

– The Russian public certainly remembers and knows that we have always said, ‘When will we get rid of dependence on oil and gas revenues?’ So, this trend is gradually gaining momentum – emphasized the Russian president, according to a report by TASS.

When excluding oil and gas exports, Russian budget revenue increased by 9.1 percent in the first five months of this year, Putin noted, and only in May, it rose by 28.5 percent according to him.

– This is an important indicator that the real sector of our economy, its manufacturing companies, trade, and services are developing and gaining momentum – he said.

The Russian economy is expected to grow by just under two percent this year, according to him. Economy Minister Maxim Reshetnikov said on Thursday to Rossiya-24 TV that the economy could grow stronger than the official forecast of 1.2 percent by the Ministry of Economic Development, TASS reports. In 2024, activities are expected to grow by two percent according to the ministry’s estimates.

Priority Neighbors

The Russian president also referred in his speech in St. Petersburg to the development of foreign trade in national currencies.

– Today, about 90 percent of payments with the countries of the Eurasian Economic Union are made in rubles, and more than 80 percent of payments with China are in rubles and yuans. We are also actively developing trade in national currencies with other countries. The priority is our closest neighbors, as well as BRICS countries and the Shanghai Cooperation Organization – emphasized Putin.

He also noted that Russia has not closed its doors to foreign companies that decided to leave, should they choose to return.

– I will say that if foreign producers want to return and come to our market, and we hear such discussions more frequently, we do not close the door to anyone – emphasized Putin, adding that they will create the necessary conditions for them to operate.

Increased Consumption

He also warned of significantly increased military spending.

– Of course, additional funds were needed to strengthen defense and security, to purchase weapons. We were forced to do this to protect the sovereignty of our country, said the Russian president, not explicitly mentioning Ukraine.

Economy Minister Maxim Reshetnikov warned on Friday that the budget would not be able to withstand higher expenditures unless regulations are amended, Reuters writes.

The budget was in a deficit of 42 billion dollars in the first five months of this year, military spending is rising, and sanctions are reducing revenues from energy sales.

Reduction or Amendment of Regulations?

Moscow therefore needs to make significant efforts to curb the deficit, and possible strategies include cutting spending, raising taxes, and increased borrowing in the domestic market.

Speaking at the gathering in St. Petersburg, the economy minister said that the government’s first option is to reduce spending.

The second option, according to the minister, would be a budget regulation that stipulates that excess oil revenues are directed to the state investment fund, which was suspended last year for financing state spending after the West imposed extensive sanctions on Moscow due to the invasion of Ukraine.

This year it has come back into effect, but with amendments raising the minimum oil price to 62 to 63 dollars per barrel. The G7 has set a price cap of 60 dollars, threatening sanctions against carriers and insurers for dealing with more expensive Russian barrels.

The third and, according to Reshetnikov, final option would be to increase taxes.

“It is pointless to try to take more from companies or the economy than they can afford,” said the minister.