Russia says it loses billions to oil slump, sanctions

Russian President Vladimir Putin, center, shakes hands with Defense Minister Sergei Shoigu at a meeting with top military officials in Sochi, Russia, on Nov. 24.
(Alexei Druzhinin / Associated Press)

International sanctions and slumping oil prices are costing Russia well over $100 billion a year, a top official acknowledged Monday.

“We are losing about $40 billion a year because of geopolitical sanctions and about $90 [billion] to $100 billion due to a 30% drop in oil prices,” Finance Minister Anton Siluanov said at an international economic conference in Moscow, Interfax reported. “When I am asked what I, the finance minister, can say about the ruble rate prospects … I say: Watch oil prices.”

Siluanov said capital flight from Russia is expected to reach $130 billion this year.

The ruble, the national currency, has experienced its biggest drop in years over the last two months, losing 30% of its value. That has added significantly to a volatile inflation rate officially projected to be close to 10% by the end of the year, officials say. Some private economists say the inflation figure could be twice that high.


“The sanctions over Ukraine and especially the continuing drop in world oil prices are painful enough, but they are by far not the biggest problem of the long-stagnating Russian economy,” Mikhail Delyagin, a leading Russian economist and chairman of the Globalization Problems Institute, a Moscow-based think tank, said in an interview. “Our economy already showed signs of skidding back in 2011 when oil prices were quite favorable. The main problems of Russia are not sanctions or oil prices but its chronic corruption problems, the lawlessness of monopolies and the utter inability of the state to properly manage anything, including the economy.”

For example, Delyagin said, since March, when Russia annexed Ukraine’s Crimea region, it has failed to establish independent fresh water and electric power supplies for the peninsula.

The United States, Canada, the European Union and some other countries have imposed economic sanctions on Russia over its annexation of Crimea and its involvement in the insurgency in Ukraine’s industrial east. The sanctions are aimed at state monopolies, banks, other vital trade spheres, as well as a number of individuals, including state and regional officials and a close circle of President Vladimir Putin’s friends.

Putin called the last measure a mistake.

“They were proceeding from the false notion that I have personal business interests based on relations with the people put on this list,” Putin said in a televised interview with the Tass news agency over the weekend. “By infringing upon them, the Americans presumed they were kind of hitting me. But this absolutely does not correspond to reality.”

Putin showed no sign of bowing to the sanctions and was adamant that Crimea belongs to Russia.

“When the Russian man feels that he is right, he is invincible,” Putin said in response to a question about the annexation. “If we thought we had done something bad or acted unfairly, then everything would hang by the hair.... In the given case I have no doubts” that Russia was right.

Putin said drooping oil prices had slashed the national budget by a third, and hinted of a conspiracy behind the dramatic drop.

Fighting resumed in Ukraine’s volatile Donbas region Monday, Ukraine officials said.

Russian military and local rebels opened fire 16 times on the positions of Ukrainian troops, according to a statement posted on the Facebook page of the Ukrainian government’s anti-terrorist organization.