Russian Budget Based on $100 Oil Price

Vladimir Putin’s math is looking fuzzy. Russia’s budget is based on oil trading for $100 a barrel, government documents reveal.
Finance minister Anton Siluanov calls that an “alternative economic reality.”

Oil currently trades around $80 a barrel.

Siluanov warned that cuts will be needed since the budget doesn’t reflect the hits Russia’s economy has taken from the standoff in Ukraine and falling oil prices.

When Russian parliament passed the draft budget for 2015-2017 last week, it assumes that oil trades at $104 a barrel for 2014 and $100 for 2015-2017. That might have made sense when oil traded at $115 in June, but not now.

The result: Russia has a huge hole in its books.

And it might get worse. Goldman Sachs (GS) and top bond investor Jeffrey Gundlach predict oil could fall as low as $70 in the coming months.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza