The Russian contingency plans convey a clear message to Riyadh and to Opec’s high command that the country can withstand very low oil prices indefinitely, thanks to a floating rouble that protects the internal budget.Russia is not entirely in the clear economically however:
Saudi Arabia is trapped by a fixed exchange peg, forcing it to bleed foreign reserves to cover a budget deficit running at 20pc of GDP.
Russia claims to have the strategic depth to sit out a long siege. It is pursuing an import-substitution policy to revive its industrial and engineering core. It can ultimately feed itself. The Gulf Opec states are one-trick ponies by comparison.…
Saudi Arabia’s leaders are fully aware of the Kremlin’s painful predicament. They appear certain that they can outlast Russia in a long duel. By the time we find out which of these two petro-giants is stronger, both may be on their knees.The Saudis are probably figuring that the US will support them if things yet rough, but after they wiped out the profitability of nascent US shale industry, that may be wishful thinking.
The Telegraph
Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies
Ambrose Evans-Pritchard
