Oil workers in the Khatanga Bay, part of the East Taimyr oilfield.
Vladimir Smirnov | TASS | Getty Images
Oil prices will have a major impact on the direction that the Russian economy will take, according to the chief executive of the Russian Direct Investment Fund (RDIF), but the country’s alliance with major oil producer group OPEC (known as OPEC+) is “ready to act” if necessary, he said.
“We’re quite optimistic about the Russian market going forward. We believe the oil price will be a significant influence going forward but due to our agreement with Saudi Arabia we believe that oil prices will be stable and the Russian market (is) poised for continuous growth,” Kirill Dmitriev, CEO of Russia’s sovereign wealth fund RDIF, told CNBC on the sidelines of the Russia Calling investment forum in Moscow Wednesday.
Earlier on Wednesday, Andrey Kostin, the head of Russia’s second largest lender, VTB Bank, told CNBC that the biggest risk to the Russian economy in 2020 would be lower oil prices, which, as a major oil producer and exporter, Russia still relies on despite efforts to diversify its economy.
Asked by CNBC’s Dan Murphy if he agreed with this risk outlook, Dmitriev conceded that he did “agree somewhat that if there are trade wars and other shocks, we could have some issues on the demand side.”
“But on the supply side we have a great agreement with OPEC+ members that are ready to act whenever there is a demand shock. So I believe oil prices will remain stable and of course trade wars are negative for the economy and can soften demand but OPEC+ will be ready to respond,” he said.
As the world’s second largest natural gas producer, and third largest oil producer, Russia has been able to lean on its energy exports as international sanctions have curtailed other parts of its economy. Oil prices have also risen since late 2016 in no small part due to Russia’s pact with OPEC to curb oil output in order to balance supply and demand.
The price of a barrel of Brent crude currently stands around the $60 mark, however, and there are concerns that global demand is faltering as the U.S.-China trade war drags on and weighs on global growth.
The OPEC+ agreement will be under scrutiny in early December when the group of oil-producing nations (which tellingly, doesn’t include U.S. shale producers) meets to discuss the policy.
On Tuesday, Reuters reported that Russia is unlikely to commit to deeper oil production cuts at the summit in Vienna because of concerns over weak demand growth expected in 2020.