Report: Russia has made $6 bln from talking to OPEC

MOSCOW, Nov 17 (PRIME) -- Russia’s decision earlier this year to engage in talks with OPEC about limiting oil output has added more than 400 billion rubles ($6 billion) to the nation’s budget, according to two officials familiar with government calculations, Bloomberg reported on Thursday.

The possibility that Russia could cooperate with the Organization of Petroleum Exporting Countries to shrink the global oil surplus helped lift international crude prices from as low as $27 in January to an average of $44 for the year as a whole. This increase, combined with rising Russian production, has boosted government revenue by 400 billion to 700 billion rubles, said the officials, who asked not to be identified because the calculations haven’t been made public.

The estimates show the incentive for Russia, the world’s largest energy exporter, to pursue talks with other major producers even after initial negotiations aimed at freezing production failed in April. That initiative deterred commodities investors from testing how low prices can go through speculative short selling, according to Energy Minister Alexander Novak. A second cooperation effort is now underway, this time backed by an OPEC pledge to cut output that is due to be finalized in Vienna on November 30.

About 40% of the Russian government’s revenue comes from oil and gas. The flow of petrodollars reduced to a trickle after crude hit a 12-year-low in the first month of the year. Amid a second year of recession, the country’s budget deficit grew to its widest in six years, leading the state to dip into rainy-day funds and raise cash by selling assets.

Higher prices translate directly to budget gains, particularly as tax rates expand when crude rises and contract when it falls. In some cases, 90 cents of each dollar of incremental gains in oil prices goes to the budget, rather than the producers themselves.

Russia received 2.7 trillion rubles from the crude-export duty and oil-extraction tax, its main energy levies that provided 26% of the total budget revenue from January to October this year, data from the country’s Treasury shows. Because of higher oil prices, monthly receipts have exceeded 300 billion rubles since June compared with 185 billion rubles in February, Bloomberg calculations based on the data show.

Russian production reached a post-Soviet monthly record of 11.2 million barrels a day last month compared with 10.9 million barrels a day in January. Energy Minister Novak has said Russia is willing to limit supply if OPEC finalizes its cuts this month, but would prefer to freeze at current levels rather than reduce output.

(64.5463 rubles – U.S. $1)

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