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Beyond oil and reserves, Russia running on empty

Published on Jul 31, 2014 10:23 PM
The logo of Russia's top crude producer Rosneft is seen at the company's headquarters, behind the Kremlin wall, in central Moscow May 27, 2013. Oil accounts for 40 percent of state revenues in Russia and its price will be a source of worry for President Vladimir Putin should it fall below US$100 (S$125)  per barrel. -- PHOTO: REUTERS

MOSCOW (Reuters) - For all the sanctions Western leaders can throw at Russia, the biggest threat to President Vladimir Putin's ability to back separatists in east Ukraine is something beyond his or their control: the price of oil.

With Russia's US$2 trillion (S$2.5 trillion) economy heavily dependent on crude exports, oil prices are always closely monitored by the Kremlin, but the government is particularly wary now as tensions with the West mount and sanctions ratchet up.

Such conflicts often push up crude prices, but as long as oil, which accounts for 40 per cent of state revenues, remains above the average US$104 per barrel written into the 2014 budget, Moscow has little immediate need to worry.

The alarm bells will start ringing if it falls significantly below US$100, forcing the government to pay more attention to propping up an economy already close to recession.

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