Over the last eight years, rising energy prices have fuelled Russia’s economic boom, boosting the popularity of Kremlin leaders and offering hope of restoring Russia’s position as a leading global economy and international player.
But the oil price has dropped from highs of almost $ 150 per barrel to under $ 50, and Medvedev said Russia, the world’s largest oil supplier after Saudi Arabia, was ready to work with the oil producing group Opec on possible output cuts.
“We should defend ourselves,” Medvedev told a meeting with officials in the southern Urals city of Kurgan. “This is the source of our revenues, including from both oil and gas.”
“Our partners and colleagues from the oil club are very actively asking us (to work with them). In order to maintain a coordinated policy … We are ready to do this.
“Such protective measures could be linked to a cut in oil output as well as taking part in existing supplier organisations or new organisations.”
“We should not exclude any options for ourselves. I repeat once again – this is a matter of our nation’s revenue base, of its economic development … of our national interests … We will act the way we deem it necessary,” Medvedev said.
Opec President Chakib Khelil said in remarks published yesterday the oil group should agree a more severe reduction in output at its meeting next week in Algeria to prop up prices.
Russia, the largest non-Opec oil producer, will send a high-ranking delegation to Algeria, including its senior energy official, Deputy Prime Minister Igor Sechin, and Energy Minister Sergei Shmatko.
Lukoil, Russia’s largest private oil company, reiterated its backing for Russia’s eventual participation in output cuts to support Opec. Leonid Fedun, the company’s vice-president, said action was likely at the Opec meeting on December 17.
“If some 2.5mn barrels per day are taken out of the market, oil prices will stay between $ 60 and $ 80 per barrel next year,” he said.
Medvedev, who earlier expressed concern of a possible rise in social tension and instability due to the effect of the global financial crisis on Russia, said budget expenditure could be cut, but he warned officials not to reduce social spending..
“We can limit some spending items, but state power has no right to save cash on social issues,” he said. “The crisis should not be an excuse to wind up our (social) programmes.”
He said in the recent years of large windfall revenues from energy exports, wages in Russia’s economy had been growing at a much faster rate than labour productivity. The crisis could now boost productivity and eliminate this discrepancy, he added.
“In general, we remain inefficient,” he said.