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Saudi Arabia's Oil Price 'Manipulation' Could Sink The Russian Economy


Mikhail Leontyev was quoted in Russian media as saying:

Prices can be manipulative. First of all, Saudi Arabia has begun making big discounts on oil. This is political manipulation, and Saudi Arabia is being manipulated, which could end badly.

The news comes as Reuters reports Saudi officials have been privately admitting to oil market participants that they are comfortable with lower oil prices. According to the news service, the Organization of the Petroleum Exporting Countries (OPEC) is willing to accept prices as low as $80 a barrel for as much as the next two years.

Falling prices are of particular concern to Russia. Russia needs high oil prices to buoy its economy. The country has seen its economic performance slow under the weight of sanctions over Ukraine and weakening domestic demand. The Russian Central Bank forecasts growth over 2014 to be a meager 0.4%, improving marginally to between 0.9%-1.1% in 2015.

The problem is that Russia's latest budget requires oil prices to average at least $100 a barrel in order to cover the government's spending promises.

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