Two weeks ago, Russian oil firm Rosneft asked for nearly $42 billion in state aid, citing considerable financial pressures resulting from Western sanctions. Now, Russia’s Economy Minister is indicating that Rosneft may get some state assistance, though it won’t be as much as it’s asking for. Reuters reports:
The company needs to repay 440 billion roubles ($12 billion) by year-end and another 626 billion roubles ($17 billion) next year, according to its latest presentation, after it borrowed heavily to finance last year’s $55 billion acquisition of Anglo-Russian oil firm TNK-BP.“The company is having a problem of lack of financing from the global markets. I have discussed the problem with the company’s management,” [Economy Minister Alexei Ulyukayev] said…”There are some options for the support but the sums’ order of magnitude is less than that.”
Moscow relies on oil and gas sales for more than half of its budget, making the energy sector a particularly sensitive pressure point for the West to exploit. Recent sanctions have by design been focused on Russia’s long-term energy prospects, in an attempt to constrain future growth without unduly affecting Europe’s considerable current supply of Russian oil and gas. Rosneft’s request and the Economy Minister’s recent response suggest that these measures are already finding traction.How this affects the Kremlin’s calculus remains to be seen, but energy sanctions seem to be tightening the screw on an already vulnerable Russian energy industry. In fact, the most effective weapon the West may have in this fight may be the shale boom: By boosting global supply, the North American energy revolution has kept oil prices below the $110 per barrel level that Moscow needs to balance its budget.