Russia will not cut oil and gas production, Putin says

Russia has no intention of cutting its production of oil and gas and will probably increase it, President Vladimir Putin said at the weekend. But he denied that this would increase the country’s dependence on energy exports, maintaining that the Russian economy was proportionately less reliant on exports of oil and gas than it was when he came to power eight years ago.

Mr Putin was answering questions from foreign Russia-watchers at his summer residence near the southern resort city of Sochi.
What had prompted a response that should reassure Russia’s Western customers, at least in the short term, was a comment by a senior official two days before to the effect that Russia’s oil and gas bonanza was almost as much trouble as it was worth. He had said that, while Russia had benefited hugely from the high energy prices of recent years, these had also created problems. Because the Russian economy simply could not absorb so much money productively in such a short time, the government had to spend much specialist time and energy on how best to use it.

A proportion goes to the “stabilisation fund”, now standing at $130bn, seen as an insurance against energy prices falling. Another share goes into an “investment fund” for infrastructure projects, higher pensions and public service salaries. What is left over is invested abroad, much of it in foreign bonds, to be as safe as possible. Russia’s foreign investment policy was, the official said, deliberately”conservative”.

The official also said that Russia was looking to invest more in foreign companies, and would already have done so but for what it saw as unwarranted suspicion of Russia’s intentions and closet protectionism on the part of foreign governments.

It was in this context that a participant in the discussion with Mr Putin asked this question: Why, if Russia found administering its new oil and gas wealth so burdensome, did it not consider cutting production? Keeping the stuff in the ground, he suggested, would have several beneficial effects for Russia. It would raise the world price, so yielding more money for less effort. It would, assuming no dramatic fall in prices in the near future, guarantee Russia a good income for many more years. And it would save ministers the time and effort involved in figuring out how to invest its windfall.

The Independent (London)