Russia’s oil boom: Miracle or mirage?

MOSCOW: After years of growth, Russia’s once mighty oil machine is feeling the strains of declining production and energy prices as the industry copes with the worst economic crisis in Russia in a decade.

Oil companies that coasted on high commodity prices, Soviet-era infrastructure and easy Western bank credit have quickly fallen on hard times. Foreign investors have pulled out and company share prices have wilted. Is this the end of the Putin boom?


“We’re watching Russia very carefully,” David Fyfe, a senior oil market analyst at the International Energy Agency in Paris, said by telephone.

Just this month, the state-controlled oil company Rosneft was compelled to meet a margin call on bank debt. Already, one Siberian oil company is unlikely to be able to roll over debt, and creditors could seize its assets, industry analysts say. Output is declining this year, for the first time in a decade.

The pivotal question in the Russian oil industry is whether the government intends to support the companies, milk them for short-term funds to shore up other areas of the economy, or intentionally allow them to wither as an unstated curb on output to help support world prices. This being Russia, evidence of all three approaches seems to be surfacing at once.

IHT