The Russian economy is ready for fluctuating commodity prices and a shift in the global energy market ahead of the loosening of sanctions on Iran, the country’s deputy finance minister told CNBC today.
Alexey Moiseev said that Russia has already implemented a number of structural reforms last year and that “time will show whether those are enough or not” to deal with political and economic changes ahead in 2014.
The Russian economy relies heavily on the country’s status as a global energy player; it is one of the largest oil producers on the planet and has the largest natural-gas reserves in the world, and a long-term solution to Iran’s economic and political isolation could see the Russian economy badly hit.
President Barack Obama said on Sunday that a six-month nuclear deal with Iran will begin on January 20, which will see Iran restrict its uranium enrichment program in exchange for the loosening of economic sanctions on the nation.
Sanctions against Iran over its nuclear program have kept 1 million barrels per day of oil off global markets, but the agreement — originally reached November 24 last year — raised hopes of a long-term deal that could see Iran resuming full exports.
Moiseev said that Russia had a number of measures were in place to deal with market fluctuations: “Last year we enacted the so-called ‘fiscal rule’ which is a rule which prohibits us from spending too much of oil money, which explains exactly how we cut where and what if the oil prices falls.”
He added: “And the second thing of course is flexible exchange rate. We’ve seen through the volatile oil price last couple of years that the flexible exchange rate works for us very, very effectively and that has protected us not only from fluctuation in oil price but also from general market fluctuations.”
Brent crude fell below $107 a barrel on Monday after Obama’s announcement on Sunday regarding the Iranian deal.