Russia Scraps Growth Downgrade as Iran War Boosts Oil Revenue

Article content(Bloomberg) — Russia is abandoning plans for a sharp downgrade to its 2026 growth forecast as the war in Iran boosts its oil revenue.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe Economy Ministry is now unlikely to significantly revise its projected 1.3% expansion in gross domestic product when it updates its macroeconomic outlook in April, according to three people familiar with the discussions. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentThe government no longer plans any substantial cuts to federal budget spending and may even increase defense outlays if the war in Ukraine drags on, the people said, asking not to be identified because the discussions aren’t public.Article contentArticle contentThat marks a sharp reversal in sentiment from just a month ago, when the government was weighing a downgrade to about 0.7% to 1% in its growth forecast as tougher sanctions over the invasion of Ukraine and lower oil prices caused revenue to tumble. It was also discussing a cut to the oil price used in Russia’s budget rule, which governs how excess energy revenues are allocated, from the current $59 per barrel to as low as $45–$50 as it braced for a potential long period of cheap crude.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe US-Israel war on Iran upended those assumptions. Russia has emerged as a major beneficiary, as disruptions to Gulf flows through the Strait of Hormuz pushed oil above $100 a barrel. The rally lifted Russia’s flagship Urals crude to near a four-year high, while the US also eased some sanctions on Russian oil sales to help stabilize global supply.Article contentAn increase in Russia’s average Urals price to $75–$80 per barrel or higher this year would bring an additional 3–4 trillion rubles ($37-$49 billion) in oil and gas revenue, helping reduce the budget deficit to about 1% of GDP, said Natalia Milchakova, a senior analyst at Freedom Finance Global.Article contentArticle contentEven as Ukrainian drone strikes on Russia’s Baltic export hubs at Primorsk and Ust-Luga are undermining Moscow’s ability to benefit from the crude rally, officials see only a limited impact. Longer term, Russia is expected to benefit even if oil prices ease as its negotiating position with China, India and other major buyers has strengthened, with attitudes toward its energy supplies shifting in response to the Middle East war.Article contentRussia has suspended its budget rule until at least June, Finance Minister Anton Siluanov said Thursday, according to the Interfax news service. The country could still meet its 2026 budget parameters if favorable commodity market conditions persist, he said.Article contentThe situation is beneficial for Russia’s economy, according to Dmitry Polevoy, investment director at Moscow-based Astra Asset Management. “An additional budget deficit could arise only if the ruble is stronger than assumed in the budget,” he said.Article contentTrending Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas Markets could be making the wrong call on interest rates Investor Quebec demands Air Canada’s CEO resignation in 92 to 0 vote Airlines LNG Canada signs key pipeline agreement required for phase two expansion Energy Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas Markets could be making the wrong call on interest rates Investor Quebec demands Air Canada’s CEO resignation in 92 to 0 vote Airlines LNG Canada signs key pipeline agreement required for phase two expansion Energy