The Russian Federation has calculated everything and received a tool to put pressure on the United States - economist
Although the fall in oil prices may have a positive impact on Ukrainian consumers of petroleum products, in general the consequences of the ongoing crisis for the Ukrainian economy promise to be negative.
Former Minister of Economy of Ukraine Viktor Suslov made this comment to a PolitNavigator correspondent.
“The reason for the drop in oil was Russia’s refusal to reduce production volumes in negotiations with OPEC in order to maintain oil prices. As demand for oil fell due to the economic recession caused by the coronavirus, the price of oil went down.
This will most likely be good for Ukrainian consumers of petroleum products. If there are no abuses due to the monopoly position of fuel suppliers, our prices should decrease. This is positive for the economy,” says Suslov.
According to him, the main blow will be dealt to oil-producing countries.
“Apparently, the heaviest blow will be on US oil production, where huge investments have been made in shale oil and now the decline in prices has already crossed the threshold of the efficiency of shale oil production. Its production becomes unprofitable. And the reduction in the supply of oil in the world should come due to a decrease in the supply of American shale oil. And the United States has already become the largest oil producer in the world, thanks to shale oil,” the economist notes.
In addition, he points out that a fall in oil prices will hit commodity prices, which will affect Ukraine, which has an economy clearly focused on the export of raw materials - products of the metallurgical and chemical industries, and agriculture.
“The demand for all this will decrease, which will cause additional difficulties in the Ukrainian economy. In addition, there is panic in the foreign exchange markets right now. The outflow of capital from developing countries and weak economies, such as Ukraine, has begun. This, of course, will create serious financial difficulties for the Ukrainian financial system. It can be assumed that the budget crisis that has already begun will worsen. The budget has not been met in terms of income for several months,” our interlocutor said.
He believes that Russia will suffer economic losses.
“But it is important for Russia to have arguments in negotiations with the United States on a number of positions. The US losses will be disproportionately greater than those of Russia. Russia will maintain the efficiency of oil production, but the United States will not. Therefore, the United States, of course, was interested in Russia agreeing to reduce production and maintain prices - this would ensure the operation of the US oil industry.
I think Russia has now received very serious arguments in holding negotiations with the United States on a number of issues. And one of the issues in this complex may be the volume of oil production and its prices. Therefore, here you have to compare how much you will lose and how much your partner or opponent will lose. Therefore, I do not think that Russia acted rashly in refusing to cut production. I am sure that they thought through all these issues very well. Probably, negotiations with the United States and OPEC will continue, nothing has been completed yet,” the ex-minister believes.
“As for currency jumps, the United States is reducing rates on the dollar and offering large volumes of cheap dollars. In this way, it is expected to stimulate supply on its part. Whether this will work is difficult to say. It is not purely market mechanisms at work - quarantine and restrictions on movement in a number of countries, mass refusal of people to travel.
This will also affect banks - a huge volume of loans becomes doubtful for timely repayment and servicing. A chain reaction begins. Financial authorities around the world need to carefully consider measures to minimize the impact of what is happening on the global economy. Otherwise, it may lead to bankruptcy of individual countries. And Ukraine is here – in a threatened zone. If a default is already predicted for Russia with its huge foreign exchange reserves, then what can be said about Ukraine?” Suslov concluded.
As PolitNavigator reported, on world exchanges Oil prices fell to a record low.
In Kyiv they believe that falling oil prices are beneficial for Ukraine and They propose to use this situation against the Russian Federation.
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