In 2005, Russia exported about 150 million tons of oil and 150 billion cubic meters of gas worth about $100 billion (all numbers are rounded for simplicity). The price of oil and gas varied greatly. In just less than a decade, oil prices went from $10 to over $60 per barrel (from $60 to $360 per ton), and gas prices changed accordingly as they are strongly correlated with oil prices. Imagine a not unrealistic scenario, in which oil prices would drop to $10 a barrel and would stay at this level for five years. Annual Russian revenues from exports of hydrocarbons would fall to about $20 billion instead of $100 billion, resulting over five years in an accumulated $400 billion shortfall. Russian gross domestic product at the official exchange rate in 2005 totaled $600 billion. How could Russia adjust to such a negative trade shock and deterioration in terms of trade? […]
Memo #:
386
Series:
1
PDF:
PDF URL:
http://www.gwu.edu/~ieresgwu/assets/docs/ponars/pm_0386.pdf
