Oil and gas in the capitals
The impact of oil prices has been obvious on Russia’s economy. To begin with, Russian hydrocarbons may not seem that dominant, accounting for only 10% to 12% of global production. They are, however, playing a major role in the Russian budget, as they represent nearly 37% of all budget revenues, Table 1. This could lead to a simple relation between oil and gas prices, and the rate of exchange. While taxes are paid in rubles to cover expenditures, one solution would be to let the ruble depreciate while prices are falling, or to appreciate when they are rising. But this view of the relations between hydrocarbons and the economy is simplistic to the extreme.
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