World Business

High oil prices disaster for Russia, says president

(Xinhua)
Updated: 2010-05-29 10:38

MOSCOW - High oil prices were the obstacle for modernization of Russia, President Dmitry Medvedev said during his meeting with the ruling United Russia party on Friday.

"To put it bluntly, $140 per barrel is a disaster for Russia as it would mean the elimination of any stimulus for development," Medvedev said.

Currently, June oil futures have been trading around $70 mark. Oil prices reached historical maximum of $140 per barrel in summer 2008.

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Russia built a lion share of its budget surplus from oil export. However, Russian economy was not immune to the so-called "Dutch disease," an economic phenomenon typical for countries reliant on commodities export as their main source of budget intake.

High price for the raw materials on the international markets swept the export-oriented nations away of the incentives they may bear to develop other sectors of the economy.

Russian experts estimated that the "golden mean" oil price for national economy is 75 dollars per barrel.