Russia Running through Long Standing Financial Downtime –Find Causes

 

Last week busy for international news editors who are found showcasing their deep logistic aptitude and brilliant analytical adroitness to dish out information regarding recent attacks of ISIS in Brussels, Obama’s international trip to Cuba and Argentina , nuclear tests conducted by North Korea and new refugee policy by European union including important speeches of president addressing AIPAC with new air strike to terminate second in command of ISIS.

New York Times has released a report confirming the change in the current tax policy of Russia to fight with recession in overall economy of the country. In this report, it has been procrastinated that Russia is running through a stringent financial crisis. If this economic downtime continues to run for long time, there will be a new threat jeopardizing the country’s economy.

Russia mainly depends on oil and gas to collect handsome revenues from large scale oil industry to renovate the national economy.

However, of late, oil prices fluctuate and Russian oil companies are not satisfied because of prominent nosedive in earning profits by selling crystal clear crude oil.

When the price for lubricant oil was pegged at $100 per barrel, $74 went straight to the pocket of Russian government in the form of taxes. 

Prince Amir Al Saud 

So, after deducting $74 from $100, oil companies had $26 per barrel. Companies selling oil in Russia had to spend around $15 to refine and ship collected natural oil to customers. So, gross profit is $11 on a barrel of oil.

Right now, oil price is $35 per barrel and after spending $15 for production and shipment, these companies get $3. So, it discourages oil companies in Russia uber.  

Prince Amir Al Saud 

New tax policy should be tailored to make the oil industry much more profitable. Russian government is not eager to reduce the tax rates as lion share of the proceeds is coming from oil companies in the shape of taxes.

Though, heavy taxes on oil will be used for development of oil reservoirs and oil refineries in various places of Russia. It has not motivated private oil companies. There are many oil wells and reservoirs which must be properly maintained to increase the product rate.

However, due to clearance of higher taxes, oil companies will not be in comfortable condition. So, government of Russia must think of chancing the tax policy to provide benefits to oil firms to reinforce their business comfortably.

Andrew Kramer of the Times has stated that by 2035 the oil output in Russia will be severely down in the event of the continuous hike in the taxes imposed on the oil companies. Russian economy would not be developed owing to such financial crisis.

Kramer recollected the previous tragic episodes way back to 1980 when the oil prices kissed the ground putting the major oil companies in deadlock with least possibility of faster recuperation from the impasse. Kremlin didn’t find any better way than imposition of heavy taxes to squeeze large amount from these small and large oil companies.

Kremlin used the oil industry as a money spinning machine to get financial stimulus whenever the national economy bobbed down. Comparing to the total oil output which recorded 11 million oil barrels in the year of 1988, the result was not satisfactory due to the steady downfall in the 8.8 million barrels in 1991. Yegor T. Gaidar, ex president of Russia, has lamented by stating that Russia has not experienced the crisis or recession not because of threat from America but owing to changes in the oil prices. It is noticeable that existing Russia must do proper workouts to overcome sudden recession with fluctuation in oil prices. It will be devastating if this powerful country doesn’t do proper tax reform to end the problem.

Maybe there are two alternatives for Kremlin to opt for to lower down the risks of recession.

One innovative solution lies in the reduction of cost of reinforcement of Russian defense. It is right now expensive to this Russian government to manage.

Secondly, the government must reduce the over expenditure to spoon feed the elite class.

Vladimir, Russian President, is popular because of his active support and co-operation to the upscale society. He gets tremendous appreciation from elite class.

Russia must do sacrifices to upgrade its economic condition removing the cloud of recession.

The first thing Russia needs to admit that it should not be involved with any cross border military dominance or any nuclear experiment to increase its power.

Russia's economy is now smaller than that of Brazil or Italy.   

Prince Amir Al Saud 

It must not increase the outlays for reinforcing defense for controlling Easter Europe, Central Asia and to some extent Middle-East.

It should be economical to prepare the budget to cut expenses on military. So this is a great sacrifice for Russian government to do for the sake of financial stability.

Secondly, Russia must control itself by choosing the less aggressive strategy. It must be a good nuclear deterrent nation with controlled military regime to regulate neighboring countries. It should react more leniently without showcasing its prowess. Political instability, civil war and tension must give a prominent jolt to the national economy of Russia.

The nouveau riche and comparatively middle class in Russia are affected by political imbroglio, racial profiling, violence and recession. So, they must face the music competently in near future.

Finally, Russia may face caustic separation regarding some critical power mongering issues in Chechnya and other Caucuses in the country. These are major issues to handle. However, none can predict what will happen in future.

The whole political infrastructure and Russian power in the global arena are based on oil revenues. This profitable oil industry seems to go down with few spots of misery.

Perhaps, Russia will have to wait for few decades more to see the sunrise once again.

This bad impact of recession in Russia must be prolonged. Few countries may be benefited due to the absence of Russia in regulating Eastern Europe due to the economic impasse or recession.

Military will be withdrawn from some sensitive pockets of Eastern Europe. It is good news for Europeans. However Russians have to be much tolerant with cool patience as unexpected incidents can bring more tragic snapshots to the country.

What ripped through Brussels is very vital to all Europeans.

Obama’s official tour to Latin American nations must give solace to US and Latin American nations to end hostilities within Western Hemisphere.

On the other hand, North Korea’s maverick attitude to do the powerful nuclear test must project this country as a powerful nation to create threat in Northeast Asia.

Truly speaking, these incidents are significant to people in the world.

However, the problem of Russia can’t be felt at a glance. At a snail’s pace, Russia enters into the hollowness of frustration to have severe economic recession.

How do all consequences play the role in upcoming years to affect Russian economy?

However, these consequences must not be overlooked while evaluating the present scenario of Russia.