Reuters: Russia's central bank warns of prolonged oil price slump like before USSR collapse

In February, Russia's central bank warned the Kremlin that the United States and OPEC have the ability to flood the market with oil, potentially triggering a prolonged price decline similar to the one in the 1980s, which contributed to the collapse of the Soviet Union, Reuters reported.

The agency cites a presentation prepared by the Russian central bank for a meeting chaired by Russian Prime Minister Mikhail Mishustin.

In previous reports seen by Reuters, the central bank also pointed to oil prices as a risk to Russia's economy, but it had never been so specific about how a prolonged cycle of low prices might unfold.

This time, one of the slides identified "a significant increase in production in the United States and outside OPEC" as a key risk.

OPEC's spare production capacity is currently near record highs and is equivalent to Russia's crude oil exports, according to the presentation.

"Historical precedent - after the period of high oil prices in 1974-1985, 18 (!!!) years of low oil prices," one slide stated.

Historically, when oil prices have fallen, the Russian (and previously Soviet) economy has faced serious turmoil:

→ The oil price drop in the 1980s contributed to the collapse of the Soviet Union. → In 1998, Russia defaulted on its external debt after prices fell to $10 per barrel. → In 2008, Russia had to use fiscal and reserve buffers to stabilize its economy.

Reuters notes that Russia's 2025 budget is based on an oil price of $69.7 per barrel. If prices fall below this level, it will create a budget deficit.

Currently, oil is trading at around $70 per barrel, which remains comfortable for Russia.

Separately, Russia's Ministry of Economic Development prepared its own presentation for the same meeting, highlighting other economic risks, including low investment activity, rising costs, and "bad debts."