STEVE INSKEEP, HOST:
Let's hear about another of the effects of low oil prices. The falling price of gasoline may be good for your commute, but it's not good for everybody. We heard yesterday that small U.S. oil producers are suffering. And so, it turns out, is Russia. Cheap oil is one of several economic problems hammering President Vladimir Putin's country. NPR's Corey Flintoff joins us from Moscow. Hi, Corey.
COREY FLINTOFF: Good morning, Steve.
INSKEEP: And let's just remind people - plenty of supply of oil right now. The OPEC countries - Saudi Arabia and others - have decided not to cut back production and reduce that supply, so prices are going to stay low for a while. What's it mean for Russia?
FLINTOFF: Well, Russia, like Saudi Arabia, is basically a petro-state. And it's really dependent on revenues from oil and gas exports. Experts say that in order to fund all its government spending, Russia needs a world oil price around $100 a barrel. Any less than that and you're running a deficit. As of this morning, oil prices actually recovered a little bit, but they're still just around $71 a barrel. So that's a big hit for the government of Russia, which actually came out and said they expected there'll be a recession next year.
INSKEEP: OK. So a recession could be coming for Russia if they're correct. And you said that they need much higher prices of oil just to pay their government bills. Can their government borrow billions or trillions of dollars the way the United States has?
FLINTOFF: You know, normally a few years of deficit spending wouldn't be a big deal for Russia. It should be in pretty good shape. During the good years, they put aside a big reserve of strong foreign currencies - you know, dollars and euros. And it's supposed to be worth more than $400 billion, so it should be able to use that to pay its bills for a fairly long time. But this comes at a time when Russia's pushing for a big boost in military spending, and it's also hampered of course by sanctions from the West.
INSKEEP: Oh, you're talking about the sanctions that the U.S. and other countries imposed because Russia grabbed Crimea from Ukraine. Are those sanctions having very much effect, really?
FLINTOFF: Well, the finance minister said the other day that sanctions will cost Russia about $40 billion in lost economic activity if they're extended through the new year. And of course government officials tend to lowball those numbers, so it could be a lot higher. The biggest problem for Russia is that the sanctions have made it really hard for Russian banks to borrow foreign capital and also for Russian companies to borrow money to finance their operations. So those banks and the big state-owned oil and gas companies are now asking the government to give them money from the big reserve fund. And that's an expensive proposition.
INSKEEP: What about when you go away from the banks and you're just meeting an ordinary Russian on the streets of Moscow - how's he affected or she affected?
FLINTOFF: You know, yesterday I was in a big mall that just opened in Moscow last weekend. And business was pretty slow there. There weren't a lot of customers. The people we talked to, though, both sellers and buyers, didn't seem to be really worried about it. You know, a lot of people said they haven't paid a lot of attention to the economic news, and those that do say they think it'll all blow over pretty soon. Interestingly enough, though, it doesn't seem to have had a lot of effect on people's support for Putin either or his policy in Ukraine. In fact, it seems to have created a situation where the Russian public is feeling pretty defiant, and they're willing to undergo some hardships to support the country.
INSKEEP: Corey, thanks very much.
FLINTOFF: Thank you, Steve.
INSKEEP: That NPR's Moscow correspondent Corey Flintoff this morning.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.