I first covered this story last month: (Only in Russia: Oil Producers Losing Millions of Dollars)
The situation has gotten so bad so fast for Russian Oil Companies that despite months of record-breaking oil prices, they are pleading for a bailout:
Russian oil companies beg for state credits - The four biggest petroleum companies in Russia – Gazprom, Rosneft, Lukoil and TNK-BP – admit that they are in serious trouble following the international financial crisis. Now, they have requested the federal government for help.In an address to Prime Minister Vladimir Putin the leaders of the companies say they will need help to handle international loans in order to avoid a drop in production, newspaper Kommersant reports. - BarentsObserver
One thing Russia can do is that instead of giving the oil companies money, would be to reduce the amount of money the oil companies pay the Russian Government for each barrel of oil they extract from the ground. At the current price of crude oil, the oil companies need to pay more in taxes and export duties than they can sell the oil for. From last month:
This is a perfect example of how high taxes (and probably corruption as well) can wreck business. How bad is the situation?Urals blend is now priced in Rotterdam at $88 per barrel. With the Primorsk FOB Urals price (ex-freight, clearing fees and port charges) at about $86/bbl, Russian companies are paying $68/bbl in export duties and another $17.40/bbl in oil extraction taxes. That results in more than $85/bbl being paid into the treasury in these two taxes alone.Moscow bank analysts calculated that only meagre amounts go back to producers after tax and other costs are taken out, leaving the producers with an operating loss of $13/bbl. - Fairplay
Several planned Russian oil and gas projects are now in danger of being postponed. The financial crisis comes at the same time as oil prices drop. Oil company Lukoil itself admits that it can not assure growing production unless the oil price is higher than 109 USD per barrel. - BarentsObserver
Surely, pissing off your International 'Partners' like BP, ExxonMobil, Shell and the other oil companies isn't going to make the situation any better. As bad as things might be in the US concerning the economy, the situation appears to be much worse in Russia. They seem to be headed for a full meltdown given that the strongest sector of their economy, oil, can't make a profit. So, just where is all that oil money going? Surely, a good portion of it is paying for Russian mischief around the globe.