Those who will rise to power in Washington soon should realize that using the language of political diktat and sanction pressure in relations with Russia will be useless, Russia’s Deputy Foreign Minister Sergey Ryabkov told TASS in an interview.

“Regardless of who is at the helm in Washington, the sole clue to better relations with us will be for the United States to give up attempts to act to the detriment of Russia’s interests, which it has done by showing no readiness to follow the fundamental principles of understanding and respect for the sovereign equality of states – meddling in Russia’s internal affairs in the most challenging way in defiance of the principle of non-intervention in the internal affairs of Russia. The United States behaves as if it is a social and political entity in its own right that enjoys greater powers than all other members of the international community,” he said.

Ryabkov doubts any of the U.S. presidential candidates would be prepared to abandon the concept of American exclusiveness. “We know that this ideology imbues the entire U.S. society, in particular, the elite, the social strata that nominates candidates for the top executive post in the United States,” Ryabkov said. “I don’t expect any dramatic changes for the better in the United States as a result of this American mentality.”

“But in the final count, there possibly is a chance that those who succeed the current administration will be able to make a conclusion – quite obvious to us – that using the language of political dictating and sanction pressure in relations with Russia will be futile. Under pressure, Russia will be getting even stronger. Our country’s foreign policy is proactive – and the way I see it – it is attractive. Many in the world are watching with interest Moscow’s foreign policy course.”

Yet, Ryabkov believes that “even without abdicating their “innate” ideology of American exclusiveness, the political figures who will be governing the United States after the elections in November will be able to adjust the current policy and try to find points of agreement with Russia for the sake of their own interests.

“There are many problems in the world that cannot be addressed on one’s own,” Ryabkov said.

Russian officials at home and at the World Economic Forum in Davos at the end of January were unanimous in forecasting low oil prices for the foreseeable future. A range of government and senior banking official said that they forecast oil trading at figures between USD20 and USD40 per barrel. While officials said they believed prices would remain volatile, they said there would be some reduction in the levels of volatility, and there was a general consensus that prices will correct slightly higher in the near term.

Government assessments

Deputy Prime Minister Arkady Dvorkovich agrees with expert assessments that the oil price will fluctuate in the range of USD20 to USD40 per barrel.

“Today, the experts, the official representatives of individual countries have the most varied estimates: somewhere from USD20 to USD40 per barrel. Although the estimates are different, we are seeing today that the price is around USD30 per barrel, plus or minus one or two dollars,” Dvorkovich told journalists.

“They may in fact be at a lower level [oil prices] for a time; they may rise,” he said. “But I think that what it comes to is a figure between USD20 and USD40 per barrel,” he said.

The Russian government, which does not have the authority to regulate oil production, expects that the industry will independently respond to changes in the market situation, Dvorkovich said.

“Russia as a state cannot easily regulate oil production. This is the prerogative of the companies operating in the oil sector, and they themselves make investment decisions on the basis of the existing system of taxation. The government has no authority to raise or lower production volumes under this system,” Dvorkovich told journalists.

“If prices are low and taxes are raised, clearly, the motivation for investment declines, and this can lead to a decline in production,” he said.

“But we believe that in the current situation, given the current system and taking into account the proposals for adjusting the tax system – I have in mind the tax on financial results – we can maintain production at the existing level. But if the price remains at a low level for a long time, some decline is possible, and our partners are aware of that,” he said.

“Of course, our oil sector will respond to changes in the global market situation on its own,” Dvorkovich said.

Russia’s Economic Development Minister Alexei Ulyukayev said that he agrees with the IMF chief Christine Lagarde that oil prices have the potential to increase due to the increasing demand, as well as a reassessment of how rapidly Iran can reenter into the market and the changes in expectations regarding the actions of the U.S. Federal Reserve.

Therefore, the Minister believes, the average annual oil price in 2016 will be higher than the current prices.

“I agree that [oil prices] have the potential for recovery,” Ulyukayev told reporters, commenting on the statements to this effect made by Lagarde at the World Economic Forum in Davos.

The IMF chief said at the forum that oil prices might increase slightly, as there has been some improvement in demand in recent months.

“The growth of demand [that Lagarde referred to] is a fact. Demand increased by about 1.5 million barrels per day in 2015. There is not a question whether demand is increasing – if the global economy grew by three percent, then demand also grew. This is obvious,” Ulyukayev said.

“It is an altogether different matter that there were very many differing expectations that were simultaneously heaped in the same pile. It was expected that the U.S. Federal Reserve (“Fed”) would raise rates quite decisively and quickly, and now those expectations have changed. Three months ago, one supposed that the Fed would make three or four moves totaling one percentage point this year. Now the consensus is that the Fed will do just one increase of 25 basis points,” Ulyukayev said.

“In addition, the expectations for Iran were clearly exaggerated – i.e. the expectation that Iran would easily enter the market and regain its positions,” he said in presenting the argument for higher oil prices.

“As always, the financial market has answered these expectations by taking short positions on oil futures. Therefore, I think there will be a certain amount of rebalancing,” he said.

Asked to forecast the average price of oil in 2016, Ulyukayev said, “I think it will be higher than the current price.”

Banking forecasts

There should be no waiting for oil prices to return to a high level, Central Bank Governor Elvira Nabiullina said at a meeting of the Finance Ministry’s collegium at the end of January.

“There might be oil price rebounds, but one should not expect for oil prices to return to the high level of a few years ago,” she said.

The new changes in the external economic market situation pose challenges for budget and monetary policy, she said.

The price of oil will be about USD30 per barrel in 2016, Sberbank CEO German Gref told reporters at the World Economic Forum in Davos.

“The price will remain volatile, but not so volatile. Anyway, we are proceeding on the assumption that the average annual price of oil will not be lower than USD30,” Gref said. “Such critical scenarios for the average annual price of oil cannot be considered because oil price volatility of five to six percent a day cannot last long,” he said.

Gref said that the price of oil could range from USD25 to USD30-35 per barrel in the first half of 2016, and that it would be between USD30 and USD40 in the second half of the year.

Russia had a “difficult start” this year, he said.

“The first reason is commodity prices, first of all oil. I think that we will see such volatility until the end of the year. For that reason we are spending a lot of time right now trying to understand what oil prices will be this year,” Gref said.

Investment plans

Russia’s Energy Minister Alexander Novak has said that in the current macroeconomic situation and with such low oil prices, oil companies should review their investment plans and start working more efficiently.

“I think that with today’s prices and changes in the rouble exchange rate, the oil and gas industry should increase its efficiency. Companies should review their investment plans once again,” he said.

In particular, oil companies should work with equipment suppliers and other contractors to cut operating costs, the Minister said.

“Companies should work primarily with their suppliers and contractors under long-term contracts to reduce their costs. For its part, the state must create conditions to encourage competition, so that there are no monopolies on these markets,” he said.

Novak said that he will meet with oil and gas companies to discuss cost reduction and adjustments to the companies’ investment programs.

The Energy Ministry is drafting proposals on administrative measures to support the oil and gas industry. Tax breaks or bailouts are not being considered, Novak told reporters.

“In regards to additional support measures, these should be not about money or about tax, but mainly about easing the administrative burden for businesses,” he said. “The task is for the government to simplify the work for oil companies,” the Minister said.

In the current situation, even oil companies themselves have not asked for money or tax support, the Russian official emphasized.

At the same time, the government is not considering raising the tax burden on the oil and gas industry, Novak said.

“We don’t have such proposals at the Energy Ministry. Nor have we received any from other ministries and departments of the Russian government,” he said.

“The most important thing now is not to touch anything, so that there is no extra burden on the industry. That is the best thing that can be done,” the Minister said.

Oil producers

Oil companies agree that prices will start rising in the second half of 2016, Vagit Alekperov, the head of Russia’s Lukoil, told reporters on the sidelines of the World Economic Forum in Davos.

“Today in Russia there is a tendency for investment in drilling to decrease, and this is fraught with a drop in production. There are no plans to put major new fields on stream. The task is to enhance operations at existing fields,” he said.

Lukoil is maintaining its forecast that oil prices will end the year at about USD50 per barrel, Alekperov said.

“Investment constraints that occurred in 2015 – this was almost USD400 billion on the global energy market, and it’s already nearly USD120 billion in the first quarter of 2016 – will affect production volumes. That, of course, will lead to the prices’ trending higher in the second half of the year,” he said.

“I am confident that we will finish the year with the price of roughly USD50 [per barrel],” he said.

The lower bound on oil prices is USD24 per barrel, Alekperov said. “Below that price, very many projects, even those in operation, will be halted,” he said.

Lukoil may cut investment this year by USD1.5 billion from a planned figure of USD8.5 billion if a baseline scenario in which oil trades at USD30 a barrel plays out, he said.

Alekperov said that his company was looking at three scenarios: a baseline scenario with USD30 per barrel oil, a stress scenario with USD20 per barrel oil, and the best-case projection with oil prices at USD40.

In the stress scenario, where oil trades at USD20 a barrel and the rouble trades at 80 roubles to the dollar, Lukoil might slash investment another USD1.5 billion to around USD5.5 billion.

“At our last board meeting we gave instructions to switch to the different scenarios – USD20, USD30, and USD40. The investment committee will be considering the scenarios. If the committee accepts them, we’ll switch to these scenarios for 2016,” he said.

At the end of last year, Alekperov said the company plans to maintain investment in 2016-2017 at USD9 billion a year.

During an annual meeting with Russia’s Energy Minister Alexander Novak, oil companies asked that the sector not be touched, Bashneft head Alexander Korsik told journalists.

“The most popular proposal of oil companies at the meeting was this: leave the sector alone,” he said.

Oil production in Russia in 2016 will be kept at the level of 2015, if the situation on the oil market does not change, he said.

Restraint urged

Alekperov meanwhile urged restraint from all quarters in the current situation: from the government to oil producers and equipment suppliers.

“In this situation everyone needs to mobilize: the government, the companies, and our contractors and suppliers. This difficult time must be survived, without being overly fussy anywhere, for example, on tax changes, or the desire to make a quick buck off equipment supplies. We must survive this period together,” Alekperov said on Rossiya 24 television.

“The oil industry is demonstrating a commitment to stable fuel prices on the Russian market. Even though excise taxes rose by two roubles as of January 1, prices at Russian filling stations are now demonstrating stability. All of us today must be a little more restrained,” Alekperov said.

In addition, oilfield service companies and equipment suppliers need to review prices for equipment that they deliver. “The sector has entered into the toughest of crises. Recovering from it is possible, by optimizing costs. Our contractors and suppliers must lower prices. At USD100 per barrel, their prices made sense; at USD27 per barrel, they don’t, not for pipe or equipment or drilling,” Alekperov told journalists.

Issues concerning tax system stability, lower prices for equipment and access to new deposits will be discussed at Energy Minister Alexander Novak’s annual meeting with the oil companies.

“Russia’s tax system made it possible to operate stably in any situation. It took away all excess profit, but always left resources for development and stable operations. A huge number of sectors depend on us. For every employee in the oil industry there are seven in associated sectors. I am confident that stable relations between the government and the energy industry will provide the ability to overcome these difficulties,” he said.

Oil projects involving Lukoil in Nigeria could produce six to seven million tons of oil per year,

Alekperov said. These estimates are based on the assumption that reserves at exploration projects are confirmed, he noted.

“Projects in Nigeria will be very successful with that country’s laws and the production sharing agreements (“PSAs”) that have been negotiated,” he said.

At the end of 2014, Lukoil’s board of directors approved the company’s entry into Chevron’s project to develop the OML 140 deep-water block on the Nigerian shelf. An exploration well that was drilled last year detected commercial reserves. The Nsiko field, with a resource base estimated at 289 million barrels of oil equivalent, was discovered in 2013. There were also discoveries at two adjacent blocks, the Bonga Southwest and the Aparo.