During a speech in Germany, Russian President Vladimir Putin has introduced flat income tax and constructed a sovereign wealth fund with oil prices at $40 or lower. With oil prices at low, institutional reforms have to be made in order to avoid financial meltdowns. Russia has been in recession for the last two years compared to a decade of thriving revenue that produced $2.1 trillion of energy windfall. However, oil prices have severely declined earlier this year.
Oil is currently traded between $44 and $51 a barrel. Analysts have cautioned that it may decrease to $40 because of the weak demand depending on the season. Russia desires for oil to be at $82 in order to balance the budget for strengthening. The Soviet union has embraced oil exports during the 1970’s and whenever it is low the government responds through reformation.
However, for reforms to be administered an agreement should take place which can take an abundance of time.
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