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Moscow - Russia's central bank is working on measures to support the economy should oil prices fall by as much as a third or more, a senior official said on Wednesday, showing growing concern as the rouble slides and Western sanctions take a toll.
The International Monetary Fund (IMF) also gave a pessimistic assessment of the Russian economy, halving its growth forecast for 2015 to just 0.5%.
Interfax news agency quoted First Deputy Governor Ksenia Yudayeva as saying the central bank was working on a "stress scenario" that was likely to envisage an oil price of $60 per barrel.
This would be added to three existing scenarios for the central bank's policy outlook for the next three years, and compares with a $100 assumption in the 2015 to 2017 state budget adopted last week.
"The purpose of this scenario is to prepare a shock scenario to work out an action plan which we would implement to limit negative effects," Interfax quoted Yudayeva as telling a conference.
Oil and gas produce about a half of Russia's federal government revenues but already the price of Urals
The IMF's mission head to Russia, Antonio Spilimbergo, cited international tensions for the lower growth forecast. "Geopolitical uncertainties are having a big direct impact on the Russian economy," he told reporters.
The central bank's current base scenario also assumes the oil price will recover above $100 per barrel for the next three years. Even then, it predicts only modest economic growth.
Commenting on the bank's new stress scenario, Finance Minister Anton Siluanov said that his ministry didn't plan to adjust its own projections used for budget planning, which he said factored in a possible oil price as low as $80 per barrel.
"The forecast of the central bank somewhat differs from that of the government. There is nothing terrible about the fact that they consider a wider range of possible changes in price parameters," he said. "I consider ($60 oil) unlikely."
While playing down the likelihood that oil would fall so sharply, Siluanov has also warned repeatedly that a lower oil price is one of the biggest risks that the economy faces, requiring budgetary prudence.
Timothy Ash, head emerging markets strategist at Standard Bank in London, said the Russian economy would be in serious trouble if crude fell to $60.
This would lead to "deep recession, large current account and fiscal deficits, huge levels of capital flight, and significant stress on banks", he said.
Budget hole
Alexei Kudrin, a former finance minister and influential figure in the Russian political elite, said recently that he foresees crude prices continuing to decline over the years ahead because of new oil production technologies.
In three to four years, he predicted, declining revenues from oil taxes would create an $30bn to $40bn hole in Russia's government finances.
Some other analysts are also worried that the official economic projections take too little account of the risk that oil prices could fall significantly.
"It's prudent policy making. I think it's sensible to consider sharp fall in oil prices," said Neil Shearing, chief emerging markets economist at Capital Economics in London.
"Prices have fallen a long way, they've fallen from $120 to $95 in the past six months of so, so it's possible they can fall another $25 a barrel in that context," he added. "That's not our forecast but we do think that prices are more likely to fall further from here than they will rise."
Were prices to fall to $60 per barrel next year and stay there, the budget deficit would widen to 4.5% of gross domestic product (GDP), he calculated - a huge burden given Russia's limited access to international capital markets.
That contrasts with official projections, based on oil around $100 per barrel, that see the deficit at 0.5% to 0.6% of GDP in 2015 to 2017.
An added headache for Russia would be the negative shock to its balance of payments. "One thing that would happen is the rouble would fall sharply," Shearing said.
"We would start to see the central bank consider more of the non-standard measures to try to defend the currency.
Capital controls may well come into place... The bigger the dislocation in markets, the more chance there is of more draconian and drastic responses from the central bank."
Macro-Advisory analyst Chris Weafer said in a note that talk of emergency measures such as capital controls did not indicate any fundamental shift in policies. Such contingency planning was normal good business practice and "does not indicate that the central bank, or the Kremlin, has changed its position", he said.
Were oil to fall below $75 per barrel, the central bank could be inclined to back-track on its plans to float the rouble next year, he said, but added that this scenario was unlikely.
"The main Opec countries would experience budget difficulties long before that and would have to take action to cut supply," he said.
