Page 66 - bne Magazine Apri20

66 Opinion
Global Oil Supply (mln bbl/d average) –US Producers have been the big winners
bne April 2020
Source: International Energy Agency, Macro-Advisory estimates
Who blinks first?
The oil price and oil producers will inevitably endure a bloody few months at least. The price of Brent will almost certainly test the early 2016 low of $30 p/bbl and this could it could
be worse given the Covid-19 effect.
President Putin will not want to start scaling back budget spending, especially for the flagship national projects programme, a very ambitious $400bn programme to transform the economy and people’s living conditions by the end of his presidential term in May 2024. He will also not want to scale back on the promised social programmes and family supports that were a big part of his Federal Assembly Address in January. Especially not as public trust in his leadership has fallen to 35%, from 60% only two years ago.
COMMENT:
If the oil price is still trading in, for example, the $20 to $30 p/bbl range in the summer, then this may change. Putin will be just as reluctant to run a big budget deficit or to reduce financial, reserves to a low level. That would leave the country vulnerable to future sanctions.
The hope in both Moscow and Riyadh is probably that either is forced to blink first and return to the negotiating table. The ideal scenario for both is that the marginal or high-cost oil producers quickly feel the pain and are forced to shutter production. It really is a waiting game and a test of both political nerve and financial reserves. The closing shoot-out scene of the spaghetti western,” The Good, The Bad, and The Ugly” comes to mind. But, whatever about the US producers, this time round Russia and President Putin are in a better position to fight this war than is Saudi Arabia or its Crown Prince.
Pandemic brings “S” back to ESG, Russian business responds
Irina Logutenkova and Tom Blackwell of EM in Moscow
Just a few weeks ago we were all locked in heated discussions about climate change and social responsibility. Then, life threw us a curveball –
the coronavirus pandemic. It’s changed life for thousands
of people almost overnight and created unprecedented challenges for businesses. The threat of pandemic has become the ultimate test of companies’ sustainability and commitment to environmental, social and governance (ESG) practices. With capital markets having effectively frozen, priorities have shifted to business continuity and economic survival.
It’s not hard to tick boxes – copy nice sounding policies, compose heartfelt CEO speeches – when time is on your side.
www.bne.eu
However, with Covid-19 spreading rapidly across the globe, we have neither the time nor the time-proven tactics to follow. Benchmarking isn’t possible and clear answers are hard to come by, as the situation changes minute by minute. The only way forward is to look at your core values and act accordingly.
We spoke with Russian business leaders and found out what they are doing to ensure the sustainability of their operations amid the global pandemic, as well as what values they rely on during these difficult times.
“We have identified several stakeholders' groups that would be the most impacted by the current situation and have