By Anya Andrianova and Evgenia Pismennaya
The Finance Ministry is currently weighing scenarios for different levels of demand, said Kolychev, one of the architects of a mechanism that funnels proceeds from energy taxes into a rainy-day fund. Putin has promised for years to reduce Russia’s dependence on energy, but the sector still makes up a third of budget revenues.
A drop in mobility due to the coronavirus has coincided with increased efforts to combat climate change this year to completely alter the outlook for fossil fuel demand. BP Plc became the first major oil giant to admit in September that oil consumption may never return to levels seen before the pandemic. Since then China and the U.S., the world’s two biggest economies, have stepped up commitments to transition to clean energy.
Russia, which generates less than 1% of power from renewables, has so far been slow to adapt to the transition and is still investing in new oil exploration projects in the Arctic. Analysts at Moscow’s Skolkovo Energy Center warned in May that economic growth may be limited to less than 0.8% a year for the next two decades if the country doesn’t adapt.
“Russia’s economy is clearly not ready for a hydrocarbon shift,” said Natalia Orlova, chief economist at Alfa-Bank in Moscow. “The government and business don’t have a clear understanding of what direction Russia should go if it moves away from oil.”