Russian restrictions and support packages
Following the slide in March, global stock markets had a strong April. Even the Moscow exchange showed vigour, despite the turmoil in the oil markets.
US WTI futures fell to negative values on April 20, but Russian oil is not sold at WTI prices but at Brent or Ural prices, which have not been as volatile but are still very low. At the time of writing, Brent futures are trading at just over USD 25.
Nonetheless, Russian oil companies and also the rouble recovered sharply during the month. The rouble’s covariation with oil prices seems to have disappeared during April, probably because of the Russian central bank’s currency support purchases and steeply declining imports.
Carnegie Rysslandsfond rose 13 percent this month and was down 16 percent since the start of the year.
The sharp falls in the oil market led to a new production agreement within OPEC+, which will cut 10 million barrels per day in May and June in the hope of stabilising prices. As usual, the biggest cuts will be made by Saudi Arabia and Russia, with Russia reducing its output by 1.9 million barrels per day.
Russia was affected fairly late by Covid-19, but has now been hit at full force. It has over 135,000 confirmed cases and around 1,300 deaths. The epidemic began in Moscow but has now spread throughout the country. The capacity to manage the disease diminishes the further you get from the capital. Health care is not well-developed or well-funded in rural areas. Russia has imposed quite severe restrictions, but is not one of those countries that has completely closed down. Putin recently announced that the restrictions will be extended to mid-May.
Like most countries, Russia has taken a number of measures to bolster business, including direct payments for small and medium-sized companies, interest-free loans to larger companies, support of RUB 200 billion for regional budgets and aid for airlines. In total, it is expected that the measures so far decided will cost a sum equivalent to about 3 percent of GDP. However, further measures may be adopted.