“Of course, the chance has not been missed,” he said. “It should be understood that… diversifying the modern economy of Russia will not take a year, or two, or three, or even ten years, it will take much more time, because our economy was fully dependent on oil [prices] for 40 years,” he added.
Crude oil exports make up a significant part of the Russian budget's revenues. Global oil prices fell sharply after the Organization of the Petroleum Exporting Countries (OPEC) decided to maintain oil production at 30 million barrels per day. Following the statement, prices of Brent futures fell to below $66, its lowest level since October 2009.
The Russian Finance Ministry said it expected the global oil prices to stabilize at $90 per barrel in the medium-term. In late November, Russian Finance Minister Anton Siluanov said the country needed to adjust its federal budget for the next few years to reflect oil prices of $80 to $90 per barrel.
Russia May Have to Correct Development of Economy, Budget
The Russian government will possibly have to correct its scenario on developing the economy and budget, Medvedev said Wednesday.
In recent months, Russia’s ruble has fallen to its historic low against the dollar and the euro amid declining oil prices and geopolitical tensions over the situation in Ukraine.
According to Russian President Vladimir Putin, the ruble’s value has been affected not only by external factors, but also by speculation.
On December 2, Russia’s Economic Development Ministry said it had revised its economic forecast for 2014 and 2015. According to the new estimates, the average annual ruble exchange rate for 2015 has been revised upward to 49 rubles from 37.7 rubles per dollar.
Ruble Weakness Triggered by Western Sanctions, Oil Price Slump
The prime minister said the currency’s fall in value was caused, among other things, by the slump in global oil prices and "external influence that is being exerted on our country."
Medvedev also noted during a live television interview that “the cost of this type of decision [sanctions] runs into the tens of billions of dollars, which means our economy has probably lost several tens of billions of dollars”.
At the same time, the prime minister said that the European economy had also been affected by the West’s politically motivated measures.
"According to estimates by our economists, the European economy has lost 40 billion euros this year and will lose 50 billion euros next year because of cancelled contracts with the Russian Federation," Medvedev said.
However, Russia's Central Bank has insisted on transitioning to free-floating currency exchange rates. In early November, the bank cancelled nonlimited exchange rate interventions, effectively free floating the currency.
The decline in the ruble's value also forced the Russian Economic Development Ministry to update its inflation rate forecast for 2014, raising the figure to 7.2 percent from 6 percent initially predicted.
Russia Able to Reject Unnecessary Imports
“In the mid-term, we are able to completely reject unnecessary imports,” Medvedev said.
Medvedev added that “no one has ever said that we would redirect our agriculture completely for the Russian producer in half a year.”
The prime minister noted that “the shelves of our stores are already currently filled with Russian goods” across the country.
Moscow has condemned the sanctions as groundless and counterproductive, introducing a one-year ban on certain food imports from the countries that have imposed sanctions.
In addition, the Russian authorities have launched an import substitution program to replace Western imports in the country's defense, space and energy sectors. Russia has also signed a number of contracts on food imports with alternative suppliers.
Moscow Hopes Kiev Will Fulfill Obligations on Paying Gas Debt by Year End
"[Ukraine] needs to pay its debt to us. At the present moment the figure is at $3.1 billion, some of this has been repaid, part of it needs to be repaid by the end of the year," Medvedev said.
The prime minister added that he hoped Ukraine would proceed with the payment, stressing that Russia will deal with Kiev on an absolutely pragmatic basis.
"Pay the money and gas will be delivered. If no money is paid, then no gas is delivered," Medvedev said.
Russian energy giant Gazprom switched Ukraine to a prepayment system for gas supplies in June over its major gas debt, which at the time exceeded $5 billion.
Following the move, Ukraine's Naftogaz turned to the Stockholm Arbitration Court requesting it to review the contract with Gazprom with hopes to recover $6 billion in alleged overpayments. In response, Gazprom filed a lawsuit against Naftogaz with the same court in order to recover the debt.
In late October, the two sides agreed on a "winter package" deal, securing the deliveries of Russian gas to Ukraine until March 2015.
According to the agreement, Kiev has to pay $3.1 billion of its gas debt to Russia by the end of 2014. The first tranche of $1.45 billion was transferred to Russia in November.
On December 9, Gazprom started prepaid gas deliveries to Ukraine.
Moscow is ready to negotiate European participation in Blue Stream gas pipeline project, Prime Minister Dmitry Medvedev said Wednesday.
“We plan to increase capacity of the Blue Stream or create additional capacities in the Black Sea region, create a [gas transportation] hub in Turkey to sell gas to other states. This idea is just as attractive, and European partners – members of the European Union – can join it, as well as partners from other states,” he said.
The Blue Stream is a major gas pipeline developed to deliver Russian natural gas to Turkey through the Black Sea.
In November, Russia and Turkey confirmed their interest in increasing gas deliveries via the Blue Stream pipeline from 16 billion cubic meters to 19 billion cubic meters per year.
Bulgaria Had to Hold Up South Stream Under Pressure From EU, US
Bulgaria refused to allow the construction of the South Stream gas pipeline via its territory under pressure from the European Union and the United States, the Russian prime minister said Wednesday.
On December 1, Russian President Vladimir Putin announced that Russia would abandon the South Stream pipeline project. The South Stream was originally designed to bring Russian natural gas to a number of EU countries via a new route under the Black Sea bypassing Ukraine.
Putin cited the European Commission's "non-constructive" stance on the matter as one of the main reasons behind this decision.
In August, the Bulgarian energy minister said he had frozen the construction of the gas pipeline indefinitely on Bulgarian soil as it did not meet EU guidelines.
However, following Russia’s decision to drop the South Stream project, Bulgarian Prime Minister Boyko Borisov expressed hope it would be resumed soon, adding that otherwise Bulgaria would lose a lot.