MOSCOW—Prices for oil, its main export, are sliding, and Russia is already gearing up for economic troubles, laying plans for spending cuts and a weaker ruble if the global situation worsens further, according to First Deputy Prime Minister Igor Shuvalov.
"The dangers are clear—falling demand for our products and the prices on them—just what we saw in 2008. For the moment, it doesn't look that bad, but we need to be ready for the most dramatic possible shocks," he said in an interview.
Russia spent tens of billions defending the ruble in 2008 and its once-hot economy dropped into a steep recession in 2009. Growth this year is expected to be around 4%.
Mr. Shuvalov said Russia is better prepared than in 2008, with less foreign-currency debt and a "practically free-floating" ruble. "At $90, we feel more or less OK," he said, referring to the price for crude oil in Europe, now about $96 a barrel.
Russia's Shuvalov on Economy, Policy
Read excerpts from the WSJ interview.
He said the government remains committed to promised steps to improve the investment climate and open the economy, including an aggressive plan to cut state ownership in half over the next five to six years.
In the first major official Russian comment on the recent explosion in tension between BP PLC and its Russian partners, Mr. Shuvalov said the government doesn't want a state company to buy BP's stake in the TNK-BP Ltd. joint venture but would welcome a takeover by BP's existing local partners, a group of Soviet-born billionaires known as AAR.
Relations between the two sides have grown so tense that BP on June 1 said it is considering selling its 50% stake in TNK-BP,which is Russia's third-largest oil producer. AAR has expressed interest, but so has a Russian state company, according to people close to the process, raising concern about a tightening of Kremlin control over the oil industry in the world's largest energy producer. "If the conflict with BP won't go away, then it's better that AAR buy BP out," Mr. Shuvalov said.
While BP has denounced AAR's approach, Mr. Shuvalov praised the often-tough tactics of its dominant shareholder, Mikhail Fridman's Alfa Group. "They're difficult partners, but they are very responsible and have shown that they can achieve a lot," said Mr. Shuvalov.
Mr. Shuvalov said the government also would be happy to see another foreign company join TNK-BP. He left the door open to participation for a state company as part of a broader alliance in which another foreign major might take a stake in OAO Rosneft, the state oil company. The government also would be eager to find a way to keep BP in the Russian oil sector even if it sold its TNK-BP stake, he said.
No discussions are under way with the government on any of these issues at the moment, he said. He said he wasn't aware that a state company had expressed interest in buying BP's stake, adding that the government would have to approve such a deal for it to go through.
Mr. Shuvalov confirmed Russia was considering a request for financial assistance from a European country but said a final decision would involve "political considerations" and would be taken by Russia's top leadership. Officials in Cyprus, struggling with banking problems, have said they have appealed to Moscow for a second bailout loan.
Mr. Shuvalov said that for Russia, the greater risk is a sharp slowdown in European growth because of its potential impact on world prices for Russia's commodity exports, rather than the fate of the euro.
In Mexico for the meeting of the Group of 20 leading economies, Russian President Vladimir Putin in a local newspaper touted Russia's low debt and relatively strong growth, but also pledged to speed reforms and called on other countries to "end the hypocrisy" and reach agreement limiting protective tariffs on trade.
Many investors have expressed concern that with Mr. Putin's return to the presidency in May, hopes for long-awaited economic reforms are fading. Mr. Shuvalov said the government remains committed to steps to improve the investment climate, noting that much of the huge capital outflow seen in recent months has been from companies with too few suitable projects to invest in.
Mr. Shuvalov hinted at differences within the government over the pace of a planned sell-off of state assets, noting that the strategic energy sector will get special treatment. But he sought to allay fears that Rosneftegaz, a state holding company where former Kremlin energy czar Igor Sechin is expected to join the board soon, would be used to bring more assets under state control. "The prime minister and I and our colleagues agree that there's no reason for the state to use it as a means to grab up assets," he said.
Political opposition and budget problems could slow some painful overhauls in areas like health, pensions and education, he said. But investors should welcome the new tension in Russia's political system, as evidenced by the mass street demonstrations in the months since the contested December parliamentary elections, Mr. Shuvalov said.
"If gradually, with the authorities moving back and forth between tightening up and loosening, people get used to this 'new normal' of protests, that means the political system is developing," he said.
Even if the Kremlin gradually opens the political system at home, tensions with the West over foreign policy—such as Moscow's support for the regime in Syria—are likely to continue because of broad domestic support for Russia's independent foreign policy, he said.
"There's no reason to expect that even if Russia has the most developed political system and no one can find anything to criticize on freedom, there won't be frictions in the international arena," he said.
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