The military stand of Russia is costing the country on the economic frontier. The NATO has lobbied hard to impose harsh sanctions on the Russia due to its stint in the Ukraine and Eastern Europe. The western governments were well aware of dependence of Russia on the oil exports and looks like they are pressing the right pressure point. Russia’s biggest oil manufacturer, OAO Rosneft has reported sharp 35 percent drop in the first quarter profit.
The economic sanctions combined with massive decline in the crude oil prices has resulted in the disastrous situation. The net income was reduced to $1 billion from almost $2 billion. The company informed about this development through its websites. Many analysts pointed out that the Moscow based corporation would earn around $36.5 billion rubble but company outperformed the predictions. The corporation has responded by implementing large-scale cost cutting measures as it has repay its debt. In order to merge with Russia’s third biggest oil player, TNK-BP, the company had to borrow around $55 billion in 2013.
Europe was the biggest importer of the Russian gas and oil but the political situation has stopped access to equipment and finance. The average oil price has also decreased to half in last year as United States flooded the market with Shale oil. The spending has been significantly reduced and there for average cash flow is better than expect, said Renaissance Capital’s Ildar Davletshin. The oil and gas analysts hope for the positive future of the corporation.