Yukos warns of Iraqi war consequences

Yukos chairman Mikhail Khodorkovsky is convinced that if the US is successful in forcing a regime change in Iraq, the price for Russian Urals-grade oil may slump to $ 12-14 per barrel, which is lower than the Finance Ministry’s most pessimistic forecasts envisioned in next year’s draft budget.
Khodorkovsky the board chairman of Russia’s second largest oil firm Yukos, who took part in the session of the State Duma’s Fatherland All Russia faction, believes a US attack on Iraq may inflict substantial damage to the oil industry of Russia, and, subsequently, to Russia’s oil-dependent budget. “If the campaign is quick and effective, the oil price may drop for a while,” Khodorkovsky told the deputies.

According to the optimistic forecasts, if the US succeeds in establishing control over Iraqi oilfields, the price for Russian Urals may drop to $ 14-16 per barrel. The more pessimistic scenario in the case of a swift US victory is a price for Russian Urals on the world market not exceeding $ 12-14 perbarrel. According to Khodorkovsky, the oil price will return to its “acceptable level” of $ 27 per barrel “in the medium-term perspective”, or three and a half years.
Yukos’ chief is convinced that the Russian government has to take into consideration such an unfavourable scenario when discussing Russia’s position on the possible military campaign of the United States and their allies against Iraq. This is especially important given that the financial plan drawn up by the Finance Ministry is calculated on the basis of relatively high oil prices. The Ministry’s forecast of the country’s economic development up to 2005, too, is based on the same figures. The average price for Urals in the past months has amounted to $ 23.6.

In the meantime, even the most pessimistic forecasts coming from the Finance Ministry envisage only the possibility of a return to a moderately low average oil price. In that case Russian Urals will cost $ 17-18.5 per barrel, which, according to the Finance Ministry, will turn a surplus budget into a deficit one.
As regards to the more favourable forecast, the Finance Ministry considers it optimal if oil prices remain between $ 21.5-22.5 per barrel until 2005. This is especially important because with high oil prices there is a chance for a higher price for Russia’s natural gas, which is also important for the national budget, whereas a slump in oil prices leaves that sector with little hope.
The Duma deputies, who are very familiar with the Finance Ministry’s figures, listened to Khodorkovsky’s forecasts with great attention -- in view of the second reading of the draft budget they may come in very useful.