: Bloomberg: Putin's decade-old dream realized as Russia to price its own oil

11:07 Apr. 28, 2016

Bloomberg: Putin's decade-old dream realized as Russia to price its own oil

Russian President Vladimir Putin listens to Uzbek President Islam Karimov at the Kremlin in Moscow, Russia, on Tuesday, April 26, 2016 (AP Photo)

Russia hopes to end dependence on Western agencies' assessment

Russian President Vladimir Putin is on the verge of realizing a decade-old dream: Russian oil priced in Russia.

Read also 'Putin is smart, but truly an evil man' - Ex U.S. Secretary of State

The nation's largest commodity exchange, whose chairman is Putin ally Igor Sechin, is courting international oil traders to join its emerging futures market. The goal is to increase revenue from Urals crude by disconnecting the price-setting mechanism from the world's most-used Brent oil benchmark. Another aim is to move away from quoting petroleum in U.S. dollars.

If Russia is going to attract international participation in Russian-based pricing, the Kremlin will need to persuade traders it's not simply trying to push prices up, some energy analysts said. The government is dependent on oil revenue to fund its budgets.

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"The goal is to create a system where Russian oil is priced and traded in a fair and straightforward way," said Alexei Rybnikov, president of the St. Petersburg International Mercantile Exchange, or Spimex, in a phone interview.

Russia, which exports about half its crude, has long complained about the size of the discounts for lower quality Urals oil compared to North Sea Brent prices, which are assessed by the Platts agency.

Read also 'Russia's only gain from oil is shame'

With world oil prices down by half in the past two years and Russia facing the prospect of its worst budget deficit as a percentage of its economic output since 2010, it needs every dollar of petroleum revenue it can get. Having its own futures market would improve Russian oil price discovery as well as help domestic companies generate extra revenue from trading, said Rybnikov.

Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy-market news and information.

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