Russia does not view energy crisis as solution to budgetary problems — Novak

MOSCOW, May 12. /TASS/. Russia does not view the energy crisis caused by the conflict in the Middle East as an additional source of solving budgetary and macroeconomic problems, Deputy Prime Minister Alexander Novak said in an interview with Vedomosti. "The present situation in foreign markets should not be considered as an additional source of solving budgetary and macroeconomic problems," he said. At the same time, additional inflationary risks arise due to the transfer of rising global prices to the domestic market, Novak said. "For high-risk goods, we have a well-established mechanism for balancing the domestic and foreign markets: fuel, sulfur, wheat, corn, fertilizers, petroleum products. However, it’s important to monitor the market situation and adjust respective mechanisms in a timely manner," he said. Growing energy export prices are strengthening the ruble, which partially offsets the positive effect on the Russian budget, the official added. The crisis caused by the conflict in the Middle East is creating preconditions for growth in export revenues for both oil and gas and a number of other goods, he noted. "But this effect is not long-term. It is important to continue pursuing a pragmatic and conservative policy," Novak said. The closure of the Strait of Hormuz instantly cut off market access for a third of global energy exports, 35% of oil and 20% of gas, as well as over 40% of sulfur, helium, and industrial exports from the Middle East, he said. Disruptions in raw material supplies had secondary effects: the production of phosphate and complex fertilizers is impossible without sulfur, and the production of semiconductors and the maintenance of MRI machines are impossible without helium. Due to energy shortages, Bangladesh and Pakistan, key textile suppliers, are limiting its production. "All this has impacted global prices for these commodities, which are having a knock-on effect, threatening rising global prices for food, cotton, and other goods," Novak concluded.