If oil prices stay where they are now, Russia's economy could be in serious trouble and could face recession in the coming year, analysts warn.
Sergei Guriev, a former advisor to the Russian government, told CNBC that, should oil prices stay at their near-record lows of around $82 a barrel, Russia, which is basing its economic forecasts on a much higher oil price, would face a "serious problem."
"The Russian budget now is including $100 per barrel for the next three years and some more optimistic assumptions on economic growth, which are probably over-optimistic," Guriev, who is currently a professor of Economics at Sciences Po, a French public research and higher education institution, told CNBC at the UBS European Conference in London.
"With $100 a barrel, the Russian budget will probably be balanced over the next two or three years, with eating into reserve funds but not really tragically. But if the oil price is where it is now, it will be a serious problem over the next couple of years."
Brent crude for December delivery traded just below $82 per barrel (pb) on Tuesday, just above a four-year low of $81.63 hit last week. The price has fallen nearly 30 percent since late June but despite the decline, the Organization of the Petroleum Exporting Countries (OPEC) shows no signs of cutting output.
The decline in oil prices has hit Russia hard as its wealth relies heavily on its export-orientated oil and gas markets. In 2013, for example, Russia's energy exports constituted more than two-thirds of total exports amounting to $372 billion of a total $526 billion, according to research by Renaissance Capital bank released on Monday.
The oil price decline, coupled with Russia's conflict with Ukraine which has led to Western sanctions on Russia, has hit the economy as well as investor confidence in the country. As a result, the ruble has declined almost 30 percent against the dollar this year.
President Vladimir Putin tried to reassure global investors that Russia's economy was in safe hands and that there were no "fundamental economic reasons" for the currency's slide.
Shortly after his comments, however, Russia's central bank lowered its 2014 growth forecast to 0.3 percent and forecast 0 percent growth in 2015. It also estimated that capital flight had risen above forecasts to 128 billion in 2014 as investors sought a safer haven for their assets.