U.S. ratings agency Fitch said the Russian government has asked ministries to identify 700 billon rubles ($9 billion) of cuts, which will help with the deficit but will also likely dent demand in an economy weakened by lower oil prices and rouble volatility.
Brent crude prices have declined over 10 percent this year, and down around 70 percent over the last 18 months, hitting the budgets of oil-dependent nations, such as Nigeria and Azerbaijan, which have sought assistance from the International Monetary Fund.
"The Kremlin is now at a position where it has to choose between further spending cuts or drawing down its sovereign wealth funds, which may be more palatable given upcoming elections. With the Russian economy declining rapidly (by 3.7 percent in 2015), there are reports of small scale protests starting to occur, which President Putin will not want to gather momentum," said chief oil analyst at Energy Aspects, Amrita Sen in a note.
Sen also noted that because Russian oil companies such as Lukoil, which have seen a growing proportion of their production become increasingly uneconomical, have begun to call for output cuts and co-operation with OPEC, there is little downside for Russia to suggest a production cut deal with the cartel.