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Putin seeks to rein in ‘rainy-day fund’ spending as energy transition looms By Reuters



© Reuters. FILE PHOTO: Russian President Vladimir Putin is seen on the Bocharov Ruchei state residence after a gathering with Turkish President Tayyip Erdogan in Sochi, Russia September 29, 2021. Sputnik/Vladimir Smirnov/Pool through REUTERS

By Darya Korsunskaya

MOSCOW (Reuters) – President Vladimir Putin ordered the Russian authorities to take a look at curbing spending from the state rainy-day fund on Friday, after the finance ministry mentioned the worldwide shift away from oil and gasoline might jeopardise Russian state funds inside a decade.

Russia now has round $190 billion in its Nationwide Wealth Fund, round $115 billion of which, or 7.3% of GDP, is liquid property raised primarily from promoting oil and gasoline.

The federal government is now permitted to spend liquid property that accumulate above 7% of GDP. However Putin ordered the cupboard to look into elevating that threshold to 10%, doubtlessly lowering future spending by tens of billions of {dollars}.

The federal government introduced plans final week to take a position $34 billion from the fund over the subsequent three years.

“Doubtless, the NWF must be preserved,” Kremlin spokesman Dmitry Peskov instructed reporters on Friday. “And because the world monetary and financial state of affairs surrounding Russia is sort of unpredictable and accommodates disaster dangers, the position of the NWF is growing.”

The Kremlin’s doc was launched a day after draft finances amendments from the finance ministry described dangers to state funds from the worldwide transition away from fossil fuels, and really useful “an particularly cautious strategy” to investing surpluses within the wealth fund whereas vitality costs stay excessive.

The EU, Russia’s major vitality buyer, goals to succeed in “web zero” emissions by 2050.

The Russian finance ministry sees the typical worth of Russia’s flagship Urals oil falling to $55.7 per barrel in 2024 from $66 per barrel this yr on projected weaker demand from the worldwide push to chop carbon emissions.

International oil costs might fall to as little as $35 per barrel in 2030 and additional to $25 per barrel by 2050 as “demand for oil would fall drastically ought to zero-neutrality targets introduced by a lot of international locations change into a legislation”, it mentioned.

Emissions cuts might put stress on Russia’s state budgets as quickly because the early 2030s. In essentially the most extreme situation, the wealth fund might shrink to as little as 3% of GDP in 2030-31, the ministry mentioned.

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