Russia diversifies stabilization fund


Richard Moore

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Russia to invest oil revenues in shares

By Neil Buckley - Financial Times

Billions of Russian petrodollars are set to be invested in shares of 
international companies for the first time, boosting Russia¹s presence in 
financial markets.

Investing in such equities is part of a plan championed by Alexei Kudrin, 
finance minister, to split Russia¹s ³stabilisation² fund ­ which has amassed 
$108bn of windfall oil tax revenues since its creation in 2004.

A reserve fund will be kept at 10 per cent of gross domestic product ­ enough to
support budget spending for three years even if oil prices were to halve. Any 
surplus after using a set portion of energy revenues for budget spending will go
into a ³future generations² fund for longer-term projects.

The reserve fund is projected to hold about $142bn and the future fund $24bn 
when the divide occurs next February, and both could continue to grow rapidly if
energy prices remain high.

Mr Kudrin told the Financial Times the reserve fund would be invested in a 
conservative portfolio of government bonds ­ as the stabilisation fund is now. 
But the other fund could invest in higher risk assets, aimed at maximising 

³There we will have corporate shares from various sectors, including oil and 
gas, so we will have a bigger income,² Mr Kudrin said, adding that the money 
could eventually buy assets such as real estate.

He suggested Russian or western fund managers could be appointed to manage the 
fund ­ a contract likely to attract vigorous competition.

The plan demonstrates the turnround in Russian public finances, fuelled by 
record energy prices, since its 1998 crisis. Russia has built gold and foreign 
exchange reserves of $356bn ­ the world¹s third biggest ­ in addition to its 
petrodollars fund.

Splitting the stabilisation money was approved by the Russian parliament last 
week, after it won endorsement from President Vladimir Putin.

[Published: April 24 2007]

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