14 May 2010 15:36

Russian 2010 budget balanced if oil at $95 per barrel

MOSCOW. May 14 (Interfax) - Russia's 2010 federal budget, including Reserve Fund spending, will be balanced if oil is at $95 per barrel, Deputy Prime Minister Alexei Kudrin, who is also the country's finance minister, said at a joint Friday collegium of the Finance and Economic Development Ministries.

"Right now our 2010 budget equilibrium is at a level of $95 per barrel, if you take into account that on top of what we planned on in revenues from the economy we will also spend the Reserve Fund. Taken together, this will balance our budget at a level of $95 per barrel," Kudrin said.

At the moment the system for "ending dependence on oil" was put together, it was determined that the average annual long-term price for oil should not exceed $50 per barrel, he said. That was an easy level when forming an oil and gas transfer - everything above that price was put toward the formation of the transfer, he said.

Kudrin also said that it was planned then that the oil and gas transfer would be cut to 3.7% of GDP in 2011, and thenceforth it would not increase.

However, it turned out in 2009 that the Finance Ministry "pinned significant expectations on oil prices," Kudrin said. Spending was planned figuring $95 oil, but it cost $61. This meant the Reserve Fund had to be used. Therefore, he said, the oil and gas transfer was more than 11% of GDP, and half of spending was provided by oil and gas proceeds.

Discussion of where to cut off the oil price for budget deficit financing continues, Kudrin said. So, in 2011 "the softest stopping point we can allow ourselves is $70 per barrel," he said. This means that "if at $70 oil we have a deficit of 4% of GDP, like we plan, then if oil is $50 a barrel, then the deficit will be 8% and that is already dangerously high," Kudrin said.