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25 abril 2007

Russia to invest oil revenues in shares

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

Investing in such equities is part of a plan championed by Alexei Kudrin, finance minister, to split Russia’s “stabilisation” 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 “future generations” 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 returns.

“There we will have corporate shares from various sectors, including oil and gas, so we will have a bigger income,” 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 world’s 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.