Russia considers budget rule to build up reserves, cap rouble strength
2022.07.19 14:50
FILE PHOTO: A view shows the FPMC B 104 bulk carrier in Nakhodka Bay near the crude oil terminal Kozmino outside the port city of Nakhodka, Russia June 13, 2022. Picture taken with a drone. REUTERS/Tatiana Meel
MOSCOW (Reuters) -Russia may reinstate the budget rule that diverts excess oil revenues into its rainy-day fund, setting a new cut-off oil price of $60 per barrel, a source close to the Kremlin said on Tuesday, confirming an earlier report.
The rule was fully suspended after harsh Western sanctions imposed after Moscow started what it calls a “special military operation” in Ukraine on Feb. 24.
Now the finance ministry is working on a new budget rule and price, aiming to help build up reserves and cap rouble strength, the source said.
Authorities are keen to shield the economy from external shocks after halting foreign currency purchases in early 2022 to ease pressure on the rouble at a time when it was falling sharply in the weeks before Moscow deployed tens of thousands of troops in Ukraine.
Now the rouble has soared to seven-year highs, boosted by capital controls that include curbs on Russians withdrawing foreign currency savings, thereby eating into Russia’s export income by denting the value of dollar and euro proceeds from sales abroad of commodities and other goods.
The source close to the Kremlin, who spoke on condition of anonymity, told Reuters that the finance ministry had proposed a crude oil price of $60 per barrel and a daily oil output of 9.5 million barrels under the new rule, confirming the earlier report in the Vedomosti daily.
The previous budget rule envisaged a cut-off oil price of $40 per barrel with an annual 2% increase.
President Vladimir Putin has said that Russia’s crude oil and gas condensate output in June stood at 10.5 million barrels per day.
The new rule parameters have been proposed by the finance ministry and some top officials had a different view, the source said, adding that details would be discussed with Putin in August.
The finance ministry declined to comment.
Finance Minister Anton Siluanov said last month Russia may start buying the currencies of “friendly” countries and use those holdings to try to influence the exchange rate of the dollar and euro, as a means of countering sharp gains in the rouble.
The new budget rule, if imposed next year with the parameters proposed by the finance ministry, could mean the rouble on average will be 10-20 roubles weaker than now, said Stanislav Murashov, an economist with Raiffeisen Bank in Moscow.
