"Given [global] oil prices of $20 per barrel, lost budget revenues would amount to $900 million, and this, along with a possible deterioration of the international business environment and growing budget spending, could lead to budget deficit," German Gref said. "In this case, the Stabilization Fund could cover country's expenditures for about two or two and a half years."
According to the Finance Ministry, the Stabilization Fund stood at 1,562.7 billion rubles ($55.7 billion) as of March 1. Deputy Prime Minister Alexander Zhukov earlier said the fund was expected to exceed $70 billion at the start of 2007 and $107 billion at the start of 2008.
The Stabilization Fund, established to harvest windfall oil revenues, has been a major source of controversy between the government, the economics and finance ministries, federal bodies and lawmakers.
Audit Chamber head Sergei Stepashin last week slammed current policy, saying: "The Stabilization Fund in its present form is not an effective economic policy tool." Stepashin said fund money had not been invested to generate more revenues, and that it risked losing value.
Gref earlier said that profitability was not the main factor in investing fund money, adding that security and quick convertibility, or liquidity, were more important. He also said that combining profitability and the other factors was difficult.
The Finance Ministry has submitted a draft resolution to the government on managing the fund that suggests investing it only in premium debt obligations of industrialized nations. The securities should have a rating of AAA (Fitch Ratings or Standard & Poor's) or Aaa (Moody's Investors Service) assigned by at least two of the three agencies.
Parliamentarian Gennady Semigin, head of an unofficial shadow Cabinet known as "the people's government" and leader of the nationalist Russian Patriots, also criticized the government for accumulating oil revenues in the Stabilization Fund instead of spending them on social programs, and for failing to reform public services, such as health, education and housing.
Mikhail Kopeikin, head of the government's economic and property management office, earlier suggested dividing the Stabilization Fund money into two, with one part be invested in foreign bonds and currencies and the other in foreign stock. He said over 66% of oil revenues could be invested in foreign bonds and currencies, and the share could be gradually increased if the investment option proved successful.
The remaining third could be placed in the shares of hundreds of reliable foreign companies in different countries and involved in businesses without links to the oil industry. The official said this would help diversify the investment package and ensure its security. These must be long-term investment options, which would help bring down risks, according to Kopeikin.
