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Putin seeks to curb spending on ‘rainy day fund’ as energy transition looms

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Russian President Vladimir Putin is seen at Bocharov Ruchei State Residence after meeting with Turkish President Tayyip Erdogan in Sochi, Russia, September 29, 2021. Sputnik / Vladimir Smirnov / Pool via REUTERS

MOSCOW, Oct. 1 (Reuters) – President Vladimir Putin on Friday ordered the Russian government to consider cutting public fund spending for rainy days, after the finance ministry said the global oil cut-off and gas could jeopardize the finances of the Russian state within a decade.

Russia now has about $ 190 billion in its National Wealth Fund, of which about $ 115 billion, or 7.3% of GDP, is liquid assets derived primarily from the sale of oil and gas.

The government is now allowed to spend liquid assets that accumulate above 7% of GDP. But Putin ordered the cabinet to consider raising that threshold to 10%, which could cut future spending by tens of billions of dollars.

The government announced last week its intention to invest $ 34 billion in the fund over the next three years. Read more

“Without a doubt, the NWF must be preserved,” Kremlin spokesman Dmitry Peskov told reporters on Friday. “And as the global financial and economic situation surrounding Russia is quite unpredictable and contains risks of crisis, the role of the NWF increases.”

The Kremlin document was released a day after the finance ministry’s draft budget amendments outlined the risks to state finances associated with the global transition from fossil fuels and recommended “a particularly cautious approach” to investing. surpluses in the investment fund while energy prices remain high.

The EU, Russia’s main energy customer, aims to achieve “net zero” emissions by 2050.

Russian Finance Ministry sees the average price of Russia’s flagship oil in the Urals drop to $ 55.7 per barrel in 2024, from $ 66 per barrel this year due to weaker demand due to the global surge to reduce carbon emissions.

Global oil prices could drop to $ 35 a barrel in 2030 and again to $ 25 a barrel by 2050, because “the demand for oil would drop dramatically if the zero neutrality targets announced by a number of countries became law “, did he declare.

Emissions reductions could put pressure on Russian state budgets from the start of the 2030s. In the most severe scenario, the heritage fund could shrink to just 3% of GDP in 2030-31, the ministry said. .

Reporting by Darya Korsunskaya and Dmitry Antonov Writing by Katya Golubkova Editing by Peter Graff

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