Russia's budget must account for risks to oil prices owing to possible uncoordinated actions by exporters - Finance Minister

MOSCOW. April 29 (Interfax) - The risks to oil prices owing to possible uncoordinated actions on the part of oil-exporting countries must be taken into account when formulating Russia's federal budget, and a three-year financial reserve must be maintained in the National Wealth Fund (NWF) to achieve this, Finance Minister Anton Siluanov said.

"Our budget is still one-fifth dependent on oil and gas revenues. We understand that this is a market situation. Oil prices are high one day and low the next. We must always have a safety net in case we receive less oil and gas revenue. We formulate the budget based on certain principles and fiscal rules. The goal is to create a three-year reserve in the NWF, so that we could weather low oil prices," Siluanov said at the Knowledge.First marathon.

"Today, let's say we hear that one country, the United Arab Emirates, is leaving OPEC. This means that they could produce and release as much oil as they have and throw it on the market. Today, it is clear that the market is limited by passage through the Strait of Hormuz. However, what will happen tomorrow? What if OPEC countries do not pursue a coordinated policy, and instead produce and extract as much oil as they want, depending on the available capacity? Consequently, prices would fall. What would happen to our budget?" Siluanov said.

Therefore, the budget must have a financial safety net for at least three years, Siluanov believes.

Explaining the rationale for the three-year period, Siluanov said that oil companies would reorient to the global market during this time.

"Some companies, especially those producing shale oil, have very high production costs at $60 or even more per barrel. Therefore, if prices fall, supply volumes would decrease on the market, and prices would recover," Siluanov said.