By Darya Korsunskaya and Alexander Marrow
(Reuters) -Finance Minister Anton Siluanov said on Wednesday an adjustment to the $60 oil cut-off price for Russia’s budget rule should be considered, marking a potential policy shift that could impact Moscow’s ability to raise spending and build up cash reserves.
Under the budget rule, the Finance Ministry sells foreign currency from its rainy-day National Wealth Fund to make up for any shortfall in revenue from oil and natural gas exports, or makes purchases in the event of a surplus.
While Siluanov had previously spoken in favour of the cut-off price being changed, he recently ruled out an adjustment for the next three-year budget.
Responding to a lawmaker’s question about Russia’s depleting reserves on Wednesday, he appeared to change tack once more, saying the issue would be discussed when formulating budget policy.
“We need to think about whether, when preparing the new budget for the medium-term, we should look at the cut-off price level … to what extent it corresponds today to levels that allow us to ensure not only the preservation of the National Wealth Fund, but also its replenishment,” Siluanov said.
Russia’s fiscal buffers have dwindled since its February 2022 invasion of Ukraine, with Moscow dipping into the wealth fund to finance budget deficits and support state-owned companies. The fund’s liquid assets stood at $40.4 billion on May 1, down from $112.7 billion before the invasion.
High prices for oil, the cornerstone of Russia’s export-focused economy, enable Russia to set funds aside, but with Brent futures having dropped to about $60 a barrel and Urals crude even lower, Moscow’s finances are under pressure.
A lower cut-off price would allow Russia to save more petrodollars, but that also implies reduced expenditure, which, as analysts have noted, may be hard to achieve with Moscow spending heavily on the war in Ukraine.
(Reporting by Darya Korsunskaya; Writing by Alexander Marrow; Editing by Alison Williams and Helen Popper)
