Russian finance minister calls for boosting government reserve fund with more windfall oil taxes

Finance Minister Alexei Kudrin called for channeling more tax revenues on windfall oil profits to the government's reserve fund, saying the fund helps control inflation, Russian news agencies reported Tuesday.

Kudrin's statement comes a week after the government raised the threshold after which export duties and taxes are contributed to the 'rainy day fund' from US$20 to US$27 (€15 to €21) per barrel. Experts said that decision would pump an extra US$6 billion (€4.7 billion) into the state budget, not the stabilization fund.

Kudrin urged the price threshold per barrel of oil to be lowered to US$25 (€20) per barrel.

"My attitude toward raising the price is negative," Kudrin was quoted as saying by the ITAR-Tass news agency. "The stabilization fund not only is a safety cushion, it also fulfills the functions of ridding the economy of monetary burden and holding back inflation."

The stabilization fund, which the government has been using to pay down Russia's foreign debts early, was created to insulate the nation against oil price fluctuations. Economists have criticized Russia for relying too heavily on oil and high oil prices to power its economy and budgets.

Russia, the world's second-largest oil exporter after Saudi Arabia, has seen its state coffers boosted by record world crude prices, which have been above US$50 a barrel for weeks.

Officials predict the Russian fund will reach one trillion rubles (US$36.3 billion) by the end of the year.

Associated Press