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Russia's Finance Minister Alexei Kudrin seems to have forgotten
Russia's Finance Minister Alexei Kudrin seems to have forgotten why he stashed away such huge sums of money in the Stabilization Fund.

He is constantly calling it a "safety cushion," but he refuses point blank to discuss the need to spend part of it to cover state budget needs in case prices for raw materials exported by Russia drop. At the Rossiya Forum, held in Moscow on January 30-31, he said that some of the to-be-reformed Stabilization Fund would be invested in foreign shares. Kudrin's colleagues tactfully tried to tell him to get his head out of the clouds.

Deputy Prime Minister and Finance Minister Alexei Kudrin was the headliner of the first day at a grandiose event called the Rossiya Forum in Moscow organized by the Troika Dialog brokerage. It looked as if he arrived there directly from Davos, which hosted the World Economic Forum last week. There he gave assurances to everybody that Russia remained a "safe haven" in the rough sea of world finance caused by a mortgage crisis in the United States, and would stay that way mainly thanks to the fact that through his efforts and windfall from oil exports, Russia had formed a "safety cushion" - a Stabilization Fund totaling $157 billion. So, according to Kudrin, Russia's future would be bright.

In Moscow, Kudrin continued his optimistic talk, again bringing up the subject of the Stabilization Fund and the strategy for managing it. Starting on February 1, he said, the fund would be divided into a reserve fund and a national wealth fund. Most of it (almost $130 million) would be deposited in the reserve fund, which would in effect fulfill the Stabilization Fund's former function - a "cushion for a rainy day." The national wealth fund (which is planned to finance Pension Fund shortages) will also be invested in foreign shares to obtain interest. As he explained, it was too soon to speak of the direct purchases of companies in, for example, the U.S., something being done by China. The reserves thus far accumulated by Russia were insufficient to risk so heavily. But, according to the minister's words, such a prospect is not far off.

Truthfully, Kudrin has not invented anything new. For years he has been diligently copying Norway's experience of managing a similar petroleum fund set up in the last century. But it is extremely strange to discuss seriously investing state funds in foreign shares when stock markets are in crisis. The amassed wealth can be easily lost.

Also, the stock crisis can slow down the leading economies. In that case, prices for raw materials exported by Russia could go down, and so could budget revenues. Drawing upon the Stabilization Fund to meet a budget deficit has not been ruled out; therefore it does not make sense to think about investment opportunities.

Anatoly Chubais and Yegor Gaidar, the authors of the Russian interim economic reforms and his former bosses, tried to hint to him about this at the forum as best as they could. Chubais, after praising Kudrin for preventing the Stabilization Fund from being squandered, emphasized that macro-economic policy must now be further tightened (that is, the fund must be cherished). Gaidar conveyed much the same, calling attention to the fact that Russia was prepared against world upheavals thanks to the Stabilization Fund, which could help the budget to overcome a possible drop in raw materials prices. (Raw materials account, according to various estimates, for 60% to 80% of all Russian exports).

Judging from everything, the Finance Ministry regards it as unthinkable that a world crisis could badly hit Russia. According to Kudrin, in the next three years the Russian economy will grow 6.5% to 7% per year. This means that experts in his ministry believe that raw materials prices will remain high, and the Stabilization Fund will continue to grow. Accordingly, they say, it would possible to look for more "interesting" targets for investing the state reserve.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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