Russian President Vladimir Putin has ordered the government to decide whether it is viable to limit the spending of the Russian sovereign wealth fund in view of expected lower oil and gas revenues in the energy transition in the coming decades.
Russia’s National Wealth Fund (NWF) holds some $190 billion in assets, most of which are liquid assets from revenues of oil and gas.
Current legislation allows Russia to spend money from the fund above a threshold of assets equal to 7 percent of gross domestic product (GDP) held by the fund.
Putin, however, wants the government to say by October 15 if the country should amend the legislation to put the minimum assets held by the fund before any spending at 10 percent of GDP. This would potentially restrict spending from the fund.
Putin’s proposal comes after the Russian finance ministry said that the energy transition could dent Russian oil and gas revenues and threaten the country’s finances within a decade, Reuters reporter Darya Korsunskaya notes.
The president’s proposal to raise the ceiling above which investments can be made from the fund is aimed at preserving the fund, Kremlin spokesman Dmitry Peskov said on Friday, as carried by Russian news agency Interfax.
“And as the global financial and economic situation surrounding Russia is quite unpredictable and contains crisis risks, the role of the NWF is increasing,” Peskov added.
Last year, when oil and gas demand and prices collapsed in the pandemic, the share of the oil and gas industry in Russia’s economy declined to 15 percent, down from 19.2 percent in 2019, according to a first such assessment published by the Russian statistics agency Rosstat in July.
The perception in Russia is that oil and gas make up around half of Russia’s GDP, but this is more likely due to the fact that fossil fuel exports account for around 50-60 percent of all Russian exports, Oleg Shibanov, finance professor at the New Economic School in Russia, told Russian outlet RBC at the time.