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Russia's Putin worried over oil price fall
By Patrick Lannin
MOSCOW, Nov 5 (Reuters) - Russian President Vladimir Putin asked his government on Monday to propose further changes to next year's budget in light of recent falls in the price of oil.
Oil revenues are vital for Russia and the government has watched with concern as prices slip. Inflation has also been a worry, although new figures for October showed prices would finish the year close to revised government expectations.
"The government should react in the proper fashion to the recent changes and we have such a possibility," Russian news agencies quoted Putin as saying of the recent fall in crude.
Prices for Russia's main export type, Urals blend, are fast heading for the $18.50 a barrel level set in the 2002 budget as the minimum expected. Further falls could wreck the government's financing plans next year.
"What is happening on world markets should not leave us in confusion," Putin was quoted as telling key ministers at a meeting in the Kremlin. "We had foreseen this."
He said amendments made to next year's budget, a landmark document as it foresees a surplus for the first time, had been correct, but that Prime Minister Mikhail Kasyanov and Deputy Prime Minister Viktor Khristenko should propose further changes.
The surplus foreseen in next year's budget is 1.63 percent of gross domestic product (GDP). The other novelty in the finance bill is a special reserve of some 109.8 billion roubles to help meet a peak of debt repayments of $19 billion in 2003.
OIL DRIVES RUSSIAN ECONOMY
The government's information office said in a statement that Kasyanov had also discussed developments on the oil market at a separate meeting held earlier in the day.
The government has said it can manage next year even if oil prices go below $18.50 a barrel, although it has said it might need help from the International Monetary Fund and from the Paris Club of sovereign lenders if things get too bad.
Booming oil prices have been one of the main drivers of the Russian economy in the last two years, helping it record GDP growth in 2000 of 8.3 percent and an expected 5.5 percent this year. GDP is expected to rise around 4.3 percent next year.
Inflation this year was originally forecast at 12 to 14 percent, but faster than expected growth in prices caused the government to revise its expectation to 17-18 percent.
The State Statistics Committee said in a statement that inflation in October was 1.1 percent on a month-on-month basis after a 0.6 percent gain in September. Food prices rose 0.7 percent, while non-food was up 1.3 percent.
The World Bank's chief economist for Russia, Christof Ruehl, said the latest figures showed an end-of-year level of 17.5 percent was realistic.
"It (inflation) is higher than the original target but it is lower than many were afraid of," Ruehl told Reuters.
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