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Russian economy gains nothing from high oil prices -- expert

MOSCOW, August 30 (RIA Novosti) - High oil prices are no obstacle to world economic growth, but the Russian economy, the main beneficiary of the petroleum boom, will gain nothing from high prices because the sector's superprofits are all appropriated by the budget, a respected business daily reported Tuesday.

Vedomosti wrote that oil prices had nearly doubled in the past two years reaching a record $70 dollars per barrel. During previous such leaps, such as in 1973-1974 and 1980-1981, the situation was described as an oil crisis, with global GDP dropping by several percent. However, in the "crisis" year 2005 global GDP, as estimated by the IMF, will rise by 4.3%, which is slightly below the record 5.1% growth of 2004.

One of the reasons for such sustained growth is that oil prices are not growing because of attempts by suppliers to manipulate the world market or for fear of the Middle East conflict as in the last century. Oil is becoming more expensive precisely because the world's economy is showing robust growth, experts told the paper.

Production volumes and exports, not prices, power Russia's economic growth, said Oleg Vyugin, the head of the Federal Service for Financial Markets. Oil prices drive the Russian economy only given certain conditions: with Urals crude priced at $35-40 per barrel, they maintained its growth at 4.5-5% of GDP. But following the review of tax legislation in 2004, 95-99% of the oil sector's superprofits are appropriated by the state. "The money is redistributed to the budget, and the budget spends it on current consumption, so GDP growth will drop by 0.1-0.2% every year," said Sergei Aleksashenko, president of Antanta Capital brokerage.

Vyugin said that the state could stimulate economic growth by strengthening the ruble. A stronger ruble would increase the value of national assets and investments in branches catering to the domestic market. But the prevailing viewpoint, according to the official, is that ruble appreciation would harm exporters.

In Aleksashenko's view, global economic trends have had their effect. The financial sector and telecommunications are developing energetically under the umbrella of the export sector. But they alone cannot generate a new economy and create an economic boom in Russia, the economist said.