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Oil Could Slip Below $60 For 6 Mths in 3 Yrs - Kudrin

Russian Oil WellMOSCOW. Dec 9 (Interfax) - Oil could slip below $60 a barrel for a six-month period within three years, Russian Deputy Prime Minister Alexei Kudrin, who is also the country's finance minister, told reporters.

"Oil will fall below $60 a barrel for a six-month period within three years," Kudrin said.

Kudrin said his predictions are based on analysis of the market and all available materials. "This is a realistic possibility, and we need to be ready for it," he said.

Oil has cost over $70/barrel for two years, but lower than that for the remainder of the decade, Kudrin noted. "We are planning on it remaining (above $70), that is what we're reckoning on," he said.

It has to be understood, he said, that Russia is running a rather high budget deficit. If oil is at $75/barrel, a deficit of 4.6% of GDP "is a very large deficit." In 2007, when oil was at $70, Russia had a budget surplus of 5% of GDP. "That means that we are now very far off the principles of balance," he said. This situation should be temporary, and should not last for more than three years, however, he said. "We need to get to a sensible deficit then," he said.

In 2015, oil could cost $82/barrel, in which case the Russian government would be looking to balance the country's budget, Kudrin said. "If the price is not $82, but $50, then the deficit could be around 3% of GDP, and if in 2015 we have a deficit of 2% of GDP (with oil at $82/barrel), then at $50 per barrel we'd have a 5% deficit," he said.

For Russia, Kudrin said, a normal budget deficit is not over 2% of GDP if oil cost $50/barrel.


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