Turning Oil Into Equities: Putin Wants Oil Surplus Invested in Russia

President Vladimir Putin urged the Russian government Monday to bolster the country’s flagging equity market by pumping surplus oil revenue into stocks. The government should consider buying Russian blue chips with excess oil revenue instead of foreign securities, Putin said at a cabinet meeting in Moscow that was broadcast on NTV television.

Chris Weafer, chief strategist at Alfa Bank in Moscow, said, “You would expect to see that money going into companies like Rosneft, Gazprom and VTB Group rather than the broader market.” Weafer added, “The danger is trying to achieve a valuation target, which would only be a short-term fix.”
The Russian Micex index has slipped 2.5 percent this year, after gaining 68 percent last year. Shares of the state-run company Gazprom, the largest Russian company by market value, have fallen 18 percent since the beginning of the year, while the state-run oil company Rosneft has slid 10 percent. Shares of VTB, which raised $8 billion this month in the largest initial public offering by a Russian bank, start trading in Moscow later this month.

Russia, the world’s largest oil producer, has amassed $386.3 billion in foreign reserves and $113.7 billion in its Stabilization Fund, which is invested in bonds denominated in dollars, euros and pounds.

Rigzone