Russia says it will invest more oil wealth in its economy

The Russian government said Friday that it would invest more of its oil wealth directly into the economy, mainly in infrastructure, as it sought to maintain its longest expansion since the fall of the Soviet Union.

Budget-funded investment will rise to at least 900 billion rubles, or $36 billion, next year, the acting first deputy prime minister, Sergei Ivanov, said at an investment conference in the Black Sea resort of Sochi. State investment will climb to 3.8 percent of gross domestic product in coming years, Ivanov said.
“Russia more than ever before is using oil and gas revenue for financing projects,” the acting finance minister, Alexei Kudrin, said. Budget revenue from taxes on oil and natural gas now equals 5 percent to 6 percent of gross domestic product, versus 2.5 percent a few years ago, Kudrin said.

Analysts have been urging Russia to wean itself from its nearly total dependence on oil and natural gas revenue through diversification measures, from improving transportation to encouraging small businesses. It is an ideal time to act, they say, because of the economy’s remarkable turnaround since the financial crisis of 1998, when the Russian ruble collapsed.

The Russian economy will probably expand 7.5 percent this year, more than the 6.5 percent originally forecast, as rising oil prices translate into record revenue, the acting economy minister, German Gref, said Thursday. The economy expanded 6.7 percent in 2006, the eighth-straight year of growth.

International Herald Tribune