Russia is paying money from a sovereign fund of oil companies to lower domestic fuel prices
MOSCOW (Reuters) - Russia expects to pay oil companies about 210 billion rubles ($ 3.3 billion) in funds from its national wealth fund this year as part of an agreement to keep gasoline and diesel prices low, a senior Finance Ministry official said on Friday.
The government and oil companies agreed last year to cut wholesale prices for domestic fuel as a temporary measure to curb gasoline and diesel costs.
Under the agreement, which went into effect on November 1 and continues until June 30, oil companies were allowed only to slowly increase gasoline and diesel costs, which began to rise due to rising world oil prices.
Russia is part of a global deal to cut oil production to boost crude prices, a key source of state revenue, but that has a negative impact at home as gasoline costs rise, a key factor affecting inflation.
Alexei Sazanov, head of the Finance Ministry's tax department, told reporters that in February alone the state paid 20-30 billion rubles to oil companies to keep fuel prices under control.
Russia uses the National Wealth Fund as a tool to mitigate potential external shocks and pay pensions or support some important projects at home. The rules of spending are strict because the state wants to keep the fund.
The payments from the National Wealth Fund to oil companies this year are expected to reach 210 billion rubles, Sazanov said.
Under the "rule of public finance", any revenue from oil prices above $ 40 a barrel goes to the National Fund for wealth, which is part of Russia's reserves of gold and foreign currency held by the Central Bank.
The fund currently has $ 59 billion, and is expected to quadruple the figure to more than $ 200 billion, or 12 percent of GDP, in 2021.
(USD = 63.9288 Russian Rubles)