Russian finance minister Aleksei Kudrin is bracing himself
to resist spending pressure from politicians in the run-up to
parliamentary elections in December 2007 and the presidential
poll in 2008.
In an interview with Emerging Markets, Kudrin also called
for heavier taxation of gas production – and said that
the state-controlled oil company Rosneft’s initial
public offering (IPO) heralded a reduction of the
state’s role in the oil sector.
Asked whether his warnings to his government colleagues
about unnecessary expenditure were being heeded, Kudrin replied
that the preparation of the 2007 and 2008 budget plans was
But "even though the government has laid down the main
parameters, ministries, parliament and [parliamentary] deputies
come up with proposals to increase expenditure of various
kinds. And so we are put under great pressure. But everything
is under control, and I’m sure we’ll
take a reasonable decision."
Russia needs a great deal of investment in infrastructure (the
power sector, roads, ports, airports, etc) and in its national
projects on education, health and demographic development,
Kudrin said. It was also "a concern" that state sector wages
are falling behind as general pay levels rise. "And in the
run-up to the elections we can expect a great deal of political
pressure to be put on us.
"Knowing that all these problems have to be solved, we
can’t allow ourselves to use up all the resources
we have on them. We have to keep within definite limits, to
prevent any sharp increase in inflation or further
strengthening of the rouble. It will be hard to explain these
things to parliament, on the eve of elections – but,
nevertheless, the effectiveness of our budget spending must be
Kudrin said that Russia’s tax regime for the oil
industry – with high taxes on production, and some of
Europe’s lowest on oil processing – is
satisfactory, but that taxes on gas production "should be
higher". He believes the level of investment in new fields
– which has been a matter of concern to economists
– will rise once the new law on mineral resources is
adopted later this year.
There would be "definite limitations" on foreign participation
in "the most important oil fields", which include some of the
world’s largest, he said. These could be worked by
joint Russian- and foreign-owned companies.
Kudrin stated several times last year – in sharp
contrast to the apparent direction of Kremlin policy –
that the state’s role in the oil sector should not
be increased. Asked how he saw this issue now, he said: "The
Rosneft IPO is a reduction in the role of the state in the oil
and gas sector. So the view I expressed coincides exactly with
what Russia is doing in this regard.
"The measures taken in the last two years – when
Sibneft was bought by Gazprom, and Rosneft received some of the
assets that used to belong to Yukos – caused a great
deal of concern. But no-one regards state ownership of such
assets as an end in itself. These measures were taken at a
particular stage of the restructuring of the sector. But we are
not going to see a continuous strengthening of the
Asked about Gazprom’s current drive to increase
its share in formerly privately-owned gas companies, he said:
"There should be an independent gas sector in Russia and a
reduction in its size is not desirable."