Russian Finance Minister Alexei Kudrin: Russia may declassify some oil deposits within 2-3 years
Russian Finance Minister Alexei Kudrin tells Interfax about the government's plans in the financial-economic and social sectors.
Russia may declassify part of its reserves of oil, gas and other minerals in two or three years, Finance Minister Alexei Kudrin told Interfax.
"In all extraction sectors there is a certain level of reserves, which are classified, but some of them need to be declassified and brought into circulation," he said.
The minister said that the declassification of part of mineral resource reserves will increase the capitalization of Russian companies and the Russian market. "And the main thing, it will let the world have a clearer picture of real mineral resources, including of oil and gas, which may have a positive influence on price stabilization," the minister said.
He said that the issue of declassifying part of reserves is related to Russian initiatives at G8 meetings, the next of which will take place in St. Petersburg on June 9-10.
"When among key issues at the G8 meetings Russia proposed the need to set up a more transparent fuel market, this also relates to the need to have more exact information on world oil and gas reserves," he said.
"Therefore other countries should also take steps towards declassifying," Kudrin said.
Talking about Russia's plans about its membership of the World Trade Organization (WTO), Kudirn said Russia has to join the WTO, but should only do so on acceptable terms.
"We can't decide not to join the WTO in principle, but we will hold as many talks as necessary. We're talking about acceptable terms," he said.
"If we don't agree on them now, we will do so in a year, or two or three," Kudrin said.
In touching on Russia's position concerning banks and insurance companies, Kudrin said that Russia is not ready to allow foreign banks to open direct branches. "We are also in difficult talks on other issues and have not made any decisions yet," he said.
Russia needs to join the WTO and it won't be possible to double GDP without doing so, Kudrin said. "If we don't join the WTO, we will lower the rate of economic growth over the next few years," he said.
"It's in our interests to join the WTO and I'm confident that this is in the interests of the entire world, therefore I'm optimistic about the prospects for resolving this issue," he said.
Kudrin also said Vneshtorgbank (VTB) could issue retail bonds this year.
Russia is planning to set up a special system to offer financial services to individuals and issuing VTB bonds will be one of these projects, he said.
"We are mainly talking about government savings bonds, but are planning to issue corporate retail bonds," Kudrin said. "We will implement one such project with VTB this year," he said, but did not comment further.
He said that Russia is planning to put forth an initiative to set up a system to provide financial services to individuals at a G8 meting in St. Petersburg on June 9-10. It will also propose a wider program to implement a program of financial education for individuals.
"I would call this initiative 'financial literacy'. The goal is to significantly improve people's financial education and improve their literacy in financial matters," Kudrin said.
He said that few people know how to get mortgage loans, fill out a tax form or transfer money. Most people do not know how to keep their savings in securities and what financial instruments exist to make money.
This financial literacy initiative will help people invest, including by buying shares, for example in Gazprom, Kudrin said. "This will give every citizen the possibility to invest and get a good yield," he said.
The lifting of restrictions on foreign currency operations in 2007 will not lead to a drastic change in the exchange rate of the ruble, Kudrin said.
"We are not expecting any fundamental changes in the market because we are constantly weakening the foreign currency regime and we don't see any sharp changes in the exchange rate of the ruble," he said.
There will be two contradictory tendencies once foreign currency restrictions are abolished, Kudrin said. On the one hand, Russian individuals and companies will get a more liberal regime to invest in Western companies and will be able to keep resources on accounts in foreign banks and conduct operations through them without getting any kind of permission, he said.
"Things will be more liberal and some people will take advantage of this, of course, therefore the possibility will arise of capital outflow," Kudrin said.
"On the other hand, Russia's investment climate is very attractive now, therefore capital is coming into Russia," he said. However, there will not be any sharp fluctuations in the exchange rate, he said.
In touching on the recent behavior of the U.S. dollar, Kudrin said that everyone has concerns about the dollar. The Swedish central bank announced recently that it had increased the euro's weight in its reserves, and China did the same before that, Kudrin said. "Of course, Russia is taking into account all risks," he said.
Strengthening the Russian ruble is having a negative effect on economic growth, Kudrin said.
"If we hadn't strengthened the ruble, economic growth would have been higher," he said in commenting on research by the Economic Expert Group which found that a stronger ruble is good for the economy on the whole.
"I don't agree entirely. Strengthening [the ruble] has a clear [negative] influence on economic growth, which is why China is not strengthening the yuan," Kudrin said.
He said that China has other reasons for economic growth that are connected to a cheaper workforce, stronger investment conditions, and a higher level of investment guarantees than in Russia. "But, on the whole, if the ruble hadn't been strengthened so quickly, we would have had more possibilities for economic growth," Kudrin said.
He said that Russian economic growth was 7%-7.3% recently, but will be around 6% this year. "The slowdown in economic growth is not only due to a stronger ruble, but its influence is beginning to be felt," Kudrin said.
Russian imports grew to $116 billion from $94 billion in one year, he said. "A 25% growth in imports is a lot, especially amid industrial growth of 4% a year," he said. The Russian market is being saturated with imported goods and this is limiting the market segment where Russian-made goods could dominate, he said.
Kudrin said that he doesn't see any serious mistakes in the Central Bank's exchange rate policy. "The strengthening that it is undertaking is a result of the government's actions," he said. Russia is getting more and more petrodollars and putting them into the Stabilization Fund, but because the government can't stop spending, the Central Bank is being forced to hold back inflation by additional measures to strengthen the ruble, he said. "This is why the actions taken by the Central Bank are a direct result of the government's actions," Kudrin said.