Urals crude price to average $63-65 in 2007

Russia`s finance minister said Friday the price of Urals crude will average at $63-65 per barrel in 2007, with the federal annual budget being based on a price of $61.

"Today we can say the crude price will be above $61 per barrel, and I even think it will reach $63-65, which will set a new record for recent years," Alexei Kudrin told journalists in the Far East port of Vladivostok.

Urals average price was $61.1 last year, and in the first half of this year the figure was $59.65 per barrel.

Kudrin said also GDP growth in Russia could hit 7.1% in 2007 compared to 6.7% last year, despite the government`s prediction earlier this year that it would level out at 6.5%.

On inflation, the minister said the government would not revise its expectations on consumer price index growth. "The government and the Central Bank have sufficient regulating instruments," Kudrin said.

The minister said the country saw a net outflow of capital totaling $6-8 billion in the first ten days of July, but that over the first half of 2007, Russia enjoyed a net capital inflow of $67 billion.

Kudrin said the economy would have to continue putting aside money into the Stabilization Fund, set up to accumulate windfall oil revenues, for the next three years. Some officials said earlier the issue of this monetary policy, or sterilization, would gradually be resolved next year as the balance of payments levels out.

But the minister assured the journalists that "in the next three years, the problem of sterilization will remain on the agenda."

From 2008, the Stabilization Fund, which totaled $121.7 billion July 1, will be transformed into the Reserve Fund and the National Prosperity Fund.

The Reserve Fund, expected to total 10% of Russia`s GDP, will cushion the federal budget in the event of an oil price plunge. Oil and gas revenues above this limit will supplement current budget spending, and go to the National Prosperity Fund.

sections: Economics