Nov. 19 (Bloomberg) -- The ruble may weaken 13 percent by the end of next year as the plunging price of oil and the erosion of Russia's current-account surplus compels the central bank to devalue the currency, a survey of analysts and investors showed.

The ruble may tumble to 35 against Bank Rossii's dollar-euro basket in the period, from about 30.7 yesterday, according to the median estimate of 16 currency strategists, economists and investors surveyed by Bloomberg News. The Russian currency is down 3.5 percent versus the dollar-euro measure this year.

Russia's ruble slid 14 percent against the dollar, the larger component in the basket, since the end of July as Urals crude dropped 67 percent from a record, a war with neighboring Georgia sparked international criticism and the global credit crisis hammered emerging-market stocks and bonds. The dollar- denominated RTS Index of equities fell 69 percent in the period.

``Commodity prices are lower, external demand is down with the G-7 headed to recession and capital markets are shut,'' Andrew Bosomworth, who helps manage more than $50 billion of emerging-market debt in Munich at Pacific Investment Management Co. and holds Russian bonds, said, referring to the Group of Seven nations. ``Three things have changed in the world. You need to adjust to that by movement in the exchange rate.''

The ruble was little changed at 27.4504 per dollar as of 5:01 p.m. in Moscow, from 27.4683 yesterday. Against the euro, it traded at 34.7107, from 34.6612. Official ruble trading runs from 10 a.m. in Moscow to 5 p.m.

`Drag on Reserves'

That left the currency little changed at 30.7063 versus the basket, which is made up of about 55 percent dollars and the rest euros. Policy makers attempt to keep the ruble within a trading band to limit fluctuations and protect Russian exporters.

Bank Rossii widened the trading band by 1 percent last week as Citigroup Inc., Goldman Sachs Group Inc. and Troika Dialog, Russia's oldest investment bank, predicted the drop in oil could force the ruble to be devalued. Alfa Bank in Moscow said expanding the official range was a ``mistake.''

The central bank will let the ruble weaken as much as 20 percent against the basket to ease the ``drag on reserves,'' Bosomworth said.

Investors withdrew almost $160 billion out of Russia since the start of August, according to BNP Paribas SA. Bank Rossii sold foreign-currency reserves to battle the drop, contributing to a 21 percent decline in the reserves to $475.4 billion, the world's third-largest.

War Chest

Surging crude prices since 2003, Urals quintupled to a record $142.94 a barrel on July 4 this year, swelled the government's currency war chest to $475.4 billion. Urals, Russia's principal oil export, fell 1.6 percent to $46.90 a barrel today, below the $70 average needed to balance the country's budget next year, according to Finance Minister Alexei Kudrin.

Arkady Dvorkovich, an economic adviser to President Dmitry Medvedev, said today the ruble won't be devalued even with lower oil prices. ``Devaluation will not happen,'' he said at a conference in Moscow. The day before allowing the 1 percent decline, central bank Chairman Sergey Ignatiev said the currency had a ``certain tendency toward weakening.''

The central bank should let the ruble weaken in one, quick drop of as much as 20 percent ``because that's defendable and the likelihood of pressure in the system is less,'' said Jeremy Brewin, who helps manage $787 million of emerging-market assets in London at Aviva Investors Ltd. Aviva cut some of its Russian holdings in August.

`Dog's Tail'

Troika, which predicts a 30 percent drop in the ruble against the basket should oil stay at current levels, advocates one or two bigger devaluations, said Anton Stroutchenevksi, an economist at the Moscow-based bank.

Widening the band bit by bit would be ``like cutting off a dog's tail in small pieces because you don't want it to suffer,'' he said, quoting a Russian saying. ``It will be less painful if they let it fall 10 to 15 percent in one day.''

The central bank is likely to ``devalue as gradually as possible'' to avoid spooking a population that remembers the ruble's 71 percent tumble in 1998, said Ulrich Leucthmann, head of currency strategy at Germany's Commerzbank AG, who predicts the ruble will reach 31.20 against the basket in the next 12 months.

``Russia can withstand the current turmoil without a large current-account crisis,'' he said.

Estimates for the decline in the ruble against the basket ranged from Commerzbank's 1.6 percent to Troika's 30 percent.

-------------------------------------------------------------- Forecast ruble versus basket decline by end of 2009: -------------------------------------------------------------- Nordea Bank AB 15% UniCredit SpA 13% Goldman Sachs Group Inc. 18% UBS AG 20.14% RBC Capital Markets 20% Danske Bank A/S 9% JPMorgan Chase & Co. 12% Barclay's Capital 10% ING Groep NV 11% TD Securities Ltd. 6.4% Commerzbank AG 1.6% Capital Economics Ltd. 5% Troika Dialog 30% Dresdner Kleinwort 3.2% Pacific Investment as much as 20% Aviva Investors as much as 20% ------------------------------------------------------------- Sources: Interviews, Research reports

To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net

Last Updated: November 19, 2008 11:27 EST