June 8 (Bloomberg) -- Goldman Sachs Group Inc. Chief Economist Jim O'Neill said Russia's economic expansion will slow in the decade from 2010 as gains in the oil price decelerate, a prediction that clashes with the government's forecasts.

``Oil prices will definitely not do what they've done the past 10 years, and that's not going to be great news for Russia,'' O'Neill said in an interview today at the St. Petersburg International Economic Forum.

O'Neill, who coined the BRIC acronym in 2001, said Russia ``doesn't have the same advantages over the next decade'' as China and India, which will benefit from larger workforces and greater productivity. Russia's economy will probably surpass Brazil's while falling behind India's by 2020, he said, adding that China will account for 15 percent of the global economy by that time, second only to the U.S.

Russia's gross domestic product will likely grow 3.3 percent a year from 2010 to 2015 and 2.9 percent a year during the following five years, making the economy the world's eighth biggest by 2020, up from 10th now, O'Neill said. The country's GDP will total $3 trillion in 2020, doubling its share to 4 percent of the world total.

Biggest Economies

First Deputy Prime Minister Igor Shuvalov said in St. Petersburg today that Russia's economy will become the world's sixth biggest by the end of this year. ``Russia has become a fully fledged member of the club of the biggest economies of the world,'' he said. The economy expanded 8.1 percent last year.

Russia is already the world's seventh-biggest economy by purchasing power parity, Prime Minister Vladimir Putin said on May 8. Purchasing power parity accounts for differences in the exchange rates of national currencies. Unadjusted, Russia's economy is the world's 10th biggest.

``If you want to be big, you have to have a lot of people working,'' O'Neill said.

Russia's population declined to 142 million last year from 148 million in 1991, when the Soviet Union collapsed, according to the Federal Service of State Statistics. President Dmitry Medvedev has made reversing the country's demographic decline a priority.

`Higher Trend'

While crude prices in New York jumped by the biggest dollar amount ever to a record on June 6, it would be ``dangerous'' to believe that the oil price will rise as quickly in the next decade as it has in this one. O'Neill said, adding that Russia's growth won't slow as much if the government bolsters property rights and the rule of law.

``These views expressed by Jim O'Neill will not be shared by the majority of people here,'' Mikhail Zadornov, chairman of VTB 24, the retail-banking arm of VTB Group, Russia's second- biggest bank, said during a panel discussion at the forum. ``We are in a position to achieve a higher trend.''

``People have gone from thinking I'm nuts to thinking I'm pessimistic,'' O'Neill said, referring to the probable slowing of Russia's economic growth.

Erik Berglof, chief economist at the European Bank for Reconstruction and Development, said in St. Petersburg that it ``won't be easy'' for Russia to reduce its dependence on energy exports ``given what it exports today.'' Russia is the world's largest energy exporter.

`Excessive Interference'

Shuvalov warned that a heavy state hand in the economy could harm the government's goal of modernization and growth.

The state must avoid ``excessive interference'' in the economy, he said. ``For an innovative economy the excessive presence of the state is just as dangerous as its absence.''

Medvedev has instructed the government to cut the number of state-controlled strategic enterprises and the government has plans to rotate officials on the boards of state companies, Shuvalov said.

Russia, the world's biggest energy exporter, created state- run institutions including the Development Bank in 2007 to help develop industries other than commodities extraction. Government spending, including on state-operated corporations, increased by 40 percent last year as Russia seeks to diversify the economy and become a global leader in nanotechnology and other high-tech industries by 2020.

``The state must concentrate on resolving only the tasks where we can be effective,'' Shuvalov said.

To contact the reporter on this story: William Mauldin in St. Petersburg through the Moscow newsroom at wmauldin1@bloomberg.net; Alex Nicholson in St. Petersburg through the Moscow newsroom at anicholson6@bloomberg.net

Last Updated: June 8, 2008 10:45 EDT