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Anton Siluanov, Russia's finance minister, right, talks to Sergei Ignatiev, chairman of Russia's central bank, during the IMF and World Bank annual spring meetings in Washington on April 20, 2012. Close

Anton Siluanov, Russia's finance minister, right, talks to Sergei Ignatiev, chairman of... Read More

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Photographer: Andrew Harrer/Bloomberg

Anton Siluanov, Russia's finance minister, right, talks to Sergei Ignatiev, chairman of Russia's central bank, during the IMF and World Bank annual spring meetings in Washington on April 20, 2012.

Russia’s budget deficit will probably shrink in 2012 due to higher prices for oil, its major export earner, and increased tax revenue, Finance Minister Anton Siluanov said.

The ministry expects a budget deficit of 0.3 percent of gross domestic product in 2012, compared with an initially estimated 1.5 percent, Siluanov said at a press briefing yesterday in Washington, where he’s attending talks with the International Monetary Fund and Group of 20 finance ministers’ meetings.

Excluding revenue from higher oil prices, the government expects an additional 107 billion rubles ($3.6 billion) of revenue in 2012, Siluanov said. Urals, Russia’s chief export oil blend, has averaged $117 per barrel this year, against an estimate average of $115 per barrel for all of 2012, he said.

Prime Minister Vladimir Putin, who won his third term as president on March 4, vowed to boost pensions and salaries for state workers and the military. Russia posted $35.1 billion of net capital outflows in the first quarter, the most since the last three months of 2008, as the European debt crisis and anti- government protests deterred investors.

“It’s important that we won’t spend a penny from the additional oil revenue, all of that revenue will be used to either replenish Reserve Fund or cut domestic borrowing,” Siluanov said. “This is fundamentally important for securing those positive macroeconomic trends that we have, first of all, low inflation.”

Russia may still balance its budget in 2012, he said.

Russia, the world’s largest energy exporter, benefits when oil prices rise. The government expects to set its crude price limit, above which it withdraws money into the Reserve Fund, at $90 per barrel for 2016, he said.

“We are in favor of budget rules that would sharply cut spending,” Siluanov said.

Gas Price Hikes

Russia plans annual increases in the domestic market price of natural gas “to bring domestic gas prices in line with gas prices abroad, excluding transportation cost and export fees,” Siluanov said. The move will also boost tax revenue from the gas industry, he said. The government will raise gas prices 15 percent on July 1, he said.

The government is in talks with OAO Gazprom, the world’s biggest producer of natural gas, on a plan to shift 80 percent of the additional revenue from higher gas prices into the budget, Siluanov said. It aims to make a final decision on the plan in the near future, he said.

Russia estimates the increase in domestic natural gas prices will boost revenue by 50 billion rubles in 2013, 140 billion rubles in 2014 and 170 billion rubles in 2015, Siluanov said.

IMF Funds

Siluanov said the country will consider committing more than an initially pledged $10 billion for the IMF’s European reserves, and will make a decision by the start of the G-20 summit in Los Cabos, Mexico, later this year.

The IMF is seeking $430 billion in new funding from member countries, of which $362 billion has been committed so far, he said.

“Overall, the situation in the Eurozone has improved,” Siluanov said. “However, the fundamental issues, such as debt, have not been solved. It’s impossible to solve problems which led to the crisis without solving the debt problem.”

Russia also seeks new rules on member-countries quotas at the IMF, which would take into account the size of a country’s economy and its gold and foreign currency reserves, Siluanov said, adding that Russia expects the rules will be approved in 2012.

The IMF is pressing Europe to intensify efforts to quell two years of turmoil that threatens to engulf Spain. The IMF has suggested the European Central Bank cut interest rates again, as well as for governments to issue joint debt and a restructuring of banks. European governments should consider using their rescue funds to inject cash directly into Spanish banks, the IMF has said.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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