Putin calls for observing budget rule

The budget rule, which concerns the use of oil and gas revenue, must be observed, Russian President Vladimir Putin said at Thursday's Cabinet meeting.

"This was a professional and courageous decision by the government, and the main thing is to support it," he said.

Putin said his recent proposal to invest 100 billion rubles from the National welfare Fund in securities from 2013 should not put the concept of the budget rule in any doubt.

"So that nobody has any misunderstandings about what I recently said in my Address, that we could break into the reserve fund a little earlier, we could take 100 billion rubles out of it for infrastructure projects - this isn't some sort kind of whim, or attempt to derail the budget rule," Putin said.

Putin said agreement on this had been reached with the Finance Ministry. "Cumulative reserves will already be above 9 percent of GDP by the end of this year. That's a small [volume] so far, and not much to resolve major infrastructure tasks. We need to do other things of a purely administrative nature, but on the whole we can get down to this work gradually," Putin said.

The main thing is that existing agreements are upheld, "so that various industry leaders do not force over the fundamental decisions that have been reached," he said.

"I hope the prime minister will not allow that to happen," Putin said.

The budget rule determines the mechanism for the use of oil and gas revenues and the formation and disposal of Reserve Fund and National Welfare Fund Resources.

The budget rule is based on a benchmark oil price to determine the ceiling for budget spending. Spending cannot exceed anticipated revenue at the base oil price, plus a budget deficit of 1 percent of GDP.

The base oil price for the next financial year and planning period is the average oil price in the previous five year period for 2013, and the previous six- and seven-year periods for 2014 and 2015, with the period increasing by one year each year until it reaches 10 years.

Therefore, with the introduction of the budget rule as of January 1, 2013, the base oil price will be calculated as the average in 2007-2011 for 2013, 2007-2012 for 2014 and 2007-2013 for 2015. Starting in 2018, the base oil will be calculated as the average in the preceding 10-year period.

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