Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

State Agrees on Uses of Oil Fund

Russia will run surpluses in 2006 and beyond, financing promises to hike pensions and public sector pay by saving less windfall oil cash in the stabilization fund, the government said Friday.

Under a three-year strategy approved at budget talks chaired by Prime Minister Mikhail Fradkov, the cutoff price at which oil revenues flow into the fund will be raised to $27 per barrel from $20 for Russia's benchmark Urals export blend crude. The strategy assumes an average Urals price of $34 per barrel.

The decision represents a victory for Fradkov, who wants higher state spending to boost growth and to give ordinary Russians a greater stake in the country's long oil boom.

But it marks a defeat for Finance Minister Alexei Kudrin, who advocates spending surpluses piling up in the fund on retiring Russia's $43 billion in debts to the Paris Club of sovereign lenders.

Fradkov has argued for a doubling of pensions and public sector pay by 2008, the year President Vladimir Putin's second -- and, under the Constitution, final -- term ends. But a government statement talked only of a "substantial" increase.

"In this context it was underlined that in 2006 and in subsequent years a federal budget surplus will be maintained," it added.

Economists said the extra spending could push the economy up against capacity constraints and fuel inflation, which is stuck in double digits and shows signs of accelerating.