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. Last Updated: 07/27/2016

World Bank: Invest in Overseas Stocks

The World Bank urged Russia on Monday to pump some of the billions of dollars it receives from its oil exports into foreign companies' shares.

The bank's chief economist for Russia, John Litwack, said that the stabilization fund -- which receives nearly every dollar of oil companies' profits over $27 per barrel -- could clock in at a healthy $2.3 trillion come 2030, if it was invested properly and left untouched.

The fund, which currently stands at more than $55 billion, was created as an inflation-fighting tool to absorb the petrodollars pouring into Russia's economy as oil prices break new records. Litwack suggested that the fund could eventually act as a safety net for the government's efforts to shift the economy away from its vulnerable dependence on oil and gas exports as well as insuring the country against any sudden drop in prices.

"One of points we stress is that if they can take the money and invest it in well managed portfolio of foreign assets ... and prices stay high -- they'll be able to accumulate such a large resource that just the income would be a huge cushion against oil price shocks," Litwack said.

The bank's latest report on the Russian economy featured an economic model for the stabilization fund that assumed oil prices would fall gradually to $40 by 2030 and that the government also would not touch the cash pile for about 24 years. In that case, the fund could be worth $2.3 trillion, with the return alone equivalent to 17 percent of gross domestic product, or about $800 billion, he said.

Litwack said that would give the government the confidence to undertake bold steps to diversify the economy, including tax cuts in the non-oil sector, which would initially have the effect of making the country more reliant on the oil price and the taxes oil companies pay.