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. Last Updated: 07/27/2016

Fund Switch No Big Deal, Officials Say

Officials assured investors Thursday that converting the mammoth oil stabilization fund into foreign currencies would not disrupt financial markets, a day after the State Duma gave a first reading to a bill that would force state officials to quote all figures in rubles.

The $71.5 billion fund, which captures excess revenues from commodity producers when oil prices are high, had been accounted for in rubles. Finance Minister Alexei Kudrin signed an order to transfer the stabilization fund into hard currencies in a Central Bank account, with 45 percent in dollars, 45 percent in euros and 10 percent in pounds sterling, news agencies reported.

"There's just going to be an accounting transaction," said Rory Macfarquhar, an economist at Goldman Sachs. "The only change is a difference in the way that the Central Bank and the Finance Ministry account for their relationship." Since no currencies would be bought or sold, the multibillion-dollar transfer would not affect the foreign exchange rates, he said.

After being transferred to hard currency, the oil stabilization funds will initially be invested in high-quality bonds denominated in dollars, euros and pounds. The Finance Ministry has said it hopes to invest 10 percent of the fund in blue-chip foreign stocks if legislation is passed allowing for equities in the portfolio. Any interest paid on the foreign bonds will be credited to the Finance Ministry.

Meanwhile, the size of the foreign currency reserves continues to grow. The deputy chairman of the Central Bank, Alexei Ulyukayev, said an even greater share of the bank's foreign reserves would be kept in euros, with a smaller percentage to be kept in dollars, Reuters reported. The total international reserves — now the world's fourth-largest — grew to $237 billion, up from $147 billion a year ago, the Central Bank said Thursday.

Economists have said that it makes sense for Russia to keep more of its currency reserves in euros since the European Union is a bigger trading partner than the United States.

The dollar was trading at just over 27.03 rubles on Thursday, slightly higher than earlier in the week. Macfarquhar said that in a year he expected the ruble to be at about 25.5 to the dollar.

Kudrin on Wednesday questioned the wisdom of a bill that would bar state officials from referring to sums of money in any currency other than the ruble. "The absurdity of this bill is obvious. … It will mean that next time I will be talking about global GDP in rubles," Kudrin said Wednesday, RIA-Novosti reported.