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. Last Updated: 07/27/2016

Gref Says Investments Are Solution to Low Oil Prices

The economy will receive a massive injection of state funds over the next three years to help it through a period of lower oil prices, Economic Development and Trade Minister German Gref said Friday.

"The Russian economy is facing a period of adaptation to lower oil prices and a shrinking current account surplus," Gref told an annual economic ministry meeting charged with diversifying the economy away from oil and gas sectors.

"The most important thing now is not to lose the growth tempo," Gref said, adding that state investment would increase to 2.5 percent of gross domestic product in 2008-09 from 1.9 percent in 2006.

The Cabinet approved this week the country's first three-year budget strategy that will see the fiscal surplus disappear in the next three years as a result of lower oil prices.

The economy grew by an average of 6.8 percent in 2004-06 but a slowing oil output, infrastructure bottlenecks as well as a declining population threatened growth rates, Gref said.

"The only way to maintain the growth rate is innovation. A transition to an innovation economy is our key task," Gref said, pledging to assign $28.83 billion over the next three years to scientific research programs.

"Such things did not happen in Russia for a very long time," Gref said, in reference to an economic decline in the 1990s -- which he compared to "sitting in a hole for 15 years" -- when Russia lost much of its competitive edge in technology.

Russia seeks to counter the impact of lower oil prices by creating state-run development institutions such as the investment fund, which will start funding 12 infrastructure projects.

Gref said the state would invest only $11 billion, with the rest coming from private investors. He added that Russia would start a Bank of Development this year with capital reaching 0.5 percent of GDP or $7.6 billion in 2010.