MOSCOW (AFP) - What do you do when you've got billions of dollars lying around and don't know how to spend them?
The enviable quandary is now faced by Russian officials arguing over how to use a "stabilization fund" created early this year that has swollen far beyond expectations by a windfall from record high oil prices.
"We've received many proposals from ministries and other agencies" on how to put the money to use, said Alexei Savatyugin, a finance ministry official who discussed the issue at a round table meeting here Wednesday.
Those range from cultural projects like work on museums to investment in the agriculture or energy sectors, purchase of new military hardware and completion of a new hydroelectric plant in Tajikistan, he said.
The fund, expected by year's end to total 574 billion rubles (19.7 billion dollars) -- more than three percent of Russia's gross domestic product -- was created at the start of the year as a precaution against a sudden drop in oil prices and to help offset inflationary effects of high oil prices.
The initiative, similar to funds set up in other major oil-exporting countries such as Norway's "Fund for Future Generations," has drawn praise from international financial institutions.
Willem Buiter, chief economist for the European Bank of Reconstruction and Development, said Thursday that "that kind of discipline has not been seen in many emerging markets," though he added that Russia could have set much more money aside this year from oil export revenue.
In any event, the money is there now in substantial quantity and the finance ministry has set a goal of making sure that at least 500 billion rubles (17.2 billion dollars) remain untouched in the fund next year.
The question of what to do with the money has become a central topic in economic policy conversations here, with the finance ministry saying it wants to limit use of the fund to reimbursement of foreign debt, payment of pensions and investment in instruments with assured annual returns of at least seven percent.
Energy Minister Viktor Khristenko has proposed spending part of the money to build a new oil pipeline to the Asia-Pacific region while Economy Minister German Gref has called for spending it to develop Russia's transport network to make the country more competitive.
"Unfortunately, none of the proposals we have received so far correspond to the criteria" fixed by the finance ministry, Savatyugin said.
Oleg Vyugin, vice-president of the Russian Central Bank, seemed to support the finance ministry's restricted and conservative plans for use of the money.
"What the ministry is suggesting is an intelligent compromise," he said.
Others take a stricter view of how the money should be spent.
Alexei Mordashov, the billionaire director of steel giant Severstal, told the round table group that "the money should not be spent at all" because additional capital inflows in Russia could boost inflation and strengthen the ruble against the dollar, undermining Russian exports.
Economic stability, which is largely dependent on raw material prices, "is more important for the investment climate than the issue of how to use the fund," Mordashov argued.
That view is shared by Andrei Illarionov, economic advisor to President Vladimir Putin.
"To those who say we should build airports, pipelines, etc., I answer that we need to let private enterprise take charge of that," he said.
Revenue from raw material sales will cover roughly half the state budget, or just over one trillion rubles (34.4 billion dollars) this year.
According to finance ministry projections based on an oil price of 28 dollars per barrel, the stabilization fund will, if none of it is spent, contain 24 billion dollars next year, 88 billion dollars in 2010 and 237 billion dollars by 2020.
11/14/2004 - 19:59 GMT - AFP