UPDATE 1-Russian Fin Min: No plans to tap oil windfall

(Adds details, background)

By Gleb Bryanski

MOSCOW Oct 16 (Reuters) - Russia has no plans to tap its $141 billion Reserve Fund - which serves to cushion the budget from oil price shocks - in 2008, despite the falling oil price, the Finance Ministry said in a statement on Thursday.

The ministry said the average price of oil in January-September 2008 stood at $109.1 per barrel and was not expected to change significantly before the year-end.

The ministry said the Reserve Fund will only be tapped if the average price of oil per year falls to below $70 per barrel, which was unlikely in 2008. The ministry's officials earlier said the budget can sustain an oil price of $50 per barrel.

In its calculations the ministry expects the average price of Urals, Russia's main export blend, to peak at $95 per barrel in 2009 and then start falling to $90 per barrel in 2010 and $88 per barrel in 2011.

The statement said Russia had no plans to tap the Reserve Fund in 2009-11 but added the estimates could be adjusted in December, when the Economy Ministry is due to unveil its revised economic forecasts.

The ministry said the reserve fund had already reached its target size of 10 percent of the gross domestic product (GDP) this year. The budget is projected to have a surplus of 1.9 billion roubles or 4.6 percent of GDP in 2008. Under the budget code Russia collects all oil revenues in the two sub-funds -- the Reserve Fund and the National Wealth Fund, which reached $32 billion on Oct.1 and is expected to reach $100 billion by year-end.

AMBITIOUS PLANS

Some of the oil revenues are transferred back to the budget to cover the arising deficit. The rest goes to the oil funds.

This year the transfer equalled 2,135 billion roubles or 4.9 percent of the projected GDP and was completed in August, the ministry said.

Both funds are currently managed by the central bank as part of its forex reserves and invested in top-rated sovereign and quasi-sovereign securities.

Russia unveiled ambitious plans to use its forex as well as fiscal reserves to help the economy weather the global crisis.

Under the plans the National Wealth Fund (NWF) should supply $15 billion in subordinated loans the country's leading banks as well as $6.6 billion for investment in domestic securities.

It is not yet clear how much the NWF will contribute to support the crippled pension system -- another idea floated by officials. The Finance Ministry is due to draft the investment strategy for NWF by the end of the month.

Economists and rating agencies raised concerns over the government's plans to tap the oil funds but Finance Minister Alexei Kudrin defended such plans, saying the funds were meant to be used during a crisis.

With the central bank's forex reserves, which include the oil funds, rapidly dwindling as a consequence of the effort to support the rouble, some economists also question how long the reserves will last.

As the oil price falls, Russia's oil firm also put pressure on the government to cut the oil export duty and mineral extraction tax, which together stand for about one third of budget revenues, or face lower oil output.