Russian 'oil sheikhs' build $2.3 trillion nest egg

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The Independent Online

Russia's fabulous oil riches could give the Kremlin a $2.3 trillion (£1.3 trillion) nest egg to play with by 2030 if managed wisely, the World Bank has forecast, as oil prices continue to rise.

The estimate, contained in a new report, has fuelled expectations that Russians could be on the verge of becoming the former Soviet Union's "Eastern Sheikhs" and that the country's wealth could for the first time be redistributed beyond a select few.

The World Bank estimated that the country's oil "stability fund" - currently worth more than $60bn - could grow to $2.3 trillion by 2030, meaning that Russia's 140 million citizens could potentially enjoy a $16,500 windfall each. A sum of $2.3 trillion would be equivalent to 43 per cent of Russia's projected gross domestic product for that year, and interest alone on the amount could yield $800bn.

The fund receives nearly every dollar of oil firms' profits over $27 a barrel and as oil prices have risen so it has gone from strength to strength.

The Kremlin is under pressure to redistribute some of the country's oil wealth to raise living standards but is showing signs of not knowing how to spend or invest its newly acquired wealth, being anxious not to fan inflation.

After Saudi Arabia, Russia is the world's largest producer of oil, though many ordinary people complain they have yet to feel benefits of the new "black gold" rush.

The Russian media therefore seized on the World Bank's report as evidence of a coming "Golden Age" heralding a trickle-down of oil dollars.

The daily Novye Izvestia published a front page picture of a flashy Middle East shopping mall with the legend: "Optimists insist that we are going to live almost as well as Sheikhs." The newspaper added that even a worst-case scenario, as outlined by the World Bank, would see the fund grow to a minimum of $1.5 trillion by 2030. "In a quarter of a century," it said, "Russians will be three times richer."

The World Bank advised the Kremlin not to spend the fund but to invest it in the stocks of multinationals.

Its estimate came as Sergey Bogdanchikov, the chief executive of the state-owned oil giant Rosneft which is poised to float on the London and Moscow stock exchanges this year, said he wanted shares of the company to be priced modestly so as to be accessible to ordinary Russians, a move clearly designed to create the fabled class of "Eastern Sheikhs".