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canada goose clearance Russia’s biggest contingent liability

MOSCOW (Reuters) With a sovereign debt of just 10 percent of GDP and half canada goose clearance sale a trillion dollars in reserves, Russia has a balance sheet that the United States and Europe can only envy as they battle their debt crises.

An employee works near a gasoline tank truck outside the Rosneft Achinsk oil refinery plant, one of the biggest Siberian fuel suppliers, near the town of Achinsk, some 188 canada goose km (117 miles) west of Krasnoyarsk, April 28, 2011. REUTERS/Ilya Naymushin

canada goose deals But a closer look at Finance cheap Canada Goose Minister Alexei Canada Goose sale Kudrin latest fiscal plans reveals two concerns: he is betting that Canada Goose Jackets oil prices will stay high for years; and even if he is right, the pace of budget consolidation will slow significantly.

canada goose By his own reckoning, the books would only balance with oil at $125 per barrel next year, reflecting the impact on the public finances of the global slump that put an end to years of surpluses generated at much lower oil prices.

Kudrin has only managed to keep the projected deficit below 3 percent of gross domestic product (GDP) over the three year budget horizon by hiking his oil price forecast to the mid $90s from the high $70s previously.

Even then, the fiscal strategy abandons a previous goal of balancing the budget by 2015. After stripping out energy revenues which account for nearly half of the Canada Goose Coats On Sale tax take the deficit will stay over 10 uk canada goose percent of GDP.

Canada Goose online the very high oil price forecast, the slow fiscal consolidation is disappointing, said Ivan Tchakarov, chief economist at Renaissance Capital. oil sensitivity of the budget has increased dramatically.

a retrograde step, agreed Edward Parker, sovereign analyst at Fitch Ratings in London. The biggest risk for Russia remains sharp and sustained drop in oil prices.

LOCKED IN In rough terms, a $10 fall in the oil price would translate into an increase of one percentage point in the deficit for the world largest oil and gas producer.

buy canada goose jacket oil at $95 everybody happy, said Sergei Guriev, rector of Moscow New Economic School. at $70, canada goose factory sale borrowing becomes hard for both companies and the government.

Canada Goose Jackets On the spending side, the government has locked itself into higher pension outlays, increasing budget transfers from 1.5 percent of GDP in 2008 to 5.2 percent in 2010, Yevsei Gurvich, head of the Economic Expert Group, wrote in a recent study.

canada goose coats An offsetting hike in payroll taxes will be partly unwound next year on the orders of President Dmitry Medvedev, who is likely Canada Goose Parka to run for a Canada Goose Online second term next March if Prime Minister Vladimir Putin chooses not to return to Russia highest buy canada goose jacket cheap office.

That will swell the largest budget item, social spending, which will rise in 2012 by 20 percent to 3.8 trillion roubles ($135 billion), accounting for 31 percent of federal outlays.

canada goose black friday sale Put another way, Russia uk canada goose outlet will spend four canada goose coats on sale fifths of its energy revenues on welfare. The cost of the pension system, if left unreformed, could undermine the stability of the budget system, Gurvich wrote.

canada goose clearance sale Kudrin will present his budget to parliament in the autumn.

DOWNSIDE ACCELERATORS canada goose store Even if those costs are bearable under a sanguine view on oil, they would become canada goose uk black friday difficult to sustain in the event of a sharp and sustained oil price crash due to other contingent liabilities that are, effectively, derivatives on the oil price.

Canada Goose Outlet Chief of those canada goose clearance are debts owed by large state controlled firms, such as energy majors Gazprom and Rosneft and banks Sberbank and VTB.

Economists at Deutsche Bank have canada goose uk shop estimated that a contingent liability shock caused by such entities could add 10 percentage points to Russia national debt by 2020.

That would raise sovereign debt to 40 percent of GDP from Deutsche baseline case of 30 percent, level associated with increasing debt sustainability problems in emerging markets, Maria Arakelyan and Thorsten Nestmann wrote in a research note.

Canada Goose sale Although Russia banks survived the global financial crisis in decent cheap canada goose uk shape, confidence has been shaken by the collapse of Bank of Moscow, Russia canadian goose jacket fifth largest bank, canada goose coats after a hostile takeover bid by VTB.

A central bank audit, conducted after Bank of Moscow Canada Goose online management was ousted, uncovered a web of related party lending that will have to be written off. That triggered a record canada goose black friday sale $14 billion bailout costing almost 1 percent of GDP.

buy canada goose jacket cheap Given glaring regulatory lapses and the growth ambitions of state controlled banks, a far more costly bailout cannot be ruled out Canada Goose Outlet if an oil crash hits Russia creditworthiness.

canada goose coats on sale SCOPE TO RESPOND Still, economists buy canada goose jacket note, policy makers have learned from the crisis after blowing $200 billion in reserves to defend the rouble, a futile exercise that is unlikely to be repeated.

A more flexible currency would absorb the impact of canada goose uk outlet an oil price shock, supporting rouble denominated revenues, while Russia external vulnerability has been reduced as firms have extended maturities on their foreign debt, they add.

Canada Goose Parka Russia can head off trouble if it undertakes an ambitious pensions reform that would raise the retirement age and ensure that only the deserving get the minimum state pension.

cheap Canada Goose And Medvedev push to accelerate privatization, which under one government proposal would treble annual proceeds to $30 billion, would also help reduce quasi sovereign liabilities.

canadian goose jacket has been no real stress test of the fiscal position, said Guriev of Russia oil dependency and the systemic risks that extend from it. is a growing understanding of these issues (in government), but nothing will happen before the elections.