Trutnev May Raise Gas Flaring Fines.

The Minister of Natural Resources, Yuri Trutnev, on May 23 warned that Russia may introduce harsher sanctions on companies for flaring associated gas. He said: "In Russia, out of the 60 billion cubic meters of discovered associated gas, only 25% is being used commercially". He noted that outside Russia, there were fines for flaring associated gas, adding that increasing the penalties would save Russia 15-20 BCM/y of gas.

The Paris-based International Energy Agency (IEA) reckons that some 60 BCM/y of associated gas are being flared in the oil heartlands of west Siberia alone. The government and Russian oil producers dispute this. LUKoil Holdings CEO Vagit Alekperov on May 22 said only 6 BCM/y were flared in west Siberia.

Turning Oil Into Equities: President Putin on May 21 urged the government to bolster Russia's flagging equity market by pumping surplus oil revenue into stocks. The government should consider buying Russian blue chips with excess oil revenue instead of foreign securities, Putin said at a cabinet meeting in Moscow broadcast on NTV.

Chris Weafer, chief strategist at Alfa Bank in Moscow, said: "You would expect to see that money going into companies like Rosneft, Gazprom and VTB Group rather than the broader market". Weafer added: "The danger is trying to achieve a valuation target, which would only be a short-term fix".

By then, the Russian Micex index had slipped 2.5% since the beginning of 2007, after gaining 68% last year. Shares of Gazprom, the largest Russian company by market value, had fallen 18% since the beginning of the year, while Rosneft had slid 10%. Shares of VTB, which raised US$8 bn earlier in May in the largest IPO by a Russian bank, was to start trading in Moscow in late May. Russia, the world's largest oil producer, has amassed US$386.3 bn in foreign reserves and $113.7 bn in its Stabilisation Fund, which is invested in bonds denominated in dollars, euros and pounds.

Weafer said Putin's proposal is similar to investment strategies of funds in Singapore and Abu Dhabi. Putin did not make clear which part of the budget would finance such stock purchases. Arkady Dvorkovich, a presidential economic adviser, said Putin was probably referring to the new National Wellbeing Fund, which will be split off from the Stabilisation Fund in January 2008. "Part of it may be invested in Russian equities, probably more in bonds than in stocks", Dvorkovich on May 21 said on the sidelines of a conference in the oil-rich Tatarstan region of Russia. The rouble-denominated Micex Index added 5.62 points, or 0.3%, to 1,651.34 on May 21. The dollar-based RTS Index climbed 7.02 points, or 0.4%, to 1,866.72.