physics

Stabilization Fund of the Russian Federation

Stabilization Fund of the Russian Federation is a physics topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Stabilization Fund of the Russian Federation rather than just read about it. In short: The Stabilization fund of the Russian Federation (SFRF, Russian: Стабилизационный фонд Российской Федерации, romanized: Stabilizatsionny fond Rossiyskoy Federatsi) was a sovereign wealth fund established based on a resolution of the Government of Russia on 1 January 2004, as a part of the federal budget to balance the federal budget at the time of when oil price falls below a cut-off price, currently set at US$27 pe…

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Reference excerpt

The Stabilization fund of the Russian Federation (SFRF, Russian: Стабилизационный фонд Российской Федерации, romanized: Stabilizatsionny fond Rossiyskoy Federatsi) was a sovereign wealth fund established based on a resolution of the Government of Russia on 1 January 2004, as a part of the federal budget to balance the federal budget at the time of when oil price falls below a cut-off price, currently set at US$27 per barrel.

The Fund was created to create a reserve of liquidity with the additional benefit of reducing inflationary pressure and insulating the economy of Russia from volatility of raw material export earnings (for example the price of crude oil), which was among the reasons of the 1998 Russian financial crisis. In February 2008 the SFRF was split into a "Reserve Fund", which was invested abroad in low-yield securities and used when oil and gas incomes fall, and the "National Welfare Fund", which invests in riskier, higher-return vehicles, as well as federal budget expenditures. The Reserve Fund was given $125 billion and the National Welfare Fund was given $32 billion. By 2017 the Reserve Fund was exhausted and ceased to exist.

History According to amendments to Russia's budget code inspired by President Vladimir Putin's budget address of March 2007 and passed in April 2007, in February 2008 the Stabilization Fund was supposed to be split into a Reserve Fund, to be invested abroad in low-yield securities and used when oil and gas incomes fall, and a Future Generations' Fund (later renamed the National Wealth Fund), which will invest in riskier, higher return vehicles, as well as federal budget expenditures. Unlike the Stabilization Fund, the new funds will also accumulate revenues from oil products and natural gas. On 21 May 2007, President Vladimir Putin urged the government to pump surplus oil revenue into domestic stocks by buying Russian blue chips such as Gazprom and Rosneft, which had fallen since the beginning of the year, instead of foreign securities, which previously had been explicitly forbidden due to fear of inflation. The SFRF had trouble during the Great Recession in Russia.

Accumulation and expenditure The Fund accumulated revenues from the export duty for oil and the tax on oil mining operations when the price for Urals oil exceeds the set cut-off price. The capital of the Fund was to be used to cover the federal budget deficit and for other purposes, if its balance exceeds 500 billion rubles, spending amounts are subject to the federal budget law for the corresponding fiscal year. As the capital of the Fund had exceeded the level of 500 billion rubles in 2005, part of its surplus was used for early foreign debt repayments as well as to cover Russian Pension Fund's deficit. The details of these transactions in 2005 are as follows:

Investment Policy

Governance Structure The Fund was managed by the Russian Ministry of Finance, in accordance with the procedure defined by the Government of the Russian Federation. Some functions of asset management may be delegated to the Central Bank of the Russian Federation ("the Bank of Russia"), based on its agreement with the Government. Concerning the Fund's objectives, its capital was to be invested in foreign sovereign debt securities. Securities' eligibility criteria are subject to the Government's approval. The Ministry of Finance was empowered by the Government to establish the Fund's currency composition and its strategic asset allocation in line with the investment policy for the Fund's management. The Ministry of Finance could use one or both of the following schemes defined by the Government to invest the Fund's capital.

The Fund assets were invested solely under second scheme (allocation to the Federal Treasury's accounts with the Bank of Russia).

Investment Guidelines The Government determined that eligible debt securities for the Fund investment were to correspond to the following requirements.

Debt securities on the date of purchase will have a minimum remaining maturity of 0,25 years and are not to exceed three years. The Fund assets were invested in the following currency composition:

Currency composition and the maturity restrictions are applicable to all Fund's assets and were subject to revisions by the Ministry of Finance.

Reporting The Ministry of Finance published a monthly report in mass media on the Fund's accumulation, spending and balance and reports quarterly and annually to the Government on accumulation, investment and spending of the Fund's capital. The Government reported quarterly and annually on the Fund's accumulation, spending and investment of capital to both chambers of the Russian Parliament (State Duma and Council of Federation).

See also Banking in Russia Central Bank of Russia Federal budget of Russia

References

External links Official website Archived 18 June 2020 at the Wayback Machine SWF Institute Archived 14 April 2008 at the Wayback Machine Russia's SWF

Illustrations

Worked examples

Example 1 — a first encounter with Stabilization Fund of the Russian Federation

Start with the simplest possible case. Write down what Stabilization Fund of the Russian Federation claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In physics, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Stabilization Fund of the Russian Federation before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Stabilization Fund of the Russian Federation ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Stabilization Fund of the Russian Federation

In research: Stabilization Fund of the Russian Federation appears in physics research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Stabilization Fund of the Russian Federation in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Stabilization Fund of the Russian Federation is common in secondary-school and first-year university syllabi. It links to neighbouring topics Economy of Russia, Energy in Russia, Government of Russia, so understanding it makes those chapters shorter.
In everyday life: Look for Stabilization Fund of the Russian Federation outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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Frequently asked questions

What is Stabilization Fund of the Russian Federation in simple terms?

Why does Stabilization Fund of the Russian Federation matter?

Because it connects several physics ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Stabilization Fund of the Russian Federation?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Stabilization Fund of the Russian Federation.