By Darya Korsunskaya

MOSCOW (Reuters). President Vladimir Putin directed the Russian government Friday to reduce spending on the state rainy day fund. This was after the Russian finance ministry warned that the shift from oil and natural gas would have a detrimental effect on Russian state finances in ten years.

Russia has approximately $190 billion to its National Wealth Fund. This is around 7.3% GDP. The liquid assets that Russia has raised mostly from the sale of oil and natural gas are around $115 trillion.

Now, the government can spend liquid assets above 7% of GDP. Putin instructed the cabinet, however to consider raising this threshold to 10%. This could reduce future spending by many billions.

Last week, the government revealed plans to invest $34 Billion from the fund in the following three years.

Dmitry Peskov, a Kremlin spokesperson said that the NWF must be maintained. The role of the NWF has been increasing as the Russian financial and economic environment is unpredictable.

The Kremlin released its document a day following draft budget amendments from finance ministry. It described potential risks to state finances due to global transition away fossil fuels and suggested “an especially cautious approach to investing surpluses into the wealth fund” while energy prices are high.

Russia’s largest energy client, the EU, has set a goal to achieve “net zero” emissions in 2050.

According to the Russian finance ministry, the average price for Russia’s Urals oil will fall to $55.7 per barrel in 2024, from $66 this year. This is due to lower demand as a result of the global effort to reduce carbon emissions.

According to it, global oil prices might fall to $35 per barrel in 2030 and to $25 by 2050, as the “demand for oil will fall dramatically if zero neutrality goals are announced by many countries,” said it.

Russia’s budgets could face pressure as soon as 2030 as emissions reductions are implemented. According to the ministry, in the worst case scenario, the wealth funds could be reduced to as low as 3% from the GDP for 2030-31.