Will oil profits ease Russian economy contraction?

Being the world's largest exporter of oil and gas clearly has its advantages, as despite the economy facing its largest contraction in 15 years, the damage is much less than expected due to the Russian oil wealth funds.

However, these funds themselves are reported to have shrunk by 40 percent over the past year in order to help the state filled budget gaps.

According to Emirates Business, as of February 1, the Reserve Fund and the National Wealth Fund, stood at 4.56 trillion roubles, some 3.26 trillion roubles, down from a year ago, based on current exchange rates and data provided by the Finance Ministry.

That decrease meant that Russia's gross domestic product shark by 7.9 percent over 2009, driven mostly by double-digit falls in construction, manufacturing, restaurants and hotels, sectors that had been key engines of growth during the consumer boom which ended when the global recession first struck.

Stepping up production

With such emerging markets, Russia has been hit hard by the economic crisis relying on its energy industry for growth.

With such a contraction, it is no surprise that Russia is stepping up projects around the world. This week, a Russian government committee approved the Kharyaga oil project budget for US$400 million for this year.

It is expected that the daily output of the field will be around 30,000 barrels this year. The Kharyaga field is said to have oil reserves of 160.4 million metric tons.

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Why has Russia's economy shrunk by 7.5%? | Gazprom eyeing US gas market? | "Dependency on oil is humiliating"

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