When US investor Michael Calvey told the International Economic Forum in St. Petersburg recently that things weren't so bad in Russia since so far none of the investors present had been arrested, nervous laughter rippled across the room.

It was the hollow laughter of fragile confidence, something felt increasingly by investors in Russia, not least after Calvey himself was placed under house arrest.

Read more: EU, Canada and US impose new sanctions on Russia

But despite the poor optics, the Russian government has forged away at accumulating a strong reserve fund from oil profits. The aim has been to build a "fiscal fortress" to make the economy sanctions-proof. And it has largely succeeded.

However, pressure is coming now from the Finance Ministry to loosen the purse strings to boost growth. Growth in the first quarter was 0.8%, far below even the most pessimistic forecasts. 

The reserves

The "budget rule" stipulates that oil and gas revenues above the $40 (€35) per barrel cut-off price must be channeled to the National Wealth Fund (NWF), a rainy day fund set up to counter the impact of sanctions. The government can invest revenues sent to the fund once the total in the fund tops 7% of GDP, or about $105 billion. The government expects to break that level early next year, given current oil prices.

The NWF holds 3.8 trillion rubles ($59 billion), or about 3.5% of GDP, and is expected to quadruple to over $200 billion, or 12% of GDP, by 2021. 

The tight fiscal stance has made Russia a favorite among bond buyers, among others, and made it stand out among emerging markets, in turn helping the ruble outperform all major currencies. 

Finance Min wants to spend

Recent unconfirmed reports suggested that the NWF could be invested in infrastructure projects, for example to support the downstream refining sector, or to finance the expenditures of energy majors such as Gazprom. Finance Minister Anton Siluanov has pointed to Gazprom's new chemical and liquefied natural gas project in the Baltic port of Ust-Luga, which requires equipment purchases of at least 900 billion rubles.

About 40% of the NWF is already invested in various projects and deposited in banks.

Siluanov has promised not to "water down" the NWF and to coordinate any spending with the central bank, the CBR, but he also said recently it was not the right decision to "sit on the money."

"This doesn't mean we will spend everything above 7%; we'll take targeted decisions and the fund will continue to grow," he said.

Mixed reactions

"There is another group of the cabinet which could be more favorable to the idea of spending extra oil revenues," Natalia Orlova, an analyst at Alfa-Bank in Moscow, told DW.

But, she added, spending more money from the budget would not necessarily guarantee a substantial acceleration in growth, but would very likely cause faster inflation and a faster decline in the competitiveness of the economy.

Orlova added, however, that any likely spending would be minimal. "This does, however, create negative expectations on the financial markets." 

Dear prudence! Central bank holds the line

The head of the Central Bank of Russia (CBR), Elvira Nabiullina, has warned the government against spending the NWF.

Under its mandate, Russia's central bank targets inflation, not economic growth and Nabiullina has the reputation of being the most orthodox and conservative central banker in the world.

"Currently the government suggests de facto changing the budget rule. This can directly or indirectly change the [cut-off] price, which can lead to real appreciation of the ruble and lower competitiveness of Russian goods," Nabiullina warned.

In the latest country report on Russia, the IMF said that tight fiscal framework was one of the main factors behind Russia withstanding sanctions pressure and also warned against unsealing the NWF. 

Lack of clarity

"This discussion indeed hints at an easing of the budget policy and creates a lot of uncertainties. The government and the CBR have a lot of explaining to do," Dmitry Dolgin, an economist at ING Groep NV in Moscow, told DW.

First, in terms of volumes — the government claims that after the liquid part of the NWF reaches 7% it will just diversify its foreign investments to have higher yielding projects, while local projects will not play a significant role. But at the same time, in the extreme case this proposal may open up the room to invest up to $100 billion locally in 2020-21, Dolgin notes.

Secondly, it is unclear whether this money will be used to replace private funding of the National Projects in 2019-24.

Read more: Do sanctions against Russia work?

"In terms of consequences for the FX and money market, the question is whether the CBR will adjust its approach to accumulation of FX assets following the potential change in the Minfin's approach to managing its state savings," Dolgin says.

Oil price is key

Although WTI oil jumped back above $60 per barrel on Monday, there is a risk prices could drop to as low as $30 a barrel because OPEC and its Russia-led allies could produce more oil by the end of the year than market demand, said Russian Energy Minister Alexander Novak.

OPEC is close to reaching an agreement to extend the production cut deal beyond June, with the sticking point how to plan the cuts with the non-OPEC group of producers led by Moscow.

Russia doesn't need oil prices to be too high and sees the $60-65 a barrel price—the price at which Brent Crude currently trades—as "quite satisfactory," President Vladimir Putin said recently.

But Saudi Arabia needs oil at $85 to balance its budget, so the leaders of the two OPEC+ groups are at odds over what they see as a "fair price" for oil.

Moscow has some time to think how to navigate between the two policy goals, Karen Vartapetov, director of Sovereign Ratings at S&P Global Ratings Europe in Frankfurt, told DW. "One of the possible scenarios is that the government will spend some of the liquid assets domestically, but that part will be modest enough not to relink the economy with the oil price."