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Unformatted text preview: European Review of Energy Marketsvolume 2, issue 3, May 2008, https://biblio.ugent.be/publication/416425] E. Liu
The same analysis applies to oil-producing companies outside OPEC. For example, in the time span of a few years, Russia
(9.7 million barrels per day) has developed into an extremely important oil and gas producer and was accused by the IMF in
2006 of having an “addiction to easy money”. Indeed, for President Putin’s government there is a great temptation to buy
social peace, which he did in 2005 by increasing public spending by $13.5 billion. Although this was not a problem for
Russia in 2005 - the country having made over $100 billion in oil sales revenue in 2004 - the high oil and gas prices are
now transforming Russia into a mono-economy12 based on oil and gas production, with a significant relationship between
growth of oil and gas production and growth of GDP13. According to the World Bank, Russia’s oil revenues accounted for
25% of its GDP in 2004. The Russian government is also increasingly scaling up, or wresting back, ] 8  6 EREM ©
European Energy Institute and contributors state control over the biggest oil companies (e.g. Transneft, Yukos) and oil and
gas reserves for which concessions had been granted (e.g. Sakhalin II, Kovykta). By so doing, Russia - like other oil
economies - risks becoming overdependent on oil revenues, with the associated risk of slowing down necessary economic
reforms (on infrastructure and tax, for instance) by not using resources for structural economic development but instead
funding short-term boosts to social well-being (e.g. public employment) with revenue generated from unsustainable raw
materials. 150 Oil DDW 2012 1
Oil Key – Russia Econ 151
Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 Decreases in oil pricing shocks the Russian economy and stunts growth
Rapoza 4/3/12 [Kenneth Rapoza, Contributor to forbes Covering Brazil, Russia, India & China.
Russia, awash in oil and natural gas. It’s the reason why the economy has a budget surplus, and for some it is the reason
why Vladimir Putin and United Russia are still in power. Follow the rising price of oil over the last seven years and you
will see the rising GDP of the Russian economy right along with it. It’s national icon, Gazprom, is a multi-billion dollar,
football sponsoring natural gas behemoth. The biggest in the world. And companies like it, from Rosneft to the privately
held Lukoil oil are bad news for the Russians in the not-so-distant future. Combined they and others in the oil and gas biz
account for 75% of Russia’s exports. “Economic growth will promptly fall to two or three percent a year in case of further
dominance of the raw materials and fuel sector in the economy as it is now,” Russian Development Minister Elvira
Nabiullina told a forum in Moscow on Tuesday. The country’s economic development may get...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.
- Spring '13
- The American, Saudi Arabia, Peak oil, Nuclear weapon, Oil prices