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Blocking russian imperial revival is a foundation of

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Unformatted text preview: iversion could foster the proliferation of weapons and weapon materials to rogue states and nonstate terrorist actors, increasing the risk of nuclear war. 21 | P a g e Russian Oil DA BDL Answers to: High Prices Discourage Russian Economic Reform [____] [____] Russia uses high oil revenues to invest in economic diversification—this will drive growth now. The Guardian (UK), January 25, 2008. “Russia investment fund seeks $4 bln/year from 2011,” http://www.guardian.co.uk/feedarticle?id=7256415. Russia, flush with windfall oil revenues, runs a strong budget surplus but has substantially loosened its fiscal policy to accommodate pension and wage hikes as well as infrastructure and industrial investment needs. The fund, which aims to introduce a concept of private-public partnership in Russia, has so far approved 20 projects worth 1 trillion roubles with the share o f state budget financing at about 30 percent. The budget investment fund is one of several vehicles created in Russia in recent years aimed at channelling oil wealth into improving infrastructure, diversifying the economy and boosting economic growth. Cash assigned to the Development Bank and other state-run institutions has so far only been used to support banking sector liquidity. Analysts see government spending as key for maintaining high growth rates in 2008 . 22 | P a g e Russian Oil DA BDL Answers to: High Prices Discourage Russian Economic Reform [____] High oil prices are key – shifting the economy now collapses Russia Clifford G. Gaddy, former Visiting Professor of Economics, Johns Hopkins University, 2011 (6/21, http://en.rian.ru/valdai_op/20110616/164645377.html) It is true that the Russian economy is backward, and that oil plays a role in that backwardness. But oil is not the root cause. The causes of Russia’s backwardness lie in its inherited production structure. The physical structure of the real economy (that is, the industries, plants, their location, work forces, equipment, products, and the production chains in which they participate) is predominantly the same as in the Soviet era. The problem is that it is precisely the oil wealth (the so-called oil rent) that is used to support and perpetuate the inefficient structure. For the sake of social and political stability, a large share of Russia’s oil and gas rents is distributed to the production enterprises that employ the inherited physical and human capital. The production and supply chains in that part of the economy are in effect “rent distribution chains.” A serious attempt to convert Russia’s economy into something resembling a modern Western economy would require dismantling this rent distribution system. This would be both highly destabilizing, and costly in terms of current welfare. Current efforts for “diversification” do not challenge the rent distribution system. On the contrary, the kinds of investment envisioned in those efforts will preserve and reinforce the rent distribution chains, and hence make Russia more dependent on...
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This document was uploaded on 02/06/2014.

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