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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
The Guardian (UK), January 25, 2008. “Russia investment fund seeks $4 bln/year from 2011,”
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
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.
- Spring '14