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Html on the other hand russia today is not and is not

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Unformatted text preview: oil rents. Even under optimal conditions for investment, any dream of creating a “non-oil” Russia that could perform as well as today’s commodity-based economy is unrealistic. The proportion of GDP that would have to be invested in non-oil sectors is impossibly high. Granted, some new firms, and even entire sectors, may grow on the outside of the oil and gas sectors and the rent distribution chains they support. But the development of the new sectors will be difficult, slow, and costly. Even if successful, the net value they generate will be too small relative to oil and gas to change the overall profile of the economy. Thus, while it is fashionable to talk of “diversification” of the Rus sian economy away from oil and gas, this is the least likely outcome for the country’s economic future. If Russia continues on the current course of pseudo-reform (which merely reinforces the old structures), oil and gas rents will remain important because they will be critical to support the inherently inefficient parts of the economy. On the other hand, if Russia were to somehow launch a genuine reform aimed at dismantling the old structures, the only realistic way to sustain success would be to focus on developing the commodity sectors. Russia could obtain higher growth if the oil and gas sectors were truly modern. Most important, oil, gas, and other commodity companies need to be freed from the requirement to participate in the various informal schemes t o share their rents with enterprises in the backward sectors inherited from the Soviet system. Certainly, there are issues with oil. It is a highly volatile source of wealth. But there are ways to hedge those risks. A bigger problem is that oil will eventually lose its special status as an energy source and therefore much of its value. But that time is far off. It will not happen suddenly. In the meantime, sensible policies can deal with the problems. Otherwise, the approach should be to generate the maximum value possible from the oil and protect that value through prudent fiscal policies. Russia should not, can not, and will not significantly reduce the role of oil and gas in its economy in the foreseeable future. It will only harm itself by ill -advised and futile efforts to try. 23 | P a g e Russian Oil DA BDL Answers to: High Prices Fuel Russian Aggression [____] [____] Russia too weak politically to constitute a threat R. Craig Nation, Professor of Strategy, U.S. Army War College, 2007 (Russian Security Strategy Under Vladimir Putin, November, http://www.strategicstudiesinstitute.army.mil/pdffiles/PUB829.pdf) At the same time, it is important not to exaggerate Russian capacity. Despite its impressive revival, the Russian Federation remains a troubled and potentially fragile polity whose ambition may well come to exceed its grasp. Blocking Russian imperial revival is a foundation of U.S. Eurasian policy, but it is important to think systematically about the consequences of success. What kind of Eurasian regional order will emerge in the absence of Russia as “ordering” force? What other...
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