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Is Russia Falling Prey to the Resource Curse?

 

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  • its oil and gas wealth condemns it to economic instability, social inequality and political authoritarianism

  • oil and gas played an important role in the Soviet economy, and the collapse of oil prices in the 1980s is now widely cited as one of the main factors precipitating the collapse of the USSR in 1991

 
  • resource curse advocates argue that the resulting liberalisation in the 1990s was just a temporary phenomenon, and that Russian democracy was doomed to fail once the oil price went back up again

  • global experience strongly suggests that oil is bad for democracy and bad for sustained economic growth

  • there are no examples of a successful transition to democracy in a country where oil generates more than one third of its export earnings

  • the tendency of oil revenues to delay modernisation; their use to buy off social protest (the rentier effect); or their use to fund a repressive state apparatus

 

Resource Cursed or Blessed?

 
  • Russia is different from other resource-cursed economies

  • resource curse had not prevented modernisation

  • Russia is clearly a modern society, as measured by urbanisation, education and industrialisation

  • Russia in 2006 is more dependent on resource exports than was the Soviet Union of 1985, yet it is also more democratic

  • in contrast to other resource-dependent economies, Russias post-Soviet privatisation resulted in a pluralistic ownership structure in the oil industry

  • the oil ministry was split into a dozen independent corporations with hundreds of small independent companies created as middlemen for oil operations

  • this pluralisation led to intense political bargaining in Russia, both vertically between the federal centre and regional bosses, and horizontally between rival companies

  • natural gas assets were kept separate from oil, and were privatised into a single nationwide corporation, Gazprom

  • Gazprom served as an important political resource for the state, domestically and internationally, and balanced out the fierce takeover battles that erupted among the oil companies

  • Russias resource endowment is not limited to oil and gas. It has a massive metals industry including iron and steel, non-ferrous metals such as copper and nickel, and precious metals such as gold and diamonds

  • the metal barons developed multi-billion dollar industries largely independent from the oil and gas companies

  • of the 33 Russians on Forbes 2006 list of billionaires, only 12 are clearly identified as coming out of the oil and gas sector, while 15 were based in the metals industry (often merged with coal interests)

  • among the 87 magnates on the 2008 list, 15 originated in oil and gas, as compared with 22 in banking, 20 in mining and metals, 11 in real estate/construction, and eight in retailing

  • the Russian economy is a more complex and differentiated political economy than the resource curse label would usually imply

  • Russias statist tradition overlaps and supplants the resource curse in complex ways that make predictions based on the experiences of other countries unreliable

Sources:

  • Rutland, Peter (2008) 'Putin's Economic Record: Is the Oil Boom Sustainable?', Europe-Asia Studies, 60:6, 10511072.

  • : , . Politcom.ru. Accessed on 2 February 2009.

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