Home News The Econo Miss

The Econo Miss

by Archives February 26, 2008

The next Russian president will have his work cut out for him. The idolized President Vladimir Putin has left the mostly state-controlled economy stronger than ever, and a population that loves him for it.
Since the near collapse of the Russian economy in 1998, Putin has managed to double the foreign investment in Russia to the tune of US$36.8 billion, while assertively nationalizing key financial sectors that form the economy’s backbone. Since the end of the Yeltsin era, economic growth in Russia has been steady at seven per cent, inflation has been stable, and the unemployment rate sits comfortably at around five per cent. Russia now boasts more billionaires than any other country and a rapidly expanding middle class.
Like many other oil and gas producing nations, Russia is high up in the commodities boom. The country now has the largest oil export earnings in the world, up from only US$12 billion in 1999 to US$470 billion in 2007. Due in part to Russia’s earnings on the global commodities market, the country’s debt has now decreased to one third of their GDP. The country also holds the third largest gold reserves in the world. Russia is largely commodity driven and a major exporter of oil, gas, grains, minerals and other resources. Government focus on these sectors however, has left the manufacturing sector in decline and in need of modernization in order to compete on world markets.
If elected, Kremlin-backed Dimitry Medvedev, who has been called an economic liberal, has said that his priorities will be to decrease state involvement in the economy and to fight corruption. At the Krasnoyarsk economic forum on Feb. 15, 2008, Medvedev said there is no reason why state officials should sit on the boards of some of the largest firms in Russia, and that directors should be truly independent of the Kremlin. Medvedev, who is the head of the state-owned monopolistic Gazprom, has very recently negotiated two deals with foreign firms to increase production of offshore gas operations.
Gazprom is now in control of 51 per cent of the Sakhalin-2 project formerly owned by Shell, as well as the Kovykta gas field formerly owned by TKN-BP.
On Thursday Gazprom, France’s Total, and Norway’s StatoilHydro signed an agreement for further development of a gas field off the northwest coast of Russia. In the next few years the gas coming from this field will be the main source for the Nord Stream pipeline and will supply most of western Europe with energy. Europe’s reliance on energy from Russia will allow the country to remain assertive in its political and economic foreign policies.
Medvedev’s vision for the Russian economy also includes cutting the value-added tax and decreasing duty on energy exports to allow oil firms to invest in new areas. The only other candidate expected to get any significant number of votes is Gennady Zyuganov of the Communist Party.
A favourite of the older generations, Zyuganov has vowed to re-nationalize the country’s resources and describes capitalism as barbaric.

Related Articles

Leave a Comment