Oil revitalises Russia

Oct 05, 2005 02:00 AM

by Geoff Kitney

The last great geo-political upheaval of the 20th century, the collapse of the Soviet Union and the defeat of communism in Europe, brought freedom to Russia.
But freedom had one particularly nasty side effect -- poverty.

The political chaos and cowboy capitalism that replaced communism after 1991 plunged Russia into a spiral of economic decline and returned per capita income to 1978 levels. Vast numbers lost their jobs and the state lost the capacity to maintain social safety nets, sending ordinary people into the streets with begging bowls.
The changing fortunes of the communist giants is evidenced by rising incomes in China, which kept its political system but embraced market forces in its economy. In 1978, China's per capita income was just 8 % of Russian income.

By 2005, it was 57 %. On present trends, Chinese incomes will exceed Russian incomes within 15 years. The impoverishment of Russia diminished its global power, though it still holds a seat on the United Nations Security Council and has a nuclear arsenal second only in destructive potential to that of the United States.
Vladimir Putin, who succeeded Boris Yeltsin as president in 2000, set about restoring Russian pride and rebuilding the economy.

Now, a new Russian geo-political reality is beginning to emerge. If nuclear weapons were the currency of strategic competition of the old century, oil is likely to be the currency of the new century.
And Russia has oil and gas in abundance. By 2030, according to the International Energy Agency, Russia will be the world's biggest gas exporter. Russian oil production is predicted to rise to nearly 11 mm bpd by 2030.

As oil and gas supplies from the West's present sources dry up, Russian energy power will grow.
Mr Putin has already moved to increase state control of Russia's energy industries, ostensibly to ensure that the people benefit from the country's energy wealth. One question will be how Russia will use the power bestowed on it by its energy wealth. A world transfixed by the rise of China and India would be foolish to forget about Russia.

Source: MosNews
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