Russia Used Oil Revenues to Pull out of the 1990s Crisis

5 april 2018 | Nezavisimaya Gazeta

Russia got rich because of the "oil curse" but it still fell behind the leading nations, writes the Independent Newspaper, citing a bulletin on the current trends in the global economy published by the Analytical Center under the title "Uneven Economic Development around the World".

Leonid Grigoryev
Leonid Grigoryev
Chief Adviser to Head of the Analytical Center

As of 2016 (this is the latest data from the World Bank), Russia ended up in the third cluster of countries with per capita GDP at purchasing power parity of between 16.9 and 25.4 thousand international dollars. The other countries in this cluster include Equatorial Guinea, Turkey, Latvia, Kazakhstan, Chile, Romania, Croatia, Panama, Uruguay, Iran, Argentina, Bulgaria and some others.

Leonid Grigoriev, Chief Advisor to the Head of the Analytical Center, explained to the newspaper the reasons why Russia cannot recreate the success of some of the other oil exporting nations. "The Persian Gulf Arab nations all have relatively small populations (which is one reason why they have such high per capita GDP) and a very high per capita oil production and export. Russia produces roughly the same amount of oil as Saudi Arabia, but domestic consumption of oil is higher and per capita spending is higher as well," Mr. Grigoriev explained.

He pointed out that Russia experienced quite a boom in the durable consumer goods market in 2011-2014, as it came up for air between crises and the plummeting oil prices. "In that period people stockpiled on cars, computers and Internet access. In other words, the revenue earned as a result of selling energy went not only on social benefits and defense but also drove up domestic consumption," Mr. Grigoriev says. "Russia used its oil revenues to pull out of the long crisis of 1990s and to invest in the future."

But the expert also adds: "We do believe, however, and it's a point few would debate, that the revenues earned from sales of energy could have been reinvested in the country's economy in a much more effective way, but that's a goal for the foreseeable future."

The Analytical Center experts studied the changes in the situation with the variability of development in different countries. The analysis covered 175 countries. The estimates were based on World Bank Statistics. 1992 was picked as the start year, thus the former USSR republics are presented in the analysis separately. The Analysts identified 7 clusters, each comprising several dozen countries.