Russia’s Political Dependency on Oil

putinski010608.jpgClifford Gaddy of Brookings and Barry Ickes of Pennsylvania State University have a new piece on the Putin economic model in The National Interest.  As usual with this publication, we have a number of disagreements about the piece, its underlying assumptions, conclusions, and the discussion events leading up to Mikhail Khodorkovsky’s arrest, but for now we will let our readers make up their own minds.

Was Putin really so prescient? The simple answer is no, Putin anticipated neither the exact timing nor the nature of this crisis. But in a more important sense, he did prepare. For eight years Putin pursued two main economic-policy priorities. One was to set up a system that could maximally exploit the advantages of the market economy while ensuring that the interests of private business owners would always remain subordinate to the strategic interests of the state. The second priority was to make the Russian economy robust to crisis. The dual policy objectives of optimal efficiency and maximum robustness to short-term shocks are inherently in tension. They cannot be permanently reconciled. Rather, they require continual balance. Until now, the balance has been struck such that there is a firm commitment to market methods and an openness to the global economy. But whether this can continue in the face of a much deeper and prolonged crisis has implications not only for Russia’s short- and long-term economic development–especially in the critical oil sector–but also for the country’s geopolitical behavior.