fbpx

The Backwards Oil Boom

$76.50 of the $113 paid for Urals crude at the moment goes to the Russian treasury, says Will Englund in the Washington Post, in a piece that addresses the boons and pitfalls of the current oil price spike.  The current price is slowing global economic growth, but Russia’s economy is booming, and the latest Forbes Rich List demonstrates the results: more billionaires, yes, buton the other hand, more ‘glaring social inequality‘.  In other words, with the Russian economy structured the way it is, oil wealth is not benefitting those who really need it, and beyond that, it reduces the pressing need for economic reform.  Instead, ‘It’s a powerful prop for the status quo‘:
[…] with increased oil revenue also comes the danger of complacency. Bureaucrats, defense contractors, pensioners and workers in construction and finance all stand to gain from the money coming in, along with the oil companies. But the cash also feeds corruption, encourages increased financial opacity and discourages attempts to shake up the system – all of which could spell trouble for Russia down the road. “All of the dominant groups in Russia get a share of the increased oil revenue,” said Alexander Auzan, an economist and adviser to Medvedev. “Yet it contradicts their long-term interests.”

[…] as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to involve a cost for someone, so why take the risk if the money is flowing in?
Read more here