As Putin’s younger alter ego takes the Presidency from his base at Gazprom, speculation is growing that the Russian economy may take on a more mature and dynamic phase of growth.  A “kinder. gentler” approach to trade issues and perhaps a clamp down on mob rule could push growth more broadly into the Russian economy. 

Such developments are very much consistent with the general arc of Russia’s place in the world.  It’s vast energy resources will increasingly make Russia a winner in the coming years in terms of both economic and political influence and success.  In fact, Russia is close to having a strangle hold on its European neighbors.  Such power is usually translated into money and that bodes very well for the per capita GDP of Russia. 

Growth in the Russian economy, on the other hand, suggests real problems for global oil supply.  Russia’s oil production may have peaked already.  Domestic estimates are for very limited growth.  As the rate of domestic oil use accelerates with a dynamic economy, less Russian oil becomes available for export.  Russia is the world’s second largest oil exporting country.  A substantial fall in its exports will have an important tightening impact on the global oil supply.

Here is an article that discussed this topic in more depth and length and below is an important excerpt:

Russia is emerging as a global economic giant
By Liam Halligan

Three years ago, Russia overtook Saudi Arabia to become the world’s largest crude exporter (correction: note that they are the top producer, not exporter). And the country’s post-Soviet recovery was initially built on a 50 per cent rise in annual crude production. Had that increase not happened (had Russia chosen to join OPEC, for example), oil would now be way above $150 a barrel, rather than close to $100. Imagine how much that would now be hurting oil importers like America and the UK.

But Russia is now far more than “just an oil and gas economy”. Retail sales are growing at around 13 per cent a year in real terms - one reason why leading multi-nationals are now piling into Russia. Construction is expanding by 16 per cent a year, and domestic investment by 20 per cent - as Russia rebuilds its shattered post-Soviet infrastructure. Again, this trend is now attracting massive - and welcome - foreign investment.

Tags: energy investments

This entry was posted on Monday, March 3rd, 2008 at 4:53 pm and is filed under Russia, oil supply. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.