Magnus Itland (itlandm) wrote,
Magnus Itland

More Russia

On the bright side, a resurgent Russian empire powered by high oil prices may be just what the Americans need to inflate their tires, put solar cells on their roof and eventually trade in their SUVs for a hybrid or electric car. Put up signs on the gas stations showing how much of the gas price goes to Russia ("Putin tax"). This should be calculable from the proportion of the world's oil that comes from Russia (second largest producer, I believe) corrected for the cost of shipping and refining. It should still be a very noticeable amount when you fill up your tank.

The thing is, Russia failed to fully implement capitalism during its window of opportunity. Instead, oligarchs gained personal control of much of the economy, and later this ownership has gradually drifted back to the government. This model does not fully tap the benefits of a market economy, and Russia still has an outdated manufacturing base and a shallow and feeble banking and insurance system. If the oil price crashes, so does Russia. The recent torrent of oil money into Russia has largely been spent right away on beefing up the military and buying goodwill for the new ruling party. The country has not set aside a substantial fraction of its petroleum wealth the way Norway did, for instance. Therefore they are vulnerable to a rapid spread of energy-saving technologies, renewable energy, petrol substitutes and of course a global recession, any of which would send the oil price down. A combo of several of these could pull the rug out under Putin, although I cannot guarantee that his successor would be better - some of the alternatives today seem outright crazy by comparison.
Tags: economy, politics
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