In a new exposé, explores the history and state of affairs of the post-Soviet energy production sector and concludes that, while the Russian economy is disproportionately dependent on natural resources for its financial viability, which tends to lead to poverty, inequality, and corruption, the country’s massive oil and gas reserves look set to maintain that situation for years to come. 

Alpharetta, GA – As one of the word’s major producers and exporters of oil, natural gas, and coal, Russia’s economic growth is driven largely by its fossil fuel reserves. In a new exposé, looks at the history and current state of the Russian energy production sector, and in particular at the ongoing effects of Russian oil corruption.

According to the article, Russia is the world’s second-largest oil producer, producing 11.3 million barrels of oil produced per day, which places it only behind only the United States. The country’s oil and natural gas revenues alone account for a little more than thirty-six percent of the country’s federal budget revenues, according to a 2017 study by the U.S. Energy Information Administration.

As oil prices increased in the early 2000s, Russia’s gross domestic product increased by over fifteen percent, which added billions of dollars into the government treasury and increased the personal incomes of many Russians by as much as a third. However, this is a double-edged sword, the exposé goes on to say, because such out-sized dependence on natural resources leads a nation’s fortunes to rise and fall in lock-step with commodities prices, a situation described colloquially, when the commodity in question is fossil fuels, by the word “petro-state.”

Russia is often listed as one of the countries impacted by the “natural resource curse,” which is the idea that wealth primarily from natural resources tends to undermine a nation’s economic stability and commitment to democratic institutions. Because the Russian oil and petroleum industry are largely controlled by a handful of insiders and oligarchs, many economists predict that Russia’s authoritarian tendencies will continue for the foreseeable future.

Because the Russian government’s main source of income derived from the oil and gas industry, the fall in oil prices during the 2008 recession sent shock waves throughout the economy. In an attempt to recoup the lost revenue, the Russian tax system wrought havoc on the country’s oil system, with ninety percent taxes on company profits hindering plans to invest profits into new oil fields, drilling operations, and technology.

The combination of enormous natural resources and weak public institutions tends to fuel poverty, inequality, and corruption. Prominent New York Times columnist Tom Friedman has even gone so far as predicting that higher oil prices will equate to less freedom for average citizens in resource-rich countries like Russia.

As oil prices have decreased, Russia’s fossil fuel revenues have declined significantly. Economic concerns have also led to taxes being raised on the oil and gas industry, which has threatened its long-term health.

While the drop in oil prices has damaged the Russian economy, the oil and gas industry looks set to continue fueling Russia’s political economy for the foreseeable future.

About the is the world’s authority on the fossil fuel energy sector.

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