Black Gold – Russia's blessing and a curse

Russia's economy continues to blossom since 2003 thanks to high oil prices on the market.

 Increased values of bank reserves, significant increase of the country's capital as well as a stable growth of trade balance, all of these factors are indicative of Russia’s positive economic development. Many economists consider that Russian President Vladimir Putin is successfully moving out the country from a period of economic stagnation by lowering taxes and creating the environment of political stability in Russia. Oil however remains the most important factor influencing the country's economic growth.

Oil continues to be Russia's blessing and a curse at the same time. When asked about the positive and negative aspects of the country's economy in the past year, Russia's Minister of Economic Growth German Greff immediately answered: “High oil prices.”

Last year, when oil supplier under a trademark “Brent” cost $28,80 per barrel, the prices did  contribute to the overall economic growth and market development stated the Minister in his interview to “Ogonek”. He also warned however that high oil prices possess a negative aspect as well. At first sight, everything appears to be good. This in turn might lead to slowing the process of creating radical reforms in the country.

War in Iraq along with rioting atmosphere in the Middle East did not only make oil prices go up worldwide, but also had quite positive impact on the overall development of Russia's economy, noted the Minister in his report about the country's financial situation.

After the price leap, Russia has been exporting more oil than in 2003. Today, the country competes with Saudi Arabia for being the world's leading oil supplier. Russia has reached a record high export level of oil, which presently constitutes $134,4 billion, thus exceeding its rating of 2002 by 25%.

Another positive factor is decreasing money-drain from Russia. This means that foreign investors begin to develop trust in Russian economy. Despite the arrest of Russian oil tycoon Mikhail Khodorkovsky, a total amount of capital transferred abroad has significantly decreased from $8,1 billion in 2002, to $2,9 billion in 2003.
Russia continues to fulfill its gold and foreign exchange reserves. Last week for instance, they constituted $77,8 billion.

According to analysts, there is only one thing that is capable of bringing Russia back to earth and that is a sudden slump of oil prices. The degree to which they would have to degrade still remains rather controversial. However, some analysts consider that Russia may soon reach a serious crisis, in case oil prices will reach a mark of 13,5 dollars per barrel.

Economist of Moscow's Investment Bank “UFG” Vladislav Oreshkin stated that Russian economy will continue to grow with a rate of 5,5 percent per year, despite oil price's decrease to $23 per barrel. Even with sinking oil prices, Russia will have a positive budget balance considers the analysts.

According to him, Russian economy will suffer only if oil prices reach $13,5 per barrel. 

Source: InoSMI.Ru

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Author`s name Andrey Mikhailov