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Russia’s Economic Potential

Is Russia’s President Vladimir Putin on the right track in making use of his country’s economic possibilities?

September 26, 2001

Is Russia's President Vladimir Putin on the right track in making use of his country's economic possibilities?

Russia has seemed like an economic basketcase for much of its existence. And yet, despite its many problems, Russia has a remarkable economic potential — especially because of its ample energy resources. In order to turn this vast potential into reality, there are tough choices ahead for President Putin. He needs to find the right approach to advance his country in the global economy. This second part of our new Globalist Factsheet examines Russia’s path to the future.

Has the Russian economy improve since the end of communism?

Between 1991 and 2000, Russia’s GDP contracted by about 45% — from $730 to $329 billion.


When did it become fully legal to own property in Russia?

In June 2001, the Russian State Duma finally passed President Putin’s land reform, which permits the sale and purchase of private property, though not farmland. Ever since the collapse of the Soviet Union, communists and rural factions in the parliament had been preventing the passage of such legislation for an entire decade.

(Washington Post)

How does the country fare economically?

Russia’s economy grew by a respectable 4.4% in 2001 — after an 9% surge in 2000.


What is the state of Russia’s banking system?

As of August 2001, there are only 12 Russian banks with equity capital of over $100 million.

(Financial Times Germany)

What is Russia’s biggest export sector?

Energy accounts for 40% of Russia’s exports — and 13% of the nation’s economic output.

(Washington Post)

Who is the biggest player?

Gazprom is the world’s largest natural gas company — and by itself accounts for 7% of Russia’s GDP. As of 2001, the Russian government owns 38% of Gazprom.

(New York Times)

What has constrained Russia’s oil exports?

As of 2000, Russia’s pipelines were not able to export even one-fourth of the country’s exporting capacity.

(Washington Post)

And what else is wrong with the Russian oil pipelines?

As of 2000, one million tons of oil — the equivalent of 25 Exxon Valdez spills — leaked out of pipelines very month.

(Washington Post)

Is Russia’s balance of trade healthy?

As of 2000, Russia has the largest trade surplus as a percentage of GDP among the G-8 nations. At $53 billion, Russia’s trade surplus that year was equal to 23% of GDP.


How does this compare to Germany and Japan?

As of 2000, Germany’s trade surplus — at $60 billion — is equal to only 2.7% of GDP, whereas Japan’s trade surplus of $99 billion is equal to 2.1% of its GDP.

(Deutsche Bundesbank)

How much does Russia owe the West?

As of early 2001, Russia owed Western governments — known as the Paris Club — a total of $42 billion. Having lent almost half of this total, Germany is the biggest single creditor nation.

(New York Times)

How pressing is the debt problem?

Nearly $19 billion of Russia’s $42 billion debt to Western governments will come due in 2003.

(New York Times)

When was most of that debt incurred?

Russia’s foreign debt tripled over the six years that Mr. Gorbachev led the Soviet Union — rising from about $35 billion in 1985 to over $100 billion in 1991.

(New York Times)

Has communication between Russia and the United States improved?

In June 2001, U.S. President George Bush and Russian President Vladimir Putin’s meeting in Slovenia marked the first time a Russian leader has ever spoken at any length in English to a U.S. president.

(Washington Post)