NCPA - National Center for Policy Analysis


December 4, 2003

Russia has a lot of oil, and this inescapable geological fact will determine many of the policy choices available to it, says Moises Naim, editor of Foreign Policy magazine.

  • Oil and gas now account for roughly 20 percent of Russia's economy, 55 percent of all its export earnings and 40 percent of its total tax revenues.
  • Russia is the world's second largest oil exporter after Saudi Arabia, and its subsoil contains about 30 percent of the world's gas reserves.
  • It already supplies 30 percent of Europe's gas needs. And Russia's oil and gas industry will only become more important.
  • Petrostates are oil-rich countries plagued by weak institutions, a poorly functioning public sector, and a high concentration of power and wealth.
  • The gulf between a petrostate's rich natural resources and the chronic poverty of its citizens often leads to political unrest and frustration (Nigeria and Venezuela are good examples).
  • Petrostates commonly suffer from a narrow tax base; in Russia, for example, the 10 largest companies account for about half of total tax revenues.

In petrostates, bitter fights over the control and distribution of the nation's oil revenues become the gravitational center of political life. It is no accident that the current crisis in Russia hinges on control of the country's largest oil company and the political uses of its profits.

Source: Moises Naim, "If Geology Is Destiny, Then Russia Is in Trouble," New York Times, December 4, 2003.


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