da oil russian

8/14/2019 Da Oil Russian

1/124

Zs Juniors AMP! LAB Jan F-F, Jan Wimmer, and Jyoti Narayanswami

Russian Oil

To all you Vada hatas well blow yo planet up! 1


2/124


INDEX RUSSIAN OIL

INDEX RUSSIAN OIL .....................................................................................................................................2

RUSSIAN OIL 1NC SHELL (1/4) ........................................................................................................................5

Shell (2/4) ......................................................................................................................................................6Shell (3/4) ......................................................................................................................................................7

Shell (4/4) ......................................................................................................................................................9

Russian Econ High - Cars .............................................................................................................................10

Econ High African Expansion .....................................................................................................................11

Econ High Oil (1/4) ....................................................................................................................................12

Econ High Oil (2/4) ....................................................................................................................................13

Econ High Oil (3/4) ....................................................................................................................................14

Econ High Oil (4/4) ....................................................................................................................................15

Russian Econ High Generic (1/3) ...............................................................................................................16Econ High Generic (2/3) ............................................................................................................................18

Econ High Generic (3/3) ............................................................................................................................20

Russian Econ Low Corruption/Bureaucracy ...............................................................................................21

Russian Econ Low - FDI................................................................................................................................23

Russian Econ Low - Inflation ........................................................................................................................24

Russian Econ Low Foreign Tech .................................................................................................................25

Russian Econ Low Energy Dependency .....................................................................................................26

Russian Econ Low - Generic .........................................................................................................................27

Russian Econ Low Oil Production Slowing ..................................................................................................28Russian Econ Low Capital Outflow .............................................................................................................30

Oil Prices Turn Warming ..............................................................................................................................31

Oil Prices Will Remain High (1/2) ..................................................................................................................32

Oil Prices Remain High (2/2) ........................................................................................................................33

US Prices Spillover .......................................................................................................................................34

I/L Extension (1/6) ........................................................................................................................................35

I/L Extension (2/6) ........................................................................................................................................36

I/L Extension (3/6) ........................................................................................................................................38

I/L Extension (4/6) ........................................................................................................................................40

I/L Extension (5/6) ........................................................................................................................................41

I/L Extension (6/6) ........................................................................................................................................42

I/L to Nationalism .........................................................................................................................................43

Nationalism NW Impact Scenario .............................................................................................................44

High Oil Prices Arent Bad ............................................................................................................................45

US Key to World Econ China and India follow ............................................................................................46

NW turns Global Warming - Generic ............................................................................................................47



3/124


Arms Sale Impact .........................................................................................................................................48

Inflation Key to Stop Nukes ..........................................................................................................................49

Global Econ Collapse Impact Scenario .........................................................................................................50

Ext: Russian Econ Key to Global Econ ..........................................................................................................52

Internal Measures Solve ...........................................................................................................................53

A2 Russian Inflation .....................................................................................................................................54

Uniqueness Oil Prices Wont Fall in Squo ...................................................................................................55

Uniqueness Ext US is Reliant .....................................................................................................................56

Oil is Abiotic (1/2) ........................................................................................................................................57

Oil is Abiotic (2/2) ........................................................................................................................................58

Alternative Energy Inevitable .......................................................................................................................59

Oil Prices Key to Stability .............................................................................................................................60

EXT Prices Based on Demand ....................................................................................................................61

A2: Speculators (1/5) ...................................................................................................................................62

A2 Speculators (2/5) ....................................................................................................................................63

A2 Speculators (3/5) ....................................................................................................................................64

A2 Speculators (4/5) ....................................................................................................................................65

A2 Speculators (5/5) ....................................................................................................................................67

A2 Stabilization Fund No Impact ..............................................................................................................68

A2 But Our Oils From Canada! (Oil = Fungible) .......................................................................................69

A2 Non-Unique: ANWR (1/2) .........................................................................................................................70

A2 ANWR (2/2) .............................................................................................................................................71

A2 Non Unique: Peak Oil..............................................................................................................................73

A2 Peak Oil: Impact to Belief ........................................................................................................................74

A2 Dutch Disease Generic (1/2) ................................................................................................................75

A2 Dutch Disease Generic (2/2) ................................................................................................................77

A2 Dutch Disease WTO Scenario ...............................................................................................................79

2NC/1NR Link Magnifiers (Perception) .....................................................................................................80

***AFFIRMATIVE ANSWERS*** ......................................................................................................................81

Aff No Link Institutional Investors (1/2) ...................................................................................................82

Aff Institutional Investors (2/2) ..................................................................................................................84

Aff Dutch Disease (1/3) .............................................................................................................................86



Aff Ruble Appreciation Inevitable Collapse ...........................................................................................90

Aff Econ Collapse Inevitable Inflation ......................................................................................................91

Aff- No Link ..................................................................................................................................................93

Aff Russian Oil Dependence Bad (1/2) .......................................................................................................94

Aff Russian Oil Dependency Bad (2/2) .......................................................................................................95

Aff - Price Fall Wont Affect Russia Immediately ...........................................................................................96

Aff Prices Wont Drop Short Term ..............................................................................................................97



4/124


Aff Oil Prices Will Fall (1/3) ........................................................................................................................98

Aff Oil Prices Will Fall (2/3) ........................................................................................................................99

Aff- Oil Prices Will Fall (3/3) ........................................................................................................................100

Aff- Oil Prices are a Lie ...............................................................................................................................101

Aff Stabilization Fund ..............................................................................................................................102

Aff Russian Econ Not Growing From Oil...................................................................................................103

Aff - No Reliance Now ................................................................................................................................104

Aff A2 Nuclear Winter Turns ....................................................................................................................105

Aff A2 Oil is Abiotic ..................................................................................................................................106

Aff A2 Global Economy Scenario .............................................................................................................107

***Impact Analysis*** ................................................................................................................................108

NW Extinction ........................................................................................................................................109

NW Outweighs GW AND Turns Environment ..............................................................................................111

NW Turns Agriculture Nuclear Winter ......................................................................................................112

NW Turns Biodiversity Nuclear Winter .....................................................................................................113

NW Turns Biodiversity Generic ................................................................................................................114

Turns GW Ozone Layer ............................................................................................................................115

Russian Econ Collapse Kills US Heg ...........................................................................................................116

2NC/1NR Impact Calc. Schell...................................................................................................................117

A2 Deterrence Its Outdated ....................................................................................................................119

GW is Unstoppable .....................................................................................................................................120

Aff GW = NW ...........................................................................................................................................121

Aff Deterrence Solves NW .......................................................................................................................122

Aff A2 NW Causes GW (NW Delays GW) ..................................................................................................124



5/124


6/124


Shell (2/4)Internal Link - Russia is vulnerable to economic shock from a drop in oil prices,

but it can compensate if prices remain high. The plan doesnt allow

enough time. Tompson and Ahrend 04(William and Rudiger, employees of Organisation for Economic Co-operation and Development, Rudigerteaches at Birkbeck College University of London School of Politics and Sociology, 25 May, OECD EconomicStudies [accessed through Google Books]JFF)

At present, Russia is highly dependent on the export of a limited range of naturalresources, chiefly hydrocarbons and metals. Indeed, this dependence has been growingin recent years, and it will not rapidly be reversed. This resource dependence makesthe economy especially vulnerable to external shocks arising from fluctuations in theinternational prices of its major export commodities, above all oil. The government iswell aware of the riskiness of such resource-dependent development and rightly

regards economic diversification as a key long-term goal. Yet policies promotingdiversification will take time to bear fruit. Even if diversification policies arespectacularly successful and Russia increases sharply its exports of moresophisticated manufactures, they will remain modest for quite some time, simplybecause they start from such a low base.

The difficulties of managing a resource-based economy have prompted someeconomists to view rich natural resource endowments as a "curse." Yet talk of a"resource curse" is greatly overblown. The risks of resource-dependent developmentare manageable, given the right policies and institutional framework. Prudentmacroeconomic management, in particular, is of vital importance. Regardless of the success or failureof diversification-oriented structural policies over the long run, the sine qua non for sustaining growthover the short to medium term will be sound macroeconomic policy.



7/124


Shell (3/4)

Impact - Economic trouble creates civil instability in Russia, looseninggovernment control and allowing for theft and use of Russias nuclear

arsenal.David, (Steven,political scientist and professor, FOREIGN AFFAIRS [a peer-reviewed journal],

January/February 1999, http://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.html JFF)

If internal war does strike Russia, economic deterioration will be a prime cause. From 1989to the present, the GDP has fallen by 50 percent. In a society where, ten years ago, unemploymentscarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to bemuch higher. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 amonth). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantlycut spending. Reformers tout privatization as the country's cure-all, but in a land without well-definedproperty rights or contract law and where subsidies remain a way of life, the prospects for transition to an

American-style capitalist economy look remote at best. As the massive devaluation of the ruble and thecurrent political crisis show, Russia's condition is even worse than most analysts feared. If conditions getworse, even the stoic Russian people will soon run out of patience. A future conflict would quickly drawin Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with theCommunist Party out of office, what little civilian control remains relies on an exceedingly fragilefoundation -- personal friendships between government leaders and military commanders. Meanwhile, themorale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay,housing, and medical care. A new emphasis on domestic missions has created an ideological split betweenthe old and new guard in the military leadership, increasing the risk that disgruntled generals may enterthe political fray and feeding the resentment of soldiers who dislike being used as a national police force.Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow evermore dependent on local governments for housing, food, and wages. Draftees serve closer to home, and

new laws have increased local control over the armed forces. Were a conflict to emerge between a

regional power and Moscow, it is not at all clear which side the military would support.Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes itvirtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow

ever more independent in a system that does little to keep them together. As the central governmentfinds itself unable to force its will beyond Moscow (if even that far), power devolves to theperiphery. With the economy collapsing, republics feel less and less incentive to pay taxes to Moscowwhen they receive so little in return. Three-quarters of them already have their own constitutions, nearlyall of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policiemay motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russiancontrol inspired similar movements for autonomy and independence throughout the country. If theserebellions spread and Moscow responds with force, civil war is likely. Should Russia succumb to internal

war, the consequences for the United States and Europe will be severe. A major power like Russia --

even though in decline -- does not suffer civil war quietly or alone. An embattled RussianFederation might provoke opportunistic attacks from enemies such as China. Massive flows ofrefugees would pour into central and western Europe. Armed struggles in Russia could easilyspill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poisonthe environment of much of Europe and Asia. Within Russia, the consequences would be even worse. Justas the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a

second civil war might produce another horrific regime. Most alarming is the real possibility thatthe violent disintegration of Russia could lead to loss of control over its nuclear arsenal.No nuclear state has ever fallen victim to civil war, but even without a clear precedent

http://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.htmlhttp://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.htmlhttp://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.htmlhttp://www.foreignaffairs.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.html


8/124


the grim consequences can be foreseen. Russia retains some 20,000 nuclear weaponsand the raw material for tens of thousands more, in scores of sites scattered throughout the country. Sofar, the government has managed to prevent the loss of any weapons or much material. If war erupts,

however, Moscow's already weak grip on nuclear sites will slacken, making weapons andsupplies available to a wide range of anti-American groups and states. Such dispersal ofnuclear weapons represents the greatest physical threat America now faces. And it is hard to think ofanything that would increase this threat more than the chaos that would follow a Russian civil war.



9/124


Shell (4/4)Russia has developed new nuclear weapons systems with long range and the

ability to bypass detection; Russia could initiate a nuclear war if its oil

revenue dropped.Evening Herald 2007 (July 21, p. 11, Lexis, JFF)

Just under two weeks ago the Russian President Vladimir Putin tested a weapon more deadly than any previouslyused by the former Soviet Union.

Besides ensuring his warheads work, Putin was sending a message. The missile was launched from a submarine in the WhiteSea, and then travelled over 3,500 miles to the Russian Far East.

The target could have easily been Los Angeles or London, and the launch signifies thatRussia means business. After two decades of relative calm is the arms race back on?

While the UK press remains focused on Iraq and the Middle East, are the rumbles from the Kremlin something to worry about?

Putin never seemed keen to join the west, and now with his healthy gas and oil revenues earning dividends, it seems he'll never have too. Putinaims to challenge and then counter American world dominance, which has been significantly weakened in recent times.

Looking back 10 years it seems crazy to think Russia would attempt such a manoeuvre. The main security issue in those days was how to stopRussian nuclear fuel being sold for scrap.

Today Russia pumps out almost as much gas as Saudi Arabia, owns a huge surplus, has banked 25 billion in a reserve funds, and boasts the thirdlargest currency reserve in the world.

Here in little Britain we moan to Gordon about the state of our infrastructure, but Mr Putin has no time for health care because he's on an armsspending spree. In 2003 the Russian defence budget stood at 140 billion roubles, today we're looking at a six fold increase to 870 billion roubles(16.8 billion pounds).

With such determined spending, there is no surprise that Mr Putin's new rocket takes off so fastthat no missile defence system can detect it. More impressive is this new Topol-M missile hasmultiple warheads which splinter so it can't be shot down. America's floundering Skynet missiledefence system wouldn't stand a chance of intercepting - even if it was finished!

Washington now hopes to place a missile defence system in Eastern Europe. Putin said seven years ago he was happy for a shared scheme toproceed, but last month he made his current feelings clear.

If interceptors are erected, Putin said, "then we disclaim responsibility for our retaliatory steps, because it is not we who are initiators of the newarms race which is undoubtedly brewing in Europe."

Europe depends on Russia for a quarter of our gas, and the Russian powers that be, are acutely aware of the strength they brandish. Eighteenmonths ago, Russia temporarily suspended the gas supplies to the Ukraine in an argument about prices. Putin's long term plans for this power

were then revealed at the Munich security conference, "The United States has overstepped its borders in all spheres - economical, political, andhumanitarian, and has imposed itself on other states." This served a notice to Bush, Russia now stands as an adversary rather than ally.

Slowly the west is beginning to realise the situation which is arising. The President of the European Union Angela Merkel has been a vocal critic ofthe Russian president, whilst we wait with anticipation for Gordon Brown's foreign policy.

With Russia simulating nuclear war with the US, and identifying Nato as a greater threat than terrorism, we can forget the clandestine practices ofthe cold war. We might reason that the recent weapons tests were simply designed to focus our attention on Russia as they bid to lead a newpower axis.

Yet we must remember that a country dependant on oil money is particularly vulnerable to adrop in oil prices. Combine this with a demographic picture worse than any non

http://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4159435181&returnToId=20_T4159440280&csi=166254&A=0.9519460702780597&sourceCSI=9369&indexTerm=%23PE0009ZT3%23&searchTerm=Vladimir%20Putin%20&indexType=Phttp://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4159435181&returnToId=20_T4159440280&csi=166254&A=0.9519460702780597&sourceCSI=9369&indexTerm=%23PE0009ZT3%23&searchTerm=Vladimir%20Putin%20&indexType=Phttp://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4159435181&returnToId=20_T4159440280&csi=166254&A=0.9519460702780597&sourceCSI=9369&indexTerm=%23PE0009ZT3%23&searchTerm=Vladimir%20Putin%20&indexType=P


10/124


African country and Russia begins to look very fragile.

[END OF SHELL 4/4]

Russian Econ High - Cars

Russias economy is currently growing car sales prove. The Economist 08(June 5th,Crisis? What Oil Crisis?, http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=11496858 JFF)

But there is one country where the high oil price is powering the expansion of the market, ratherthan painful restructuring. Thanks to abundant natural resources, Russia's economy has grownby an average of 7% a year for the past decade. Real disposable income has nearly doubled inthe past five years and is growing by more than 10% a year. That means a lot of Russians cansuddenly afford to buy cars.Car ownership, at about 200 per 1,000 people, is still very low by developed-world standards. (Inmost of western Europe it is over 500, and in America it is around 800.) And although averageincomes are lower than in the West, so is consumer debt. Heidi McCormack, GM's head of

business development in Russia, says that compared with other markets, burdened by debt andoil prices, Russia is still magically isolated.

The growth and size of the Russian market has confounded every forecast. In 2007 sales of newcars grew 36% by volume and, reflecting the steadily increasing buying power of customers,57% by value. Sales of passenger vehicles exceeded 2.7m. Eduard Faritov, an analyst atRenaissance Capital, an investment bank, thinks Russia could outstrip Germany as Europe'sbiggest market this year, with sales reaching around 3.3m. By 2012 Russians will be buying morethan 5m new cars a year, of which nearly 90% will be foreign brands, predicts Ernst & Young, aconsultancy.

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=11496858http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=11496858http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=11496858http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=11496858


11/124


Econ High African ExpansionThe Russian economy is strong now it is leveraging oil profits to expand into

Africa and is therefore diversifying its economy. AP 06(September, PUTIN IN MOROCCO FOR TALKS ON MIDDLE EAST, ENERGY COOPERATION,http://70.84.171.10/~etools/newsbrief/2006/news0908.txt JFF)

Russia's state-owned nuclear power company said Thursday it would bid to build Morocco'sfirst nuclear plant, while Russian PresidentVladimir Putin signed cooperation deals with theMoroccan king as part of an economic mission to expand Russia's African reach.

Putin -- the first Russian leader to visit Morocco -- was welcomed by King Mohammed VI, Moroccan dignitaries and foreign ambassadors at aceremony under the baking sun before the royal palace in Casablanca, with a military band piping and minarets towering in the backgroundbeyond a screen of pine trees.

They then headed into talks. Afterward the Russian and Moroccan delegations signed documents on extradition, tourism, fishing, medicine andsports, palace spokesman Chakib Laroussi told The Associated Press.

The trip wraps up an Africa tour aimed at spreading Russia's influence beyond its traditional Soviet-era partners. Putin arrived early Thursday fromSouth Africa, where he pushed for a greater Russian business presence.

'The huge, positive moral and political potential, for which the USSR paid a lot in its time,must be transformed today into pragmatic relations in the economic sphere,' he said in televisedcomments.

'This is a very promising direction for our activity, our foreign policy, our economic expansion,' he said, adding: 'In the good sense of the word, soas not to frighten anyone'

Putin and the king were expected to discuss boosting the U.N.'s role in global affairs, anti-terrorism efforts and tensions in the Middle East, Putinaide Sergei Prikhodko said.

Regarding the Middle East, he said Putin and the king would 'consider prospects for resuming the political process in order to ensure a lastingpeace in the region in compliance with the norms of international law,' according to Russia's ITAR-Tass news agency.

The two were also expected to discuss the dispute over the Western Sahara, Laroussi said, adding that Morocco and Russia shared similarpositions on the issue. Morocco annexed the territory in 1975, but most countries do not recognize its sovereignty and years of U.N. efforts havefailed to organize a vote on self-determination.

Early Russian support for Algeria, which in turn backs the Western Saharan independence movement Polisario, has waned since the fall of theSoviet Union.

Arms cooperation, including sales of Russian Kornet anti-tank missiles and Tunguska air defense systems, was also on the agenda, Prikhodko said,adding that current arms trade between the countries was 'insignificant.'

Energy, too, was expected to be a key part of the talks. Russia is seeking to expand its energy influence and Morocco is seeking to diversify itssources of gas and electricity.

Russia's nuclear power monopoly, Atomstroiexport, said Thursday it would bid for a contract to build Morocco's first nuclear plant, ITAR-TASSreported.

Bidding has not yet opened for the plant, expected to go on line in 2016-2017.

Officials of Morocco's National Electricity office, which sent a delegation to Moscow for talks with Atomstroiexport last week, could not be reachedfor comment.

Both countries stand to gain from cooperating on energy, said Claire Spencer, an analyst at London's Chatham House think tank.

Russia, whose natural gas exports are key to its now-booming economy, 'is looking formarkets outside Europe, and Morocco is looking to diversify away from Algerian gas,' Spencer said.

Morocco is heavily dependent on importing natural gas from neighbor Algeria, with whom relations are

http://70.84.171.10/~etools/newsbrief/2006/news0908.txthttp://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4177347575&returnToId=20_T4177353446&csi=314633&A=0.8559481620704017&sourceCSI=9369&indexTerm=%23PE0009ZT3%23&searchTerm=Vladimir%20Putin%20&indexType=Phttp://70.84.171.10/~etools/newsbrief/2006/news0908.txthttp://www.lexisnexis.com.turing.library.northwestern.edu/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4177347575&returnToId=20_T4177353446&csi=314633&A=0.8559481620704017&sourceCSI=9369&indexTerm=%23PE0009ZT3%23&searchTerm=Vladimir%20Putin%20&indexType=P


12/124


sometimes tense, Spencer said.

Moscow was traditionally close to Algeria and other communist-friendly African states during the Soviet period,

but with the Russian economy thriving thanks largely to high oil prices, it is reaching out toother African nations. In South Africa, Putin said Wednesday that advancing Russian businesspenetration abroad was a priority. He said Russian businesses are prepared to investin South Africa, and corporate leaders signed agreements in mining, diamond and

banking.

Econ High Oil (1/4)

Russia is economically far ahead of other similar countries because of oilGlobe and Mail 08 (Oil wealth: Proving to be more purse than curse, July 15, Lexis).

The authors saythere is "little or no evidence" that an abundance of natural resources slows down long-term economicgrowth. They also debunk the notion that oil wealth degrades public institutions. Institutions may not be markedly better, theysaid, but they are not any worse.The economists point to the post-Soviet collapse experience of Russia, Ukraine andBelarus as a "natural experiment" of the influence of oil and mineral resources. All three Slavic nations emerged from

the Soviet era with similar cultural, governmental and economic backgrounds, but with distinctly unequal resource

wealth. Russia was a powerhouse, Ukraine had less and Belarus had none. If the curse exists, Belarus would have emergedthe big winner. That isn't the case. It's Russia, and it isn't even close, based on key measures, including gross domestic productper capita, rule of law, control of corruption and government effectiveness.

Russias economy largely depends on its wealth in oil and gas.Gaddy and Ickes 08 (Clifford G and Barry W, (Gaddy) an economist specializing in Russia, iswriting books on the political economy of Russian oil and gas and on the countrys long-termgrowth prospects. His earlier books include Russias Virtual Economy and The Siberian Curse,(Ickes) an Associate Professor in the Department of Economics of the Pennsylvania StateUniversity, and Director of Research at The New Economic School in Moscow, currently theChair of the Board of Directors of the National Council for Eurasian and East EuropeanResearch, and the American Editor of the journal Economic Systems, Russias Addiction: ThePolitical Economy of Resource Dependence, July 1, The Brookings Institute,http://www.brookings.edu)

For nearly 40 years, the political economy of Russia has been shaped by its heavy reliance on oil and gas wealth.

Through alternating periods of boom and bust, Russias fortunes and the legacies of its leaders have been dependent on thefluctuating value of its oiland natural gas.Resource dependence played a crucial role in both the development and thedemise of the Soviet economy. Resource abundance did not merely mask the flaws in the Soviet system;it led to atransformation of the economys physical and institutional structure. The result was addiction to oil and gas wealth.When oil prices collapsed in the early 1980s, Soviet leaders struggled to cope in much the same way as an addict facedwith a cutoff in the supply of a narcotic.Their panicky reactions weakened the system fatally.

http://www.brookings.edu/http://www.brookings.edu/


13/124


Econ High Oil (2/4)

Russias economy always has and still does depend on high oil prices.Washington Post 08(Back In the USSR? July 14th, lexis)

Vladimir Putin's appointment this spring as prime minister of the symbolic "union" of Russia and Belarus was yet anotherexample ofthe troubling similarities between today's Russia and the other most stable and prosperousRussian regime of thepast 80 years: Leonid Brezhnev's Soviet Union in the 1970s. That economy, too,was fueled by then-record oil prices. Andwhile there are clear differences between the two Russias, if these tendencies go unchecked, the increasingly authoritarian andeconomically statist country may soon face crises of the kind that became apparent under Brezhnev and contributed to theSoviet Union's demise. The most disturbing of these propensities include: The national alcoholic binge. In the 1970s,Soviets annually consumed eight liters of strong (40 to 80 percent proof) alcoholic beverages per person -- more than any othercountry. Between 1964 and 1980, male life expectancy fell from 67 to 62. Today, per capita consumption of vodka, which isfour times cheaper in relation to the average salary than 30 years ago, has grown to 10 liters, according to official statistics(outside experts say it is higher). By contrast, the most recent data available from the World Health Organization show thecorresponding U.S. figure is 2.57 liters. One in 10 Russian men is thought to be an alcoholic. Life expectancy for Russian menis less than 60.6 years, more than 15 years shorter than in the United States and European Union and below current levels inPakistan or Bangladesh. Oil-for-food. This spring, Putin admitted that 70 percent of the food consumed in Russia's largestcities is imported, a situation he decried as "intolerable." This problem, too, first surfacedin the 1970s, when grain importswere so high that by the end of the decade they supplied the flour for every third loaf of bread.When oil prices collapsed,Russia was forced to spend gold reserves and seek loans -- and eventually found itself without grain or gold.

Russias economy is growing and is now more dependent on oil than ever beforeThe Economist 08(Smoke and mirrors, Feb 28,

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120)

Even Mr Putin's critics are impressed by Russia's transformation in the past few years. A country thatalmost went bust ten years ago now boasts a $1.3 trillion economy, foreign-currency reserves of nearly $480 billion and

a $144 billion stabilisation fund for surplus oil and gas revenue. Annual growth of real incomes has been in double

digits. GDP per head has risen from less than $2,000 in 1998 to $9,000 today at current rates of exchange. Never beforehave Russians shopped or travelled so much. Restaurants, mega-malls and airports are heaving; streets are choked with foreigncars. Nor is the wealth confined to Moscow; every other city now seems to have a decent hotel, an Italian restaurant and aHugo Boss store. Mr Putin boasts that this is the result of his presidency, and implies that most Russians would back DmitryMedvedev, his chosen successor, even if the election were free and fair. Asked by a foreign journalist why there is no politicalcompetition and why Mr Medvedev has not taken part in televised debates, Mr Putin says: The salaries here are going up by16%. There's the answer to your question. Yet the truth is thatRussia's economy began its rebound 18 months before hebecame president. Behind it lie three factors: a revival of private initiative, oil prices that have risen fourfold during his

presidency and macroeconomic stability. Only the third can be credited to Mr Putin. The economy is now more dependenton oil than ever.



14/124


Econ High Oil (3/4)Russias economy is flourishing, mainly because of oil and other commodity exports.Canberra Times 08(Russia is back and proud, July 16, lexis)

Russia is back and proud. Prime Minister Vladimir Putin and President Dmitry Medvedev, are the Russian state, and

overwhelmingly supported by the Russian people. Today Russia is booming mainly from commodity exports, particularlyoil and natural gas. Also about 60 per cent of the world's uranium supply still comes from Russia's Cold War stockpiles.

The prosperity trickle down is apparent. Expensive brand names dominate Moscow's upmarket shops. GUM, the famousmonopoly Soviet department store, is now a tourist trap full of designer boutiques. Unfortunately there is no direct way forAustralian investors to buy Russian shares or managed funds although there are emerging market funds and AustralianSecurities Exchange-listed exchange traded funds that include Russian companies. The mindsets of ordinary Russians arehangovers from decades of communism. As a result Russians do not save. If you have got it you spend it. For the nouveauriche anything imported is better than anything Russian. A Hermes tie bought in Paris for $200 is inferior to a Hermes tiebought in Moscow for $400. Imported strawberries at $40 a punnet are superior to Russian strawberries at $5 a punnet.Consumers have money to spend. Foreign capital and businesses are making substantial profits.

Russia is thriving on high oil pricesEmirates Business 247, 08 (Peter, Russian economy flourishes like UAEs, July 11th,http://www.business24-7.ae )

With oil prices remaining high, Russia is enjoying a similareconomic boom to the Emirates, and has amassed $500 billion(Dh1.83trn) in foreign currency reserves. GDP has been rising sharply at around seven per cent per annum for the pastseven years. And as emerging stock markets like China and India have sold down rapidly since last October, 48 and 35 percent respectively, the Russian bourse hovers near an all-time high.

http://www.business24-7.ae/http://www.business24-7.ae/


15/124


Econ High Oil (4/4)Russias energy sector has made the country wealthy, and the real estateprices in Moscow are rising.Columbia Missourian 08 (U.S. exports economic problems, July20, http://www.columbiamissourian.com/stories/2008/07/20/us-exports-economic-problems/)

Loory: How is the Russian economy doing? Matthew Chance, senior internationalcorrespondent, CNN, Moscow: Russian state coffers have been overflowing, particularlyfrom Russias newly found energy wealth. Russia is one of the biggest oil producers inthe world, so as the world economies suffer the rising oil prices, Russia is one of the fewthat benefits. It is putting that windfall of cash in its stabilization fund to spend onprojects later, and it is investing it in other foreign utilities. Loory: Housing prices aregoing sky-high in Moscow and in other large Russian cities. How do people afford thoseprices? Chance: Russia is in a boom-time economy, particularly in cities like Moscow andSt. Petersburg. Vast oil and gas wealth is trickling down to the general economy, and lotsof individuals have spare cash to spend. That hasnt changed because of the creditcrunch. As a result, property prices in Moscow are getting more expensive. It may wellbe the most expensive city in the world for real estate, and that doesnt seem likely toend soon.

Russia is seen by other EU countries as an attractive area to invest because ofits wealth in oil and natural gas.

Global Research 08 (Russias "New Order" of security relations incorporating the US, Russia and the EuropeanUnion, July 22, http://www.globalresearch.ca/index.php?context=va&aid=9641)

In a real sense the EU political elites today are schizophrenic. On the one hand Germany and the EU as a whole seek peaceful

economic cooperation with Russia, particularly in energy but increasingly in broader investment and economic terms. TheRussian economy is seen more and more by European business as a prime area to investand a booming potential market. Russia enjoys the fourth largest foreign exchangereserves in the world, near half a trillion dollars. It is the worlds premier repository ofraw materials and the second largest oil producer after Saudi Arabia and by far thelargest natural gas producer.

Russia is one of the few countries benefiting from high oil prices, and bankersare cashing in on lucrative deals.Guardian Weekly 08 (Western workers cash in on Russia, July 22, http://www.guardianweekly.co.uk/?

page=editorial&id=661&catID=15)As the US enters recession and many European economies attempt to cope with financiameltdown and a collapse in housing prices, Russia goes from strength to strength. Aboom in consumer spending, oil tilting towards $140 a barrel, a high growth rate,coupled with success in football and the Eurovision song contest, have put the spotlighton Russia in 2008. Western bankers in particular are charging to Moscow to cash in on arecord number of lucrative takeover deals, as London and New York have increasinglybecome graveyards for the major financial institutions. Jonathan Astbury, a managing director at the headhunterSandton Group, which works with Goldman Sachs and Socit Gnrale, said financiers are being incentivised to defect to Russia. He said: "This is aslight premium compared to New York and London but the main benefit is that they are taxed at just 13% across the board, so they are significantlybetter off in real terms. Certainly, in career terms, we feel the continued malaise in western markets notably the UK and North America is making



16/124

Zs Juniors AMP! LAB Jan F-F, Jan Wimmer, and Jyoti Narayanswamimany bankers contemplate eastern Europe, Asia and the Middle East as the main viable career options in the short term." Astbury has detected lots ofmovement by expatriates between places such as Hong Kong, Dubai, Mumbai and Moscow: "Once a person has made the emotional decision to try anoverseas move, subsequent relocations then seem less daunting," he says. This was very much a characteristic of the 1980s and 90s when Hong Kong,

Tokyo and Singapore saw a major influx of expatriates to staff roles, many of whom stayed to build long-term careers within the region. Russianbanks Renaissance Capital and Troika Dialog have doubled their headcounts over thepast 18 months, often looking overseas for expertise, in a period when the world'sbiggest financial institutions have been forced to slash personnel in the wake of thecredit crunch. Andrew Keeley, head of financial institutions research at Troika, has spentsix years in Moscow, and now divides his time between the Russian capital and London."Bankers moving into Moscow from the west can expect to double their incomes becausea major skills shortage still exists here," says Keeley, who comes from Kent

Russian Econ High Generic (1/3)Russias economy is progressing and becoming competitive with other global

superpowers.The Independent 08(Russias New Revolution, July 1, lexis)

It has been a very good year to be Russian. The national football team sparkled at Euro 2008, it secured the unrivalled musicalaccolade of winning the Eurovision Song Contest, and while the markets around the world disintegrate, its own economy hascontinued to boom. Soaring consumer spending, oil past $140 a barrel, record numbers of mergers and acquisitions(M&A) and a high growth rate means the financial focus is firmly on Russia in 2008 . Investment bankers in the West arecharging to Moscow to cash in on the rise of lucrative takeover deals, as London and New York have increasingly becomegraveyards for the bulge-bracket institutions. "Foreign bankers are pouring into Mos-cow, that's where the action is," onecapital markets professional said yesterday. The Russian investment banks Renaissance Capital and Troika Dialog havedoubled staff in the past 18 months, often looking abroad for expertise, at a time when Western bulge-bracket institutions havebeen forced to slash headcount in the wake of the credit crunch. The latest big-name banker to make for Red Square is NickHarwood, the former head of equities for Central and Eastern Europe, the Middle East and Africa at Citigroup. Mr Harwoodwill take up a post as deputy head of global markets at Troika Dialog, a Russian investment bank known for its close ties to theKremlin, in mid-September. Banks in Moscow are known to offer bankers packages that are well above market rates in theWest, yet Mr Harwood, who has worked for Citigroup around the world, said remuneration had not influenced his decision to

move. He said: "I am leaving a global market to work in a regional market, but the role will have a much wider remit thanequities. Moscow is a very dynamic city and Russia now has the energy of a major economic superpower." Chris Harvey,the global head of banking at Deloitte, said: "Bankers from the UK are increasingly targeting the emerging markets, especiallyRussia. The economy is modernising, and while it is not necessarily making headlines in the West, there is a lot of mergers andacquisitions and project finance activity. The country is moving further into the 21st century, and barring micro-economicshocks should continue to grow."

Russia is one of the worlds fastest growing economies.New Straits Times 08(Russia next hotspot? July 12, lexis)RUSSIA'S high net-worth (HNW) population of 119,000 is said to be the largest among the emerging economies.The numberof Russian HNW individuals, increasing at 15 per cent per annum, also puts it among the world's fastest growing - atfourth spot after Singapore's 21.2 per cent, India's 20.5 per cent and Indonesia's 16 per cent. Additionally, Russia's privateconsumption growth forecast at 13 per cent even exceeds the 10 per cent projection for China. "With cheap valuations, strongreturn on equity and a calm inflation outlook, Russia could be the emerging market play in the current year," said areport by AsianInvestor.net, a subsidiary of United Kingdom-based Haymarket Media Group. Last month, it quoted HSBCGlobal Asset Management fund manager for Russian equities, Douglas Helfer, as saying "Russia might once again become acompelling case for emerging market investments this year as Bric (Brazil, Russia, India, China) markets have dippedinto financial trouble ... with a price-to-earnings ratio of 9.2 times, Russia's market is trading at the lowest valuations



17/124


among all global emerging markets".



18/124


Econ High Generic (2/3)Russias economy is growing new president, widespread benefits, and the

financial sector prove. Enskog 08(Feb. - Current Senior Editor at Credit Suisse Past Editor at Bloomberg News Reporter at AFX News Researcher at Asahi EducationUniversit catholique de Louvain Facults universitaires 'Saint-Louis', Bruxelles ISB - http://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=228284&lang=EN Russias Economy Continues Strong Growth JFF)

Russia's new president takes over the reins of a country in full economic swing.Dmitry Medvedev seems to beaware of the structural reforms the country urgently needs, says Alexis Rodzianko, head of PrivateBanking for Credit Suisse in Russia. It remains to be seen whether he has the political will to carry them out.

Vladimir Putin's former chief of staff, Dmitry Medvedev, was sworn in as Russia's president on May 7, with Putinappointed as his prime minister. What does this political change effectively mean for Russia?Alexis Rodzianko: The new president Dmitry Medvedev is very close to Vladimir Putin, the outgoing president. Hiselection was strongly supported by Putin, and initially they will be working very closely on the continuation of existingpolicies. But any organizational change is a change. I do expect we will begin to see a real impact over time, whenMedvedev's leadership style will become apparent.How about the short term?

The Russian government will be very active in the coming months, with Vladimir Putinmaintaining his influence. But the election is an opportunity for change in certain key positions, and there could be achange of emphasis. One important signal is the nomination of Alexander Konovalov as minister of justice, succeedingVladimir Ustinov.

Russia has posted annual economic growth between 6 and 8 percent over the past fiveyears. What are the main drivers behind this growth?

Soaring commodity prices and the rise of emerging markets like India and China are indisputably the main growthdrivers.

Are such growth rates sustainable?Russia's growth rate has the potential to remain strong if the necessary structuralreforms, such as modernizing the country's judiciary and bureaucracy, are carried out.

To tackle the widespread corruption is also essential. But the country can theoreticallycontinue to grow even without these structural reforms, albeit at a slower pace, thanksto its vast reserves of natural resources such as oil and gas.

Has the middle class benefited from this economic growth?

Undoubtedly yes. It's unequivocal that the broad population has benefited from the pastdecade's economic growth. It can however be argued that the depth and breadth of the wealth distributionhas not been as fair as it could have been.

Is Russia's economic dependence on commodities such as oil and gas a problem in the longer term?It will depend on the development of commodity prices. These have declined in relative value over the past 100 years,but rapidly risen over the past seven years with energy prices being a major lever. Russia's energy supply is an

important asset, though a diversification of its economy would be good to sustain a broader growth base.

How is the Russian financial industry developing?

It's developing quite strongly. We see this in terms of the prices paid for banks beingacquired. The sums paid for financial institutions are way above the levels paid forsimilar institutions just two or three years ago. There is a strong inflow of assets into thesector.

http://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=228284&lang=ENhttp://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=228284&lang=ENhttp://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=228284&lang=ENhttp://emagazine.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=228284&lang=EN


19/124


What are the banking needs of the growing and increasingly wealthy Russian middleclass?

Clients from the middle class have quickly become more sophisticated, not so differentfrom their European or American counterparts. They tend to invest in their home countryand put their reserves abroad, mainly in Europe or Switzerland.



20/124


Econ High Generic (3/3)The Russian economy is growing retail prices, millionaires, GDP, exports, and average

income prove. BBC News 07( July 4, http://news.bbc.co.uk/2/hi/business/6265068.stm -JFF)

Retail sales in the country soared 13% last year, well ahead of the rest of Europe.

And almost half the Russian people believe it important to be fashionably dressed,according to a recent Wall Street Journal survey.

But unlike many fashion victims in the West, Russia's elite can really afford to strut.

Last year, the number of so-called "high net worth individuals" - people whose spendingpower exceeds $1m (500,000) - in Russia rose 15.5% - compared with an 8% swellingin their number globally, according to the Merrill Lynch and CapGemini World Wealth

Report.

Similarly, President Vladimir Putin's confident swagger on the international stage is thatof a man who has delivered what his people want: stability, prosperity and nationalpride.

Regional growth

"There's been a fantastic transfer of wealth to Russia," observes Accenture energyanalyst, Mark Spelman.

In just four years, Russia's GDP has almost trebled, from $345bn in 2002 to $984bn in2006, in dollar terms (partly due to economic growth, but also because the value of therouble has soared). The economy is now growing at almost 7% per year - up from lessthan 5% four years ago.

Inflation, meanwhile, has slipped from almost 16% in 2002 to single-digit figures.

Exports have trebled - largely thanks to metals, oil and gas - to about $300bn, by faroutpacing import growth. This has enabled Russia to pump up its foreign cash reserves.

In 2002, the reserves stood at $44bn. By 2006, they had ballooned to more than $295bn.

Hence, as far as the Russian people is concerned, it seems President Putin can donothing wrong. "Putin has the highest [voter] approval rating of anyone in the world,"says Mr Spelman.

"Everyone's focussing on the fact that there are more billionaires in Moscow than thereare in London, but what we're actually also seeing is that the disposable income ofskilled people in Russia is going up.

http://news.bbc.co.uk/2/hi/business/6265068.stmhttp://news.bbc.co.uk/2/hi/business/6265068.stm


21/124


"You see a lot of infrastructure, a lot of housing, shopping malls. The commodity boom isnow percolating beyond Moscow."

Agrees Global Insight Russia analyst Natalia Leshchenko: "Living standards are slowlybeginning to improve, also for the poorest, and that's why Putin is popular."

Russian Econ Low Corruption/Bureaucracy

The Russian economy is already weakening the Yukos affair causedinefficient government oil to take over bureaucracy worsens theproblem. The Economist 08

(http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120 Russias Economy Smoke and Mirrors, Feb. 28 JFF)

Where did it go wrong? Mr Illarionov, who quit his post in 2005, argues that the breakingpoint was the attack on Yukos that began in mid-2003. The significance of the Yukosaffair went beyond the destruction of Russia's largest oil company and the imprisonmentof its boss, Mikhail Khodorkovsky. It dictated the country's entire economic and politicalcourse.

The attack on Mr Khodorkovsky was presented as a crackdown on the oligarchs. Yet itcreated a new, more powerful and less visible caste that began to play a dominant rolein the economy. The share of crude-oil production controlled by state and semi-statecompanies doubled. Growth in oil output, which before the Yukos affair had been running

at about 9% a year, slowed to just 1% by the end of 2007.

Worse, the destruction of Yukos negated any efforts to strengthen the rule of law. Theproblem is not that the Russian legal system is weak, says Vitaly Naishul, who watchesRussian institutions. The problem is that it does not exist. The Russian justice systemhas as much to do with justice as the Soviet system of trade with trade. That problem isas old as Russia, but under Mr Yeltsin the courts, however corrupt, were at leastindependent of the Kremlin. Under Mr Putin, judges have again turned into bureaucratswho rubber-stamp dubious administrative decisions.

The Russian economy is weakening officials engage in multiple types ofcorruption. The Economist 08


Andrei Sharonov, a liberal reformer who left the economics ministry last year, says heunderestimated the impact of arbitrary bureaucratic decisions. We have turned ourback on healthy competition. The system rewards those who are closer to the centre ofpower, not those who work better. It is easier to get a competitor into a jail than to

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120


22/124


compete with him. Businessmen complain that corruption, already rampant in the1990s, is now more entrenched, and the sums involved are getting larger.Corruption is of two kinds. One sort is driven by private firms and individuals who bribeofficials to turn a blind eye to the rules. This allows businesses to get around a net ofconflicting and outdated laws. If everyone followed every rule and instruction in Russia,the country would grind to a halt, says Mr Naishul. The other kind of corruption

emanates directly from the Kremlin and benefits state officials and their friends whodouble up as businessmen. Both damage the country, but the second is more insidious.



23/124


Russian Econ Low - FDI

Russias economy is weak because it is overly reliant on large companies andlacks foreign direct investment. The Economist 08


The structure of the Russian economy remains skewed towards a few giant companies, mostly forged fromSoviet-era assets. Small and medium-sized businesses contribute less than 15% of GDP. The cost of opening abusiness is higher than in most other countries. Only 5% of firms have been created in the past ten years,according to the World Bank. And start-ups do not seem to push up the productivity of incumbents, a sure signof weak competition. In even more worrying contrast to the 1990s, polls show that half of young Russians wantto work in the government rather than go into business.

Russia's business climate and red tape also deter potential new investors. Although foreign direct investment(FDI) doubled last year to $27.8 billion, that is still only 2.2% of GDPhalf the level achieved in Ukraine. Half

of FDI went into mineral resources, and only some of it was genuinely foreign. (Tax havens are still the topinvestors in Russia.)

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=349002&story_id=10765120


24/124


Russian Econ Low - InflationThe Russian economy is suffering because of inflationThe Gazette 08 (Russia to cut state role in economy, Medvedev says; Analysts say inflation is topproblem, June 26, lexis)

Russia wants to reduce the state's role in the economy and will curb government spending to combat rising inflation,President Dmitry Medvedev told Reuters in an interview. Medvedev rejected any idea of a state energy giant buying into oneof Russia's biggest foreign investments, oil firm TNK-BP, half owned by BP, and said Russia would not gamble its vastsovereign oil wealth on risky equity investments. In a wide-ranging interview with Reuters at the Kremlin, Medvedev stressedthe importance of international cooperation to solve global economic woes and repeated his proposal to make the ruble one ofseveral regional reserve currencies, limiting the world's exposure to the dollar. Analysts say rising inflation, likely to hit 14per cent this year, is Russia's top economic problem. They believe the economy is growing too quickly, or overheating.

Noting prices were rising more than twice as fast as an original government target of five per cent to six per cent a year,

Medvedev said Russia did not have "supernatural overheating" but should act "toughly and clearly to limit these

inflationary tendencies."



25/124


Russian Econ Low Foreign TechRussias energy sector isnt as strong as it seems; they rely on foreign technology

Carey, founder of W.P. Carey & Co. LLC, 08 (W.P, The Bear Is Back: Rising Oil Prices Raise Russias GlobalInfluence, July 16, http://knowledge.wpcarey.asu.edu)

There are chinks in the Russians' energy armor, however, Goldman writes. From the earliest years in the fossil fuelbusiness, Russians have been dependent on foreign-supplied technology to extract and transport their oil and gasefficiently. Long before the aforementioned reliance on Western compressor technology to pipe their gas, the Russians'

oil-drilling technology has been chronically inferior, which opened the door for foreign corporations to get a piece of the

Russian profits, though not of Russia's oil and gas. Secondly, being commodity-rich tends to make any nation less likely todevelop manufacturing technology in general. Citing "Dutch Disease," Goldman notes that such nations as Russia andSaudi Arabia tend to accumulate commodity-fueled wealth and to use it to buy manufactured goods from other nationssuch as Japan and Switzerland that, lacking commodity wealth, have great motivation to develop manufacturing technology."Once the Dutch found natural gas off their North Sea Coast, the relative prosperity it brought came at the expense of thecountry's manufacturing section." Gas exports boosted Dutch currency and undercut prices of foreign imports, so Dutchmanufacturing declined along with domestic employment, Goldman reports.



26/124


Russian Econ Low Energy DependencyRussias economy cant progress; its too dependent on energy

Russia Today 07 (Russias economy not competitive? November 23, http://www.russiatoday.ru/business/news/17426)Russia's economy has progressed in the last couple of years - but not enough, according to Christian H.M. Ketels at the

Institute for Strategy and Economy. He saysRussia is not on the right track to fulfill its economic potential. "The country isreally not on the right track to fulfill its economic potential. Russia can do much better; Russia could develop into a

much stronger economy. But to do so we feel that something has to be changed," he said. Russian companies are movingonto the global business stage by improving their operational strategies. But they are not regarded as having distinctadvantages or unique strategies. According to Ketels, "the culture of buying assets and market shares rather thanthinking about how you can be more innovative and efficient. That has to change over time for Russia to become a more

competitive economy." The report points to poor administrative practices in carrying out government policies as a main areaof weakness in Russia. However not everyone agrees with this. Andrey Klepach from the Ministry of Economic Developmentand Trade says Russia's low competitiveness scores call the objectivity of these ratings into question. He says the situation inthe country is changing but the indexes remain at the same level. Deputy Economic and Trade Minister Kirill Androsov saysthere was nothing new in the report for Russia. But he conceded thatRussia was 'weak at execution', and needed to co-ordinate and implement all of its strategies and documenting procedures . Russia has experienced solid growth per capitaand improved its macroeconomic management. However thisgrowth has been significantly driven by oil prices.



27/124


Russian Econ Low - Generic

Russias economic strength wont last in the long termGaddy, an economist specializing in Russia, is writing books on the political economy of Russian oil and gas and on the countrys long-term growthprospects. His earlier books include Russias Virtual Economy and The Siberian Curse,

07(Clifford G, As Russia Looks East: Can It ManageResources, Space, and People? January 1, The Brookings Institute, http://www.brookings.edu/articles/2007/01russia_gaddy.aspx)

The suddenness with which Russia has re-emerged as a global political and economic power has stunned observers. This time, its power rests not on tanks andnuclear arms but on oil and gas. Russia become a critical supplier of energy to a world whose demand is growing rapidly. At the same time, thanks to soaring

prices for these commodities, both the Russian state and its big corporations have turned into financial powerhouses. Is Russia's new-found power

only temporary, or will it last? In the short to medium term, high world oil prices are likely to continue to bolster Russia's wealth, strength, and

confidence. However, there are questions about the longer term. Russia has yet to address fundamental problems left behind

by decades of Soviet mismanagement of its economy. Some of these problems directly affect the future of Russia's

energy wealth. The oil and gas of the future lie in the vast, cold expanses of the eastern part of the country. In the

earlier phase of great energy wealth the 1970s and early 1980s Soviet economic planners committed great

mistakes by misdeveloping and overpopulating Siberia.



28/124


Russian Econ Low Oil ProductionSlowing

Russias oil production is slowingThe Economist 08 (Trouble in the pipeline, May 8,http://www.economist.com/research/articlesBySubject/displaystory.cfm?

subjectid=349002&story_id=11332313)Over the past seven years, according to Citibank, Russia accounted for 80% of the growth in oil production outside theOrganisation of the Petroleum Exporting Countries. The increase in its output in the early part of the decade matched thegrowth in demand from China and India almost barrel for barrel. Yet in April, production fell for the fourth month in a row.It is now over 2% below the peak of 9.9m barrels a day (b/d) reached in October last year. Before that, the growth in

Russia's output had been slowing steadily, suggesting that the drop is not a blip. Leonid Fedun, a vice-president of

Lukoil, a local oil firm, says Russia's production will never top 10m b/d.

Russian Economy is low: oil production is slowing now; economic collapse isinevitable

International Herald Tribune2006. March 6th.http://www.iht.com/articles/2006/03/02/business/ruble.php. Russia Economy Chief Warns of a StockCrash

Economy Minister German Gref said Thursday that Russia's quality of economic growth

was declining and that he was "very afraid" of a possible sudden drop in stock pricesafter equity benchmarks soared to records last year.

"We're very afraid of the formation of a so-called bubble," Gref said at a cabinet meetingin Moscow. "We should keep our hands on the pulse of key companies to understand ifthe optimism of stock market players will lead to a fall that will take a long time torecover from."

The RTS index surged 83 percent last year, making it the biggest gainer outside theMiddle East of the 77 major indexes tracked by Bloomberg. The RTS has added 30percent this year, lagging only the main indexes in Venezuela and Peru.

Underinvestment is eroding the Russian economy's eight-year-old boom, Gref said.Growth slowed for a third year in 2005, to 6.4 percent, as oil output advanced at the

http://www.iht.com/articles/2006/03/02/business/ruble.phphttp://www.iht.com/articles/2006/03/02/business/ruble.php


29/124


slowest pace in six years and output declined in key sectors of the machine-buildingindustry.



30/124


Russian Econ Low Capital Outflow

Russias economy is weakening from capital outflow. Russia Today

08(July 22, http://www.russiatoday.com/business/news/27848 JFF)Russias central bank says this time it is the foreign debts of Russian companies thatstand behind capital outflow. Oil company Rosneft, alone, has to pay back $22 billion bythe end of the year. Vladimir Tikhomirov, Chief Economist at Uralsib says there is amountain of debt to be repaid by Russian companies.

In the first half of 2007, the Russian private sector on the whole, including banks andcorporates, did manage to attract quite a significant amount of money somewhere tothe tune of about $70 Billion. The large bulk of this had a duration of up to 12 months

Capital outflow is also a signal of decreasing interest by foreign investors in the Russianmarket. They are pulling money out of emerging economies to cover losses stemmingfrom the financial crisis.

Kevin Dougherty of Pharos Financial group says the fear of a world-wide slow down is thekey influence on investors.

http://www.russiatoday.com/business/news/27848http://www.russiatoday.com/business/news/27848


31/124


Oil Prices Turn Warming

Oil prices turn global warming a temporary fall in oil prices will stifle

investment in renewables that are needed to address global warming.Brittan, economic analyst for Financial Times, 06 (Samuel, Oil prices need to stay up, March 10,http://www.samuelbrittan.co.uk/text240_p.html)

If anything about the world economy could keep me awake at night, it would be neither the danger of another recessionnor the alternative danger of fresh inflation arising from excess liquidity. It would be the possibility of a temporary fall inthe price of oil. David Walton, of the Bank of England monetary policy committee, recently gave a lecture entitled: Has OilLost the Capacity to Shock? His main object was to explain why the current explosion in the oil price has had neither theinflationary nor the recessionary effect of previous shocks. One reason is that the price increase has taken longer tounfold. Mr. Walton goes on to say that the UK has been better placed to absorb the current oil shock because of theabsence of the excess demand which coincided with previous shocks. In addition, the labor market is now more flexible

real wages have been modestly squeezed to absorb higher energy prices without any attempt at catch-up. Last but notleast, successful inflation targeting has helped anchor inflation expectations. This means that employers and unionshave not projected into the future the initial impact of higher oil prices. I am happy to grant the MPC credit for the UKmonetary framework. But I would like to turn to another aspect of Mr. Waltons paper. That is the chart at the beginning ofthe real sterling oil price. This rose to a peak during the first shock of 1973, then subsided in the later 1970s only to riseagain during the second shock associated with the deposition of the Shah of Iran. There was a third sharp, but very short,shock at the time of the first Iraq war. In the light of what came before and after, the period between the mid-1980s andthe beginning of the 21st century looks one of relative stability. The earlier shocks were, however, sufficient to reduce UKenergy use from a peak of 3.5 per cent of gross domestic product in the early 1980s to 1.5 per cent in 2003. But thereduction nearly all took place between the 1970s and the mid-1980s. Something similar happened in the US whenseveral administrations launched energy-saving drives, only to let the efforts fizzle out once the crisis was no longerstaring them in the face. The latest oil price explosion has bitten deeply into business psychology. Yet we should be onour guard. A faltering in US and world growth could easily produce a temporary fall in oil prices which would again setback progress being made towards greater fuel efficiency. There are three reasons for wanting to economize on energy ingeneral and oil in particular. First, there is climate change. In a recent address, Sir Nicholas Stern, who is conducting aBritish Treasury inquiry into the economics of global warming, listed a number of policies such as carbon-free electricity

generation, which could reduce unhealthy emissions. All of them would be stimulated by high oil prices and most would bewell worth achieving for their own sake. Second, there are old-fashioned environmental considerations. The ever-increasing emission of toxic substances into the atmosphere cannot be healthy; and it is noticeable that protagonists onall sides of the debate like to live in country areas as far removed from motorways and industrial works as possible.

http://www.samuelbrittan.co.uk/text240_p.htmlhttp://www.samuelbrittan.co.uk/text240_p.html


32/124


Oil Prices Will Remain High (1/2)

Oil prices won't fallthe OPEC president has rebuffed calls from oil consumingcountries to increase supply. ABC News 08 ("Oil prices won't fall: OPEC president,"June 24, http://www.abc.net.au/news/stories/2008/06/24/2284726.htm)

OPEC president Chakib Khelil has rebuffed calls from oil-consuming countries to increasesupply saying that the cartel had already done what it could on high prices. "OPEC hasalready done what OPEC can do and prices will not come down," Mr. Khelil toldjournalists as he arrived for a meeting with EU energy officials in Brussels. Ahead of asummit between producers and consumers in Jeddah last weekend, OPEC heavyweightSaudi Arabia promised on Thursday (local time) to lift its oil production by 200,000barrels per day. However, Saudi Arabia's increased output to counter the fears ofinflation-hit consumers, exposed divisions within OPEC at the summit with Mr. Khelil andothers opposed to a production hike. "Other member countries don't want to increasetheir production because as they've said many times from our perspective we don't see

any shortage in the market," OPEC secretary-general Abdullah al-Badri said. In the faceof calls from consumer countries for an oil output hike, Mr. al-Badri insisted that "themarket is full of oil," blaming "other factors" for the high price of crude, including refineryproblems and hedge funds piling into the market.

http://www.abc.net.au/news/stories/2008/06/24/2284726.htmhttp://www.abc.net.au/news/stories/2008/06/24/2284726.htm


33/124


Oil Prices Remain High (2/2)

Oil prices can't fall right now; demand, especially from the US, is keeping themhigh. Midweek 08 ("Why Gas Prices Won't Fall," March 25, article quotes Dr. FereidunFesharaki, a senior fellow at the East-West Center,http://www.midweek.com/content/columns/newsmaker_article/why_gas_prices_wont_fall/)

The problem is that the oil is in countries where "the owners are not keen on depletingit," since it is their main export and source of revenue. To maintain their most valuable

commodity, oil-rich nations will probably only increase production to about 95 millionbarrels a day, a bit more than the current levels of 87 million to 88 million barrels a day.Those extra 7 million or 8 million barrels will not be enough to accommodate growingdemands for fuel. Simple economics: When demand grows more than supply, costs goup. The American driver stands to take the brunt of rising oil prices. According toFesharaki, the U.S. consumes one out of every four barrels of oil produced worldwide."The four big Asian economies of China, India, Japan and South Korea combined," heexplains, "use less oil than the U.S."

http://www.midweek.com/content/columns/newsmaker_article/why_gas_prices_wont_fall/http://www.midweek.com/content/columns/newsmaker_article/why_gas_prices_wont_fall/


34/124


US Prices Spillover



35/124


I/L Extension (1/6)A drop in oil prices would decimate the Russia economy its growth is solely

dependent on high prices.Skidelsky, former professor of Political Economy at the University of Warwick, 07 (Robert, Putins patrimony, Prospect,March 2007, http://skidelskyr.com/index.php?id=2,113,0,0,1,0)As we know, the Russian economy suffered a severe collapse between 1990 and 1996. Official GDP fell by 50 per cent.The average standard of living probably fell by much less, but there was a big increase in inequality and in absolutepoverty. Growth started in 1997, but there was another collapse following the ruble crisis of 1998. Since 1999, theeconomy has been growing at an annual average rate of 6.7 per cent. Russia is now the tenth largest economy in theworld, and its income per head has doubled since 1999 to around $12,000, about the same as Chile's. The stock markethas been doing even better: 2006 was the fourth year in which it notched up returns of over 50 per cent. Russia runs bigannual budget surpluses; it has almost no foreign debt, and has the largest foreign exchange reserves outside Asia. Nowonder investors love Putin. However, Russia is a single-track economy. Its boom is driven by rising energy andcommodity prices. The dominance of the energy sector is the result of two factors: the failure of "shock therapy" torestructure the Soviet economy in the 1990s, and the belief that energyoil, gas, pipelineskeeps Russia in the greatpower game. Since 2001, energy prices have more than doubled. By 2006, oil and gas made up 40 per cent of GDP;

energy and minerals accounted for 60 per cent of Russian exports, and 40 per cent of government revenue. Commoditystocks comprised 80 per cent of the stock market. The economy is more dependent on the production and export ofnatural resources than it was in Soviet times, a unique case of de-industrialization. In the shor

da oil russian

Documents