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G8 host Russia rides oil wave back to superpower status
By Dario Thuburn
AFP
MOSCOW
Petroleumworld.com 07 11 06
A country that once clung to the lifeline of international credit, Russia is set to host the G8 summit later this week with renewed economic confidence -- even if old problems remain, experts say.
"There is a broad understanding now that the Russian economy has become a normal market economy," said Anders Aslund from the Institute of International Economics in Washington, a former adviser to the Russian government.
Russia's economy has changed dramatically since a newly-elected President Vladimir Putin called his land of unparalleled natural wealth "a rich country of poor people" in 2000.
Rapid economic growth averaging some six percent in recent years has lifted millions out of poverty, contributed to an astronomic rise in consumer spending and helped fuel a construction boom in many urban centres.
But experts warn that corruption and state meddling in the economy -- problems that beset Russia after the fall of the Soviet Union in 1991 -- are becoming ever greater headaches.
For many Russians, the lasting achievements of Putin, whose presidential term runs out in 2008, have been restoring stability, pride and a degree of well-being in Russia.
"We used to live with our hand held out for many years... But now the Russian economy can not only repay debts but do so ahead of time," Putin said at an Internet question-and-answer session last Thursday.
Earlier this month, Moscow agreed to pay back early some 22 billion dollars to the Paris Club of creditor countries with cash from the Stabilisation Fund, a massive reserve of oil profits.
"Russia has become a superpower again -- not in terms of arms but in terms of oil," said Peter Westin, chief economist at MDM bank in Moscow.
Ordinary Russians have also seen at least some of the benefits of growth, with the World Bank earlier this year promoting Russia to the status of an "upper middle-income economy" alongside Malaysia, Poland and Turkey.
But the wealth of Russians remains a far cry from that of the country's rich G8 partners Britain, Canada, France, Germany, Italy, Japan and the United States.
The gap between the richest and poorest in Russia is also one of the fastest growing in the world. Some regions and sections of the population are being left behind.
A report last year by the UN Development Programme found regions such as Ivanovo, a former textile hub near Moscow, and Komi in northwest Russia, a province rich in forests and minerals, were among the country's poorest areas.
The biggest concentration of poverty was in the North Caucasus -- a restive, mostly Muslim corner of southwest Russia where discontent at corruption, organised crime and human rights abuses has grown.
Economists also worry about the growing role of the state -- both through state-controlled energy groups Rosneft and Gazprom and concerns in other sectors such as Rosoboronexport, the country's massive arms export monopoly.
Modernising the economy "will depend on to what extent this will be a state-led operation. The state is generally bad at picking winners," Westin said.
Critics point to the dismemberment of Yukos, formerly Russia's biggest oil company, and the sale of its key production assets to state-owned Rosneft in 2004 as the start of harmful "renationalisation" in Russia.
The rollercoaster ride of Russia's economy since 1991 can be seen at the All-Russia Exhibition Centre in Moscow -- a sprawling complex vaunting Soviet succcess.
Despite the grandiose monuments to the workers' paradise all around, the talk here is no longer about grain harvests or even the cheap kiosks that crowded the area in the 1990s.
The state-owned company running the exhibition space now has the slogan "Your Gates to the World of Business" and director Magomed Musayev talked of "innovation," "technology" and "investment" in a recent interview.
A portrait of Putin behind him, a large statue of an eagle on one side of his desk and a globe on the other, Musayev said the exhibition centre should become a display case for Russia's economic success.
"This territory was once a symbol of the Soviet economy -- this was a dream city. We want to keep that but in a new format," Musayev said. The plan now is to build a new 240,000-square-metre exhibition hall. Its name? "Russia."
AFP 11 0250 GMT 07 06
Copyright ©2006 AFP. All Rights Reserved.
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