Tuesday, May 15, 2018

Rising Oil Price May Kill Off Economic Reform in Russia, Savelyev Says

Paul Goble
            Staunton, May 15 – The Russian government is delighted that oil prices are rising and that its earnings from the sale of petroleum are allowing it to cover its budget, Valery Savelyev says. But there is a downside to this: higher oil prices have significantly reduced the pressure on the regime to engage in economic reform, making future progress that much more unlikely.

            When it appeared that oil prices were heading below 40 US dollars a barrel, the Moscow commentator says, many in Russia said that “such a price would make economic reforms in Russia inevitable” and warned that if prices returned to above 50 US dollars “no reforms would take place at all” (publizist.ru/blogs/33/24995/- ).

            But somehow Russia muddled through and now oil prices are approach 80 US dollars a barrel. That means, Savelyev says, that there is money for the reform program Putin suggested but at the same time, there are fewer pressures on him or anyone else to carry it out.  Inertia works as far as he and they are concerned. 

            In short, the economic commentator says, “the rise in prices for oil is returning us to a situation when it is possible to continue without making any principled changes;” and thus, the pressure for all reforms is much less than it was a year ago. The only thing that is pushing Moscow toward reform is its contest with the West; but that may not prove to be enough.

            As a result, the new higher prices for oil may prove to be almost as much a curse this time around as the higher prices for oil a decade and more ago were, a justification for not doing anything because there is enough money around to keep dependent elites happy and buy off those who are unhappy. 

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