2. Black Gold's Curse

In this scenario, world oil prices recover to pre 2008 levels. Russia begins to see its oil revenues rise once again.

Economic performance

Strong state regulation and protection of the economy from outside forces lead to slow and fluctuating GDP growth. Lack of diversification due to very high returns and profits in the oil and gas industry. Russia’s economy is linked directly to oil and gas prices.

Social development

High social tensions due to prevalent corruption and growing gap between rich and poor. Low investment in health and education leads to brain drain and continued decline of the population.

Politics

Better relationship with China as result of growing trade and China’s growing need for natural resources. Closer relationship with EU on strategic issues however EU now less dependent on Russian oil. Relationship with U.S becomes less relevant.

Leadership & Governance

Power maintained by small group of elite both at national and regional levels. Dissatisfaction with ineffective governance leads to conflict between the regions in Russia and Moscow. Increasing conflict of interest between regional governors and leaders in Moscow leads to internal conflict and a call from some of the regions to gain total independence from Russia. Similar conflict begins to that in Chechnya and more ethnic groups demand independence.

Conflict

Continued dependence on oil and gas revenues leads to increased conflict between government ministries and departments over who controls which assets.

Rent state

Little relationship between the government and Russian people. Low taxation rates due to over reliance on natural resource revenues. The government has a guaranteed source of income, they do not sufficiently tax the citizens who in turn do not expect that the government should do a good job governing. Civil jobs at the lower and middle levels are poorly paid and corruption is rampant which adds to the ineffectiveness of government and lack of good policy.

2010 – 2020

Russia continues its role as the main supplier of oil and natural gas. The economy is based almost exclusively on the exploitation of natural resources with little development or investment in other industries. As a result, other there is little investment in sustainable business, infrastructure or social programmes such as health and education. Due to the high price of oil, the regime is able to justify its practices, as has happened in the past.

Medvedev is still in power with Putin as prime minister. Putin does not return as president for the 2012 elections however maintains control behind the scenes. While Medvedev has a veneer of being more liberal and western oriented, this is designed to give the regime legitimacy and a softer façade.

Putin and the siloviki have controlling stakes in most of Russia’s natural resource industry. Stability is maintained because the people at the very top have too much to lose. Although there is one ruling party, there are fractions within. Some have control of the oil and gas industry, other of telecom, etc. No one has been able to get the required balance of power to make and significant changes. There is an uneasy stability within. The FSB is used as an organ to control anyone who steps out of line.

The ruling party appoints senior executives directly to positions in the major Russian companies, such as Gazprom. Without political connections, career prospects at these companies are limited. Positions of influence and power are held not by competent managers but by people willing to work with the government.

As a result, Russian companies are ineffective and are not able to bring any large oil or gas projects online. They rely on investment from foreign companies such as BHP, BP and Shell. This continues in a vicious cycle where Russian companies are unable to get the necessary experience they need in order to be able to conduct exploration and develop projects without outside assistance. On one hand the government tries to protect Russia from outside influence, on the other they are forced to let companies in as they themselves do not have sufficient technology to extract oil and gas.

Rather than investing the oil revenues into the country, money is either skimmed off the top by government officials or put into a fund to offset any possible downturn in the economic situation. As was done in 2008, Russia can use this to boost its performance and defend the ruble if necessary.

2020 – 2030 - to come...