Russia: The Curse Of $50 A Barrel

With crude prices hovering around $50 a barrel, Russia, the world's second-largest producer of oil after Saudi Arabia, is raking in petrodollars. This year oil exports are forecast to earn Russia some $90 billion, up from $14.5 billion in 1998. With so much hard currency pouring in, and oil prices way above historical averages, shouldn't economists be in a cheerful mood about Russia's economy? Maybe so. But it often seems that the higher oil prices go, the louder the cries of doom and gloom.

No one is gloomier than President Vladimir V. Putin's economic adviser Andrei Illarionov, who recently coined the term "Venezuelaization" to describe the fate he fears awaits Russia's economy. "Today we decided to join the Third World," he told reporters last December, following the controversial renationalization of the core production subsidiary of oil giant Yukos. The growing role of the state in Russia's oil sector adds to the risk of economic mismanagement. In Venezuela, oil was eventually dubbed "the Devil's excrement" in the 1970s because of the massive corruption, waste, and shortsightedness that turned Venezuela into a classic example of how to wreck an economy.