Russia's Oil Industry: Risk Aversion in a Risk-Prone Environment

A Russian economist and a Norwegian political scientist, both long-term observers of the Russian energy industries, discuss the outlook for the Russian oil industry. The focus is on the relationship between reserves and industry strategies, and is presented from the perspective of an oil-producing enterprise. The authors analyze trends in reserve exploration and development and compare them with oil-industry investment patterns. They discuss differences and similarities among companies, as well as implications for future output. Also examined in the paper are factors inhibiting long-term private investment in the oil industry (including factors specific to particular companies) as well as the relevant policies of the government. Journal of Economic Literature, Classification Numbers: D21, H25, L71, Q48. 8 figures, 1 table, 40 references.     

Developments in Russia's Far East and their implications for the Pacific Basin

The Soviet Union ceased to exist as a subject of international law and a geopolitical reality in December 1991 with the declaration of a new Commonwealth of Independent States (CIS). For the present the territory formerly known as the Soviet Far East remains part of the Russian Republic controlled from Moscow, but its political and economic destiny remains uncertain. In 1986 Mikhail Gorbachev asserted that the USSR was an Asian-Pacific country and that the development of the Far East region was to be reinvigorated. This coincided with. and was closely related to, efforts designed to improve relations with several countries in the Pacific Basin, including Australia. This paper outlines some of the infrastructural, social and other obstacles to development that can only be overcome by financial and technological assistance from abroad. Lingering international tensions (such as the Kurile Islands dispute with Japan) and political, economic and administrative uncertainties within the Russian Republic and the CIS more generally have led private companies — including several in Australia — to defer their investment plans. It seems likely that it will be many years before the Russian Far East will have much impact on the economy of the Pacific Basin.     

Observations on the Costs of the Yukos Affair to Russia

A prominent senior British specialist on the Russian economy reviews some consequences of the Russian state's dismemberment and partial re-nationalization of the Yukos oil company. The implications for state interventionism of Russia's engagement in international markets are assessed, and the effects of market feedbacks to Russian policymakers analyzed. Also considered is the question of whether Russian economic structure is changing in ways that could lessen the vulnerability of business to state action. Journal of Economic Literature, Classification Numbers: F21, F23, F32, L71. 4 figures, 1 table, 16 references.     

Financial Constraints on the Modernization of the Russian Economy

A British economist examines the main obstacles to economic modernization in the Russian economy. After arguing that increased investment is required if the Russian economy is to undergo significant modernization, he presents a framework for identifying binding constraints on such investment. A number of popular explanations of Russia's persistent underinvestment are considered, with particular emphasis on financial constraints. Recent Russian government proposals to restructure the financial system are then assessed in light of their implications for the wider economic modernization. On the basis of the growth diagnostics framework employed in the paper, the author makes the case that the binding constraint on investment in Russia is the poor quality of domestic financial intermediation.     

Who identifies with the “Russian World”? Geopolitical attitudes in southeastern Ukraine,Crimea, Abkhazia,South Ossetia,and Transnistria

Abstract

The concept of the Russian world (Russkii mir) re-entered geopolitical discourse after the end of the Soviet Union. Though it has long historical roots, the practical definition and geopolitical framing of the term has been debated and refined in Russian political and cultural circles during the years of the Putin presidency. Having both linguistic-cultural and geopolitical meanings, the concept of the Russian world remains controversial, and outside Russia it is often associated with Russian foreign policy actions. Examination of official texts from Vladimir Putin and articles from three Russian newspapers indicate complicated and multifaceted views of the significance and usage of the Russkii mir concept. Surveys in December 2014 in five sites on the fringes of Russia – in southeastern Ukraine, Crimea, and three Russian-supported de facto states (Abkhazia, South Ossetia, and Transnistria) – show significant differences between the Ukrainian sample points and the other locations about whether respondents believe that they live in the Russian world. In Ukraine, nationality (Russian vs. Ukrainian) is aligned with the answers, while overall, attitudes toward Russian foreign policy, level of trust in the Russian president, trust of Vladimir Putin, and liking Russians are positively related to beliefs about living in the Russian world. In Ukraine, the negative reactions to geopolitical speech acts and suspicions about Russian government actions overlap with and confuse historical linguistic-cultural linkages with Russia, but in the other settings, close security and economic ties reinforce a sense of being in the Russian “world.”     

Ukraine's Geopolitical Choice, 2009

A noted specialist in international affairs and former U.S. ambassador to Ukraine reviews and analyzes the history of independent Ukraine's relations with Russia and the West following the disintegration of the Soviet Union. The author proceeds to examine the multifaceted Western position toward Kyiv as it has evolved through June 2009, paying due attention to the European Union and NATO. He then discusses the factors contributing to the volatility of Ukrainian-Russian relations following the Orange Revolution of 2004, including a range of specific concerns as well as more general Russian desires for a compliant government that would pay deference to key Russian interests. Concluding sections focus on Ukraine's future geopolitical trajectory in the run-up to the country's presidential elections in early 2010 and on internal problems (constitutional, market, and energy reform) that will command urgent attention once the political situation stabilizes and the outlines of a constructive engagement that could be pursued by the West are at hand. Journal of Economic Literature, Classification Numbers: F500, F520, P200. 1 figure, 1 table, 39 references.     

Russian Roundwood Exports: The Effects of Tariffs on the Finnish Border Economy

Two economic geographers based in Finland use time series analysis and an inputoutput model to evaluate the economic effects of tariffs imposed on Russian roundwood exports on the economy of a Finnish border region heavily dependent on Russian timber supplies. The authors demonstrate the serious economic consequences of the possible cessation of Finnish imports after 2009, by analyzing the depths of the impacts on the regional economy, and options for compensating for the loss of supplies through increased domestic timber harvesting. They place the impacts of the protectionist Russian policy in the broader context of the dynamics and vulnerabilities of border economies, particularly those dependent on imported raw materials. Journal of Economic Literature, Classification Numbers: F13, F14, L70, L73, O18, R10. 4 figures, 6 tables, 48 references.     

A New Energy Age in Pacific Russia: Lessons from the Sakhalin Oil and Gas Projects

A noted British specialist in Russia's economic geography and the Far East region presents a comprehensive account of the development of the onshore and offshore oil and gas deposits of Sakhalin. Following a review of early multinational activity in geological surveying and exploration during the 1970s, he charts subsequent changes in the entities formed to develop and exploit the deposits (Sakhalin-I and -II) later in the Soviet period and during the first two decades of Russian independence. These changes have responded to improved knowledge of the geology of the deposits and changing relations between the Russian central government and Sakhalin regional authorities. Also analyzed are efforts by the Russian side to overturn or otherwise modify terms of previous agreements deemed unfavorable, and maneuvering by China and Japan to secure increasing sources of supply for their markets. With Sakhalin's two core projects now entering the active production phase, the author distills a number of key issues that have shaped the development of the island's offshore hydrocarbon resources and will have a bearing on prospects for a future generation of less spectacular new projects (incremental development); he also outlines wider lessons that have been learned over the life of Sakhalin's projects. Journal of Economic Literature, Classification Numbers: F210, L710, L950, P330, Q400. 4 figures, 2 tables, 45 references.     

Russia’s Accession to the World Trade Organization

Two noted British economists survey a range of issues linked to Russia’s forthcoming accession to the World Trade Organization (WTO) and its implications for the Russian economy. They describe the far-reaching commitments Russia has undertaken in the realm of tariffs, non-tariff barriers, and openness to inward investment, identifying factors that tend both to support and challenge realization of these commitments. They follow with a brief historical account of the reasons why the accession process for Russia was so protracted and an assessment of the likely medium- and long-term economic impacts of accession for the country as well as for its particular regions and social groups. The arguments suggest that the likely direct impacts of accession will overall be modest (at least over the near- to medium-term), and focused in spheres in which a foreign presence may enhance the productivity of Russian firms in the domestic market (e.g., business services). Potentially, more substantial indirect benefits will largely depend on the scale and seriousness of domestic reform policies launched in support of WTO compliance (i.e., effects of accession on Russia’s political economy). Journal of Economic Literature, Classification Numbers: F130, F500, P330. 3 figures, 6 tables, 54 references.     

Immigration to Russia: Inevitability and Prospective Inflows

A U.S.-based geographer joins a senior Russian demographer in an effort to explore the potential flows of immigrants to Russia (principally from the Commonwealth of Independent States and to a lesser extent from China) to stem the country's recent population decline and compensate for looming decreases in the country's working-age inhabitants. More specifically, they examine the demand for immigration to Russia and assess the likelihood of three possible scenarios (high, medium, and low) to meet that demand by 2026. Particular attention is paid to the likely interplay of immigration and domestic migration in terms of its effects on the future distribution of migrants among Russia's federal districts. Journal of Economic Literature, Classification Numbers: F220, J110, J210, J610. 6 figures, 4 tables, 33 references.     

Patterns of Foreign Direct Investment in Mongolia, 1990-2003: A Research Note

This paper delineates the pattern and structure of foreign direct investment (FDI) in a land-locked transition economy, Mongolia, situated strategically between Russia and China. The assessment is based on publications of major international financial institutions, official statistical publications of the Mongolian Government, and a unique dataset of 1,035 FDI firms based on a database compiled by the Mongolian office of the World Bank. A structured analysis of the dataset and government statistical publications makes it possible to ascertain patterns with respect to FDI country origin, sectoral composition, mode of entry, firm capitalization, composition of foreign and local partners, entry date, and location of the investment (core versus periphery). Journal of Economic Literature, Classification Numbers: E60, F21, P33. 5 figures, 3 tables, 34 references.     

News Notes

The paper surveys the Russian aluminum industry during the turbulent transition years of the 1990s, and updates developments to the current period. The focus is on primary aluminum production, with emphasis on the key topics of ownership and governance, output and performance, costs of production (dominated by energy and transportation), investments, technology, and alumina and bauxite inputs. Considerable attention is devoted to elucidating the corporate strategies of the two dominant Russian aluminum companies emerging by the end of the period—Rusal and SUAL. Journal of Economic Literature, Classification Numbers: F21, L61, L72. 1 figure, 4 tables, 79 references.     

Inward investment and economic development in Poland

This paper summarizes results of a research project funded by the Overseas Development Administration of the UK Government. Its aims were to explore the nature and extent of foreign direct investment in Poland, and to assess the extent of integration of such investment with the indigenous economy. The research involved interviews with Polish government ministries, banks, development agencies, inward investors and indigenous firms. It concludes that there are numerous financial and technical obstacles to indigenous business development. The majority of inward investors aim to serve the Polish and other Central and Eastern European markets rather than simply selling cheaply produced products to the West. Moreover, most have already developed significant local sourcing from Polish suppliers.     

Russia's Accession to the World Trade Organization

A prominent specialist on the Russian economy presents a timely assessment of Russia's accession to the World Trade Organization. The author discusses the reasons that prompted Russia to seek membership and scrutinizes the major obstacles, such as complexities of the accession process and the country's institutional malaise. An analysis of the effects of possible membership on the Russian economy is followed by a focus on Putin's first term (2000-2003) when he supported entry, and the second (2004-2007) when he lost interest. Also presented are two scenarios projecting reinvigorated pursuit of Russian membership, or abandonment of the goal. Journal of Economic Literature, Classification Numbers: F13, F40, O19. 1 table, 46 references.     

Nordic Investments in the Former Soviet Baltic Frontier: A Survey of Firms and Selected Case Studies

Nordic companies have been leaders in the rapid expansion of Western business into Estonia, Latvia, Lithuania, and the St Petersburg area of Russia. While joint ventures were being developed prior to the demise of the USSR, investment rose sharply in early 1992. Our survey of companies from Nordic countries revealed a pattern of location and of adaptation to the conditions of former Soviet infrastructure, culture, politics and economy. Initial Nordic investment has renewed economic ties across the Baltic Sea, with inter‐country links stronger between specific countries. Frustrations with changing government rules, communications, work ethic, quality expectations and other conditions were expressed in interviews with managers of Nordic companies in the Baltic area. Optimism was tempered by continued uncertainty about Russian governmental policies and market potential.     

Economic Policy in Post-Soviet St. Petersburg

The paper assesses the efforts of regional government officials in St. Petersburg, a city heavily dependent on the defense sector, to transform its economic base after the fall of communism. It describes how the strategy initially favored in the early 1990s (the development of St. Petersburg as an international business center based largely on foreign investment) fell well short of expectations. The author then examines the results thus far from an alternative strategy, following the election of a new mayor in 1996, that focuses on the revival of the city's industry and the promotion of trade. Journal of Economic Literature, Classification Numbers: F21, H71, L52, O20. 59 references.     

Dairy Farming and Milk Marketing Relationships in the CIS

A team of Western and CIS agricultural economists presents the results of a cross-national survey of 916 dairy farms located in Armenia, Moldova, and Ukraine. The focus on milk marketing and supply chain relationships reflects their importance as determinants of farmers' welfare. Survey findings cover herd sizes, milk yields, investment activities, prices, sales to processors, and relationships with and support from buyers. An analysis of farmer satisfaction based on use of an ordered probit model, highlights the significance of trust and support measures. Journal of Economic Literature, Classification Numbers: O18, P32, Q13. 8 tables, 37 references.     

China's Nuclear Energy in Light of the Disaster in Japan

An American specialist on Russian agriculture examines that country's agrarian policy, as well as the agricultural sector more generally, one year into the presidency of Dmitriy Medvedev. Focusing on the three key policy issues—state financial support, state intervention in the grain market, and international food trade policy—he assesses the extent to which current policy represents a continuation of that prevailing during the presidency of Vladimir Putin. The author discusses the appointment of a new Agriculture Minister in 2009, which may signal a different approach to the management of the sector, and concludes with an assessment of the impact of the global financial crisis. Journal of Economic Literature, Classification Numbers: F130, Q100, Q170, Q180. 2 tables, 63 references.     

Comments on the Flow and Taxation of Oil-Gas Export Revenues in Russia

A senior American specialist on the oil and gas industry of the Russian Federation comments on the flow and taxation of Russian crude oil and natural gas export revenues. The comments supplement the preceding paper by Professor Shinichiro Tabata, adding instructive detail on long-distance transportation, internal pricing policies of Gazprom, and selected references to the location of deposits in relation to exports. Journal of Economic Literature, Classification Numbers: F14, H20, Z43. 5 references.     

A critical assessment of the Hawke government's 1985 code of conduct for Australian companies with interests in the republic of South Africa

Like other Australian governments in the contemporary period the Hawke government sought to enhance its international standing by condemning apartheid. Failing to implement effective policy to match the strong criticism exposed the rhetorical character of the government's South Africa policy. Repeatedly the Hawke government found itself defending a policy framework, which in opposition it had denounced. In essence Australia's South Africa policy had displayed little principle. Refusing to play sport while maintaining bilateral trade and investment with South Africa, underscored the contradictory basis of Australia's South Africa policy. In an effort to redress this policy imbalance the Hawke government chose to enact an employment code for Australian employers of black South African labour. The government promoted this element of policy as a substantial advance in reformulating its overall policy approach. Archival documents and material released under the Freedom of Information Act reveal a very different image.