An Impossible Trinity?: Resources, Space, and People

April 1, 2007

The suddenness with which Russia has re-emerged as a global political and economic power has stunned observers. This time, its power rests not on tanks and nuclear missiles but on oil and gas. Russia has become a critical supplier of energy to a world whose demand is growing rapidly. At the same time, thanks to soaring prices for these commodities, both the Russian state and its big corporations have turned into financial powerhouses. Is Russia’s newfound power only temporary, or will it last? High world oil prices are likely to continue to bolster Russia’s wealth, strength and confidence in the short to medium term, but there are questions about the longer term. Russia has yet to adequately address fundamental problems left behind by decades of Soviet mismanagement of its economy. Some of these problems directly affect the future of Russia’s energy wealth. The oil and gas of the future lie in the vast, cold expanses of the eastern part of the country. In the earlier phase of energy wealth — the 1970s and early 1980s — Soviet economic planners committed great mistakes by misdeveloping and overpopulating Siberia. To avoid repeating the same mistakes, Russian policymakers today need a comprehensive view to tackle the dual challenges of resource management and Siberian development. The issue is all the more important because today Russia faces a shortage of one asset that it has in the past possessed in abundance — human beings. It is therefore worth examining Russia’s future in terms of how it deals with the challenge of managing its resources, its space and its people.