As Russia Looks East: Can It Manage Resources, Space and People?

January 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 arms but on oil and gas. Russia 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 new-found power only temporary, or will it last?

 In the short to medium term, high world oil prices are likely to continue to bolster Russia’s wealth, strength, and confidence. However, there are questions about the longer term. Russia has yet to 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 great 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.