Petrodollars Fail to Fuel Economic Expansion

Just as crude prices stormed to new heights last September, Russian oil producers appeared to have given up. They added less and less output as the year wound down.

This seemed to defy the laws of economics: The higher the price of a product, the more incentive companies have to produce it. As it turns out, however, oil barons were responding to very real disincentives from the government.

The state had decided, in the name of diversification, to redirect investment from the oil sector to less successful parts of the economy. But since it failed to make other sectors attractive, investment cash simply fled. The blunder, say analysts, highlights the dangers of state attempts to meddle with the allocation of resources in the economy.
Moscow Times