The Russian Bear Awakens: A Global Macro View

Russian oil reserves make the Persian Gulf look like a puddle of spit. Just the known proven oil reserves in Russia are the eighth largest in the world, and Russia is already the world’s second largest producer of oil. Speculation abounds that actual extractable reserves are far larger, and are either not proven or are deliberately kept secret by the Russian government. In any case, Russia has a lot of oil by any standards. Natural gas resources are comparable. Putin has made it clear what he’s going to do with this money, and he has the human resources to make it happen.
As Putin said, Russia is acutely aware that simply exporting energy as its primary economic activity is not a good long-term strategy. This would leave Russia vulnerable to the vagaries of supply and demand, and at best produce a highly volatile and unstable economy subject to boom and bust cycles. Right now, they’re in a boom, with real GDP growth averaging over 6% lately and projected to continue growing. They have been investing the windfall in fully modernizing the Russian economy, a proposition that will take years to accomplish and longer to begin to pay off.

Russia has strong growth prospects: ample funding, vast untapped energy reserves at a time when the rest of the world is talking about peak oil, a plan to quickly fully modernize its economy and soon become competitive in high technology, newfound political stability and absolute political control, and a stable of allies and client states that is growing once more to help it along.

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