"Dirty" (Oil) Money is Making Russia Rich

PanAsianBiz ^ | June 6, 2006 | Dr. Bill Belew

[G. Stolyarov II]

Russia is flooded with cash that comes for high oil prices so high. And the walls of the rich and corrupt are starting to overflow to the little fellow in the distant outposts.

For seven years, Russia has seen 6% growth AFTER inflation. There is now a consumer class in Russia and they can't wait to go shopping.

For as little as $1000/month a family of four can live somewhat comfortably...and this salary is within reach of about 30% of the population and continues to grow.

In 2002, 12% of all Russians had a cell phone. In 2006, 88% of Russians have a cell phone. When I was there in the early 90s everyone said, "What's a cell phone?"

New foreign car sales has jumped 60% since a year ago. 5 years ago, Russian sailors used to come to the port of Niigata and buy used Japanese cars to take back to the motherland to sell - I helped arrange for a bunch of these.

As a result of this soaring economy - Prez Putin is enjoying a 70% approval rating.

Things are getting better in Russia...or so, it seems.

What do you think?

[G. Stolyarov II]

As with any government-fueled economic boom, I fear that this one will come to a crashing halt sometime soon. The Russian government now controls virtually the entire Russian oil supply through the state monopoly, Gazprom. This is bound to produce inefficiencies, stagnation, and decay-- as has been experienced in the old days of Soviet control over industry. If it is oil revenue alone that fuels the rising standards of living-- and not the private market economy-- then Russia is in undergoing an economic bubble that will eventually burst. See Dr. Belew's blog at PanAsianBiz

[spanalot]

$30 oil will take care of a lot of mischief in the world

[Mount Athos]

Russian government controls less than 1/3rd of oil, not "virtually the entire supply". Maybe you confused oil with natural gas

[rodguy911]

I bet putin's person wealth is close to or equivalent to that of mother russia. His swiss a/c is bound to be worth billions by now.

[Racer1]

Thats right but we'll have to convince a lot of people that have invested big in oil stocks that's the best policy. They have huge gains and really don't care what they do to anybody to keep them.

[Ostlandr]

I think, human nature being what it is, that Putin will grab every scrap of power the Russian people allow him to have.
He will remain in power so long as the Russian people are prosperous, well fed, and have as much freedom as they desire.
One hopes that Capitalism will take root there. But more important would be to have the Enlightenment values that inspired our own Revolution take root in Russia. The Russian revolution of 1917 was no more and no less than a slave revolt. Sadly that gaping would allowed the infection of Communism to enter their society.

[mhx]

I tend to think that a prosperous middle class in Russia will take care of a lot of mischief in the world too.

[Eccl 10:2]

They have a flat tax, and I read recently that their govt ran an enormous SURPLUS this last year.

[rodguy911]

From what I have heard and or read Russia is already so corrupt, run by the Russian mob and decadent it will just evolve into a northern version of mexico.

[spanalot]

What Russian Middle Class - its becoming a nation of billionaires and beggars.

http://www.freep.com/apps/pbcs.dll/article?AID=/20060604/NEWS07/606040742/1009

[mhx]

I don't know, the 88% of the people that can afford cell phones?

[spanalot]

"I don't know, the 88% of the people that can afford cell phones?"

I think a lot of that is that many areas were ever hard wired.

[Centurion2000]

From what I have heard and or read Russia is already so corrupt, run by the Russian mob and decadent it will just evolve into a northern version of mexico.

Interestingly enough you nailed my description of russia to a tee. My wife (Russian) and my family always asked me what my trips to Russia were like. I told them that it was exactly like a cold Mexico with white people.