Pankratov's article is very good in some ways. Russia is not the petro state so many claim. Russia's economy is far more complex compared to other major energy exporters. Russia has a large internal market, which it supplies itself (beyond the rich major cities). Petro dollars hardly touch these parts of the economy. For example, if petro dollars weren't coming in or were to stop, Russian butter and bread production would continue - just during the worst of the Yeltsin years. At the start of the oil boom (c. 2000), oil profits were sent off shore. This remained the case until c. 2004, though still happens to some degree. The caveat being, petro dollars going off shore are now searching for oil (related assets) to invest in. (Remember, approx 60% of all oil export capacity is now under the Kremlin's control). Until very recently, oil profits have NOT been invested in the non-energy economy ( the margins weren't there, so why bother?). Now there is Kremlin pressure to do this (recall the Yukos affair - meaning: how money is spent is just as important as how it is earned). Very high natural resource taxation keeps the economy from over heating (i.e. this keeps the money in circulation managable). Also, counter to the conventional wisdom, the CBR is not overly concerned with capital flight (again the influx of petro dollars). More and more generous tax holidays for investment in non-energy sectors is attracting the money back to Russia. Cyprus is the largest "foreign investor" in Russia! The Stabilization Fund (should be at $100 billion by the end of 2006) is to be partly invested in non-energy sectors. It is a great idea, but there are dramatic worries about stoking inflation (political sensitive). Thus, all in all, this is all a very mixed bag. Russia appears to be in a class of its own: a proto-petro-state with transitional layers of the economy in play. Chris Doss <lookoverhere1@yahoo.com> wrote:<blockquote class="replbq" style="border-left: 2px solid rgb(16, 16, 255); margin-left: 5px; padding-left: 5px;"> I'm not an economist and don't follow these issues with a microscope, but I'll try to address some of the points you bring up. Maybe Peter will jump in -- he really DOES follow these issues with a microscope.  </blockquote> <hr size=1>New Yahoo! Messenger with Voice. <a href="http://us.rd.yahoo.com/mail_us/taglines/postman6/*http://us.rd.yahoo.com/evt=39663/*http://voice.yahoo.com">Call regular phones from your PC</a> and save big.