It is not right to put Russian growth down to oil and gas alone. In fact between them, they account for twenty per cent of Gross Domestic Product (compared to eight per cent in 1999). Since 1999 Russia posted growth rates averaging 6 per cent of GDP a year, while the average of the G8 countries was just 2 per cent. Oil and gas are more important for overseas trade.One third of Russia's export earnings came from oil and gas in 1999, but by 2005 that had risen to 55 per cent. According to the RAND corporation, the positive outcome of Putin's economic nationalism has been 'the husbanding rather than the dissipating of economic rents from high oil and gas prices' (Charles Wolf and Thomas Lange, Russia's Economy, 2006).
There seems little reason to expect that international oil prices will fall and Russia's 27 per cent share of world gas reserves, currently under-developed, should prove valuable in the coming years.
Analyses of the state of Russia's economic health vary wildly. The (much disputed) stats say just over one in seven workers is in the public sector (compared with one in five in the UK), and government spending at 35 per cent of output is much lower than the Eurozone average of 49 per cent.
That is all the more extraordinary considering where Russia has come from. In 1996, most workers were still in the state sector. The number of privately owned enterprises more than doubled between 1996 and 2005, and employment in state owned enterprises shrank by 15 per cent, while those in private business grew by 41 per cent.
One important indicator of the change is that Russia's debt, which had been marked down by traders as so many junk bonds, has been re-classified as investment grade - greatly reducing the cost of borrowing. And under Putin debt has been paid off, reducing from 50 to 30 per cent of GDP. IMF debts of $3.3bn and $22bn owed to creditors in the Paris Club were repaid ahead of schedule in 2005 and 2006 respectively.
Happy Victory Day, Chris