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Oil Price Rise Causes Global Shift in Wealth
Inside the Kremlin, with Putin nearing the end of his second and final term as president, that sum now looks like peanuts. Russia's gold and foreign-currency reserves have risen by more than that amount just since July. The soaring price of oil has helped Russia increase the federal budget tenfold since 1999 while paying off its foreign debt and building the third-largest gold and hard-currency reserves in the world, about $425 billion.
"The government is much stronger, much more self-assured and self-confident," said Vladimir Milov, head of the Institute of Energy Policy in Moscow and a former deputy minister of energy. "It believes it can cope with any economic crisis at home."
With good reason. Using energy revenue, the government has built up a $150 billion rainy-day account called the Stabilization Fund.
"This financial independence has contributed to more assertive actions by Russia in the international arena," Milov said. "There is a strong drive within part of the elite to show that we are off our knees."
The result: Russia is trying to reclaim former Soviet republics as part of its sphere of influence. Freed of the need to curry favor with foreign oil companies and Western bankers, Russia can resist what it views as American expansionism, particularly regarding NATO enlargement and U.S. missile defense in Eastern Europe, and forge an independent approach to contentious issues like Iran's nuclear program.
The abundance of petrodollars has also led to a consumer boom evident in the sprawling malls, 24-hour hyper-markets, new apartment and office buildings, and foreign cars that have become commonplace not just in Moscow and St. Petersburg but in provincial cities. Average income has doubled under Putin, and the number of people living below the poverty line has been cut in half.
But many economists have called petroleum reserves a bane, saying they enable oil-rich countries to avoid taking steps that would diversify their economies and spread wealth more equally. Russia, for example, has rising inflation, soaring imports and a lack of new investment in the very industry that is fueling the boom.
'Our Oil Wealth Is a Curse'
The problems are worse in Nigeria, which is battling an insurgency that has curtailed output in the oil-rich Niger River Delta. The central government has been disbursing its remaining oil revenue, though corruption has undermined the program's effectiveness. The government has also cut domestic gas subsidies, raising prices several times over in the name of improving health, education and infrastructure.
"Our oil wealth is a curse rather than a blessing for our country," said Halima Dahiru, a 36-year-old housewife, as she waited for a bus near a Texaco station in Kano, the commercial capital of northern Nigeria. Billows of dust enveloped the gas station as vehicles frenetically cruised along the laterite-covered road, adding to the harmattan haze that blankets the city.
"You go to bed and wake up the next morning to hear the government has increased the price of petrol, and you have to live with it," she said. "The only sensible thing to do is to adjust to the new reality because nothing will make the government listen to public outcry."
Newly oil-exporting countries such as Sudan and Chad and the companies operating there -- including Malaysia's Petronas and France's Total -- are winners. Sudan's capital, Khartoum, is booming, with new skyscrapers and five-star luxury hotels, despite U.S. and European sanctions aimed at pressuring the country to halt attacks against people in the western Darfur region.
Chad's government has used some of its oil revenue to buy weapons rather than develop the country's economy. In eastern Chad, there are hardly any gas stations; people buy their gas -- often for motorcycles, not cars -- from roadside stands that sell it out of glass bottles.