Lost Opportunities
Energy and Politics in Russia

The fate of Russia’s energy sector is the key to the future of the Russian economy, and perhaps to the very survivability of Russia as a nation-state. In a world with ever-growing energy needs, Russia’s energy resources could be the locomotive of growth in its transition to a market economy, and could finance the reconstruction of the outdated industrial dinosaurs inherited from the Soviet Union. Thus, many Western observers eagerly predict an energy-led boom in Russia once the remaining bricks in the edifice of a market economy are in place. A booming energy sector would generate higher tax revenues and export earnings, while boosting demand for domestic construction and engineering industries.

The political conditions for Russian economic growth look more auspicious than at any time since 1991. The political stand-off between President Boris Yeltsin and the anti-reform State Duma, which led to the bloody confrontation of October 1993, seems to have settled down to a more predictable and civilized pattern. Yeltsin’s victory in the June 1996 presidential election should put to rest the idea that Russia could possibly turn its back on liberal democracy and a market economy. Likewise, the privatization program that was launched in 1992 and that transformed 70 percent of the economy from state enterprises into private corporations is essentially irreversible. The dominant figure controlling the bureaucracy throughout this period has been Viktor Chernomyrdin, prime minister since December 1992 and a close friend of the energy lobby. He was joined in March of 1997 by two energetic first deputy prime ministers, Anatolii Chubais and Boris Nemtsov, both of whom are firmly committed to market reform and the promotion of deregulation and increased competition in the energy sector. Polls show Nemtsov as the leading contender to replace Yeltsin in the next presidential election, scheduled for the year 2000.