Top financial officials offered high praise for Russia's economic performance at an annual investment conference at America's Harvard University on 2 November. But estimates varied on how long the country's growth prospects can withstand the effects of falling world oil prices.
Boston, 3 November 2001 (RFE/RL) -- Experts painted a bright picture of the Russian economy at a Harvard University investment conference yesterday (2 November), but differed over how much trouble lower oil prices could cause.
Speakers at the fifth-annual Russian Investment Symposium were lavish in their praise for the country's progress since the August 1998 ruble crisis.
Anders Aslund is a senior associate at the Carnegie Endowment for International Peace. He said: "Nobody today doubts that Russia has become a market economy. The problems we were discussing three years ago, they're all gone."
Aslund said economic growth in Russia has been well above forecasts, a fact he attributed to more than oil prices or devaluation. In an interview with RFE/RL, Aslund cited major budgetary and tax reforms carried out under President Vladimir Putin, saying, "They can't do everything at once, but they have done a lot."
The Russian government was also commended for its partial land reform and moves toward judicial reform, as well as for the building of more than $38 billion in Central Bank reserves.
One measure of how much the government has done was a lengthy speech by Economic Development and Trade Minister German Gref on Thursday (1 November) night.
Gref, who drew comments at last year's conference by speaking for only a few minutes, delivered an address of some 20 pages this year, listing the government's many plans and accomplishments.
Stanley Fischer, the former first deputy managing director of the International Monetary Fund, said the Putin government is following an economic course that the IMF fully supports, without the prompting that characterized Moscow's relations with the fund in the past. "There is absolutely no difference between what the international agencies...have urged on Russia and what Russia is doing now."
Although Russia's image in the West has been enhanced by its cooperation with the United States since the 11 September terrorist attacks, the speakers made clear that the country's progress predates the latest wave of positive press.
Jean Lemierre, president of the European Bank for Reconstruction and Development (EBRD), said: "I think what has changed is not Russia. What has changed on the 11th of September is the perception and understanding of what is happening in Russia. And what is happening is very important, new and promising."
Johannes Linn, vice president of the World Bank, said, "Russia is acting sensibly in its own self-interest, and that is terrific."
But speakers varied in their level of concern about the effect of falling oil prices on Russia, which remains heavily reliant on exports of oil, gas, and metals.
Anders Aslund argued that the economy would not be affected even if oil prices dipped below $15 per barrel for a period of one year, citing the country's pace of reform, its reserves and its $40 billion current account surplus.
Stanley Fischer noted that Russia's draft budget for 2002 is premised on an average oil price of $23.50 per barrel, saying, "It may well be lower than that for Russia, and the budget had better reflect that."
As he spoke, world oil prices slumped yesterday, with Urals crude for delivery in the Mediterranean falling to $18.10 per barrel, below Deputy Prime Minister's Alexei Kudrin's worst-case scenario of $18.50.
In an interview, the EBRD's Jean Lemierre voiced confidence that Russia's growth could be sustained for six months if oil falls below the $15 level, although he said the bank had not projected the effect if the slump were to continue for a year.
Lemierre told the audience, "Russia needs a fair price of oil to be able to finance the process of reform."
Some experts in the audience were less optimistic. Marshall Goldman, associate director of the Davis Center for Russian Research at Harvard, said, "If the price of oil goes down, it's going to be affected." He said the result would be more difficult if the ruble continues to appreciate in real terms.
In a report last month, the Russian investment bank Troika Dialog lowered its forecast for Urals crude to $18 per barrel for 2002 and 2003, but it argued that the losses to the budget could be managed even if the price falls to $15 for the next four years.
But oil is not the only blot on Russia's bright picture. In another report this month, Keith Bush, research director of the U.S.-Russia Business Council, noted a series of stubborn problems that have persisted for years.
Aged equipment and insufficient investment continue to hold the economy back, despite recent increases. The report said, "The level is still too low to underpin a high and sustained rate of growth."