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Medvedev: Natural resources 'easy'

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11 November 2009 14:06

In an interview with Spiegel, Russian President Dmitri Medvedev says his country is coasting on a natural resources boom (h/t Oil Drum):

SPIEGEL: In a recent article that you wrote entitled "Go, Russia," you spoke of your country's "humiliating" economic "backwardness." Why hasn't Russia managed to overcome its dependency on natural resources in the time since the end of the Soviet Union?

Medvedev: Because people quickly get addicted to drugs. Trading gas and oil is our drug. People can't get enough of it, even when prices are going through the roof. Five years ago, who could have imagined an oil price of $150 a barrel? Trading in natural resources is easy, it leads to the illusion of economic stability. Money flows in -- considerable sums of money. Acute problems can be effectively resolved with it. You don't need any economic reforms; you don't need to deal with diversifying production. We could rid ourselves of this lethargy if we would only learn the right lessons from the crisis.

You hear this in relation to Australia as well. It's the idea that you can disguise a lack of economic reform if you just have enough natural resources to pull out of the ground. But how true is this, really?

Australia and Russia are both blessed with a great many valuable natural resources, but these resources don't extract themselves. There's an array of technological, regulatory, economic and infrastructure factors involved in extracting, processing and transporting these resources at a competitive price.

None of that is 'easy', as Medvedev would have it, and Russia's under-performance as a resource supplier seems to prove that point. Russia would be doing a lot better out of its natural resource sector if it improved its infrastructure and reduced corruption.