MOSCOW, Jan. 6 - Bolstered by higher oil prices, Russia's economy continued its growth streak in 2003, as the latest data showed healthy bank reserves, diminished capital flight and a growing trade surplus.
Many economists credit the president, Vladimir V. Putin, with shepherding Russia out of economic stasis, by cutting taxes and fostering political stability in his first term. But oil remained the crucial factor underpinning Russia's economic boom, and rising oil prices, combined with Mr. Putin's policies, spurred growth of 6.1 percent on average over the last four years. In 2003, the economy grew 6.8 percent, the economic ministry said in a preliminary report this week.
Oil remains Russia's blessing and its curse. Asked for the positives and negatives in Russia's economy in the last year, German O. Gref, the country's minister of economic development and trade, readily answered, "High oil prices."
With Brent crude oil averaging $28.80 a barrel last year, high prices fleshed out Russia's economic and market indicators, Mr. Gref said in interview in the weekly magazine Ogonyok. But he warned that the high price of oil was "also negative, because it created the impression that everything was good, and that we could postpone radical economic reforms a little bit longer." Mr. Gref said growth was 6.7 percent in 2003.
War in Iraq and turmoil in the Middle East propped up not only global oil prices, but Russia's economy, Russia's economic ministry said in a report on the state of the country's financial health. "World prices of crude oil were an initial and defining factor of general economic growth, as well as exports," the ministry said in a report this week.
As oil prices climbed, Russia exported more of it than in the previous year. The country competes with Saudi Arabia to be the No. 1 oil supplier. Russian oil exports outside of the Commonwealth of Independent States in 2003 totaled 3.1 million barrels a day, up 12.4 percent from 2002.
Oil helped Russia set an export record of $134.4 billion, up 25 percent from 2002. Energy products accounted for virtually the entire surplus. Hydrocarbons and oil products accounted for $74 billion of that, crude oil exports $39.7 billion and natural gas $20.1 billion.
Another positive factor was that less money is leaving Russia, signaling that investors have more confidence in the economy.
Despite the arrest last fall of Russia's richest man, the oil magnate Mikhail B. Khodorkovsky, the country's net capital flight slowed to $2.9 billion for all of 2003, from $8.1 billion in 2002, central bank officials said on Monday. In 2001, $14.8 billion left Russia, and $20 billion a year reportedly was sent abroad in the 1990's amid the post-Soviet economic collapse.
Russia also continued building its foreign currency and gold reserves, which totaled $77.8 billion as of Dec. 26, up from $74.5 billion the previous week, according to the latest data. However, Oleg Vyugin, first deputy chairman of Russia's central bank, was cautious about the record high reserves, attributing the numbers to "hot money."
Analysts say only one thing could push Russia off its cloud: a plummet in oil prices. How low the prices would have to go is debatable, but some analysts said that Russia could withstand a serious crisis as long as oil remained above $13.50, according to one economist.
Russia's economy could still grow a healthy 5.5 percent even if the price of Brent crude fell to $23 a barrel this year, one analyst said. "That could maintain growth in 2004 and create the basis for a sustainable long-term growth trend, without threatening public finances or risking overheating in the economy," notes Vladislav Oreshkin, an economist with the UFG investment bank in Moscow.
Russia has a budget surplus, and would still have balanced accounts even if the price of oil fell to $21 a barrel, he added. With oil at $16 a barrel or less, Mr. Oreshkin said, "Russia may face a balance-of-payments deficit for the first time since 1998; moreover, the ruble would probably then devalue in real terms."
Only if the average Brent price collapsed, falling below $13.50 a barrel, would Russia's economy deteriorate in 2004, he added.
source: http://query.nytimes.com/mem/tnt.html?tntget=2004/01/07/business/07ruble.html&tntemail0=&pagewanted=print&position= 7jan04
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