Russia's Addiction: The Political Economy of Resource Dependence

For nearly 40 years, the political economy of Russia has been shaped by its heavy reliance on oil and gas wealth. Through alternating periods of boom and bust, Russia's fortunes and the legacies of its leaders have been dependent on the fluctuating value of its oil and natural gas. Resource dependence played a crucial role in both the development and the demise of the Soviet economy. Resource abundance did not merely mask the flaws in the Soviet system; it led to a transformation of the economy's physical and institutional structure. The result was addiction to oil and gas wealth. When oil prices collapsed in the early 1980s, Soviet leaders struggled to cope in much the same way as an addict faced with a cutoff in the supply of a narcotic. Their panicky reactions weakened the system fatally. Although record high oil prices have once again led to a boom, Russia's current prosperity may be a bubble. As Clifford G. Gaddy and Barry W. Ickes explain, Russia's addiction persists, and its political-economic system is still driven by the imperatives of distributing the wealth from oil and gas.

Clifford G. Gaddy is a senior fellow in the Foreign Policy and Global Economy and Development programs at Brookings.