Harnessing hydrocarbon revenues: reflections on Russia

Abstract

Economies, like Russia, blessed with resource abundance, do not usually perform well during the period of commodity price boom. The optimal policy of managing resource revenues prescribes to commit the permanent income rule to smooth the resource dividend in efficiency units and to smooth the real exchange rate. During the commodity price boom, Russia followed partially this prescribed policy, but the situation changed after the crash of oil and gas prices in 2014. Possible ways to overcome the consequences of low oil and gas prices are discussed, paying particular attention to the lack of economic complexity and the need for diversifi cation and capabilities for growth and development of the Russian economy.