Russia Moves into the Global Economy Letiche’s book is a fine analysis, of interest to all observers of new world economic trends. Lawrence R. Klein, Nobel Laureate in Economics Professor Letiche’s book is certainly the most comprehensive and up-to- date review of the important economic and political developments cur- rently taking place in Russia. It also has the merit of being well documented, carefully balanced, and quite provocative in its analysis and conclusions. His analysis of the developments in the energy sector is of particular interest in this context. Jacques R. Artus, Former Deputy of the European Department, I.M.F. Russia is breaking out from historic cataclysms into the global economy. This book is necessary reading for anyone with an interest in what is really happening in Russia today. Three phases are identified and explored in Russia’s successful eco- nomic transition. The first is associated predominantly with an effective depreciation in the value of the ruble. The second is driven primarily by the sharp rise in world energy prices. The third phase represents a contin- uum of phase one and two, with successes and setbacks of President Putin’s administration. Thus, the concluding part of this study considers longer-term reforms in both economic and non-economic areas. The book will benefit undergraduate as well as graduate students of subjects such as international economics, Russian and eastern European politics and economics. John M. Letiche is Professor Emeritus of Economics at the University of California, Berkeley. Routledge studies in the modern world economy 1 Interest Rates and Budget 6 Fiscal Policy and Economic Deficits Reforms A study of the advanced Essays in honour of Vito Tanzi economies Edited by Mario I. Blejer and Kanhaya L. Gupta and Teresa M. Ter-Minassian Bakhtiar Moazzami 7 Competition Policy in the 2 World Trade after the Global Economy Uruguay Round Modalities for co-operation Prospects and policy options for Edited by Leonard Waverman, the twenty-first century William S. Comanor and Edited by Harald Sander and Akira Goto András Inotai 8 Working in the Macro 3 The Flow Analysis of Labour Economy Markets A study of the US labor market Edited by Ronald Schettkat Martin F.J. Prachowny 4 Inflation and Unemployment 9 How Does Privatization Contributions to a new Work? macroeconomic approach Edited by Anthony Bennett Edited by Alvaro Cencini and Mauro Baranzini 10 The Economics and Politics of International Trade 5 Macroeconomic Dimensions Freedom and trade: volume II of Public Finance Edited by Gary Cook Essays in honour of Vito Tanzi Edited by Mario I. Blejer and Teresa M. Ter-Minassian 11 The Legal and Moral Aspects 18 Models of Futures Markets of International Trade Edited by Barry Goss Freedom and trade: volume III Edited by Asif Qureshi, 19 Venture Capital Investment Hillel Steiner and Geraint An agency analysis of UK Parry practice Gavin C. Reid 12 Capital Markets and Corporate Governance in 20 Macroeconomic Forecasting Japan, Germany and the A sociological appraisal United States Robert Evans Organizational response to market inefficiencies 21 Multimedia and Regional Helmut M. Dietl Economic Restructuring Edited by Hans-Joachim 13 Competition and Trade Braczyk, Gerhard Fuchs and Policies Hans-Georg Wolf Coherence or conflict Edited by Einar Hope 22 The New Industrial Geography 14 Rice Regions, regulation and The primary commodity institutions A.J.H. Latham Edited by Trevor J. Barnes and Meric S. Gertler 15 Trade, Theory and Econometrics 23 The Employment Impact of Essays in honour of Innovation John S. Chipman Evidence and policy Edited by James C. Moore, Edited by Marco Vivarelli and Raymond Riezman and Mario Pianta James R. Melvin 24 International Health Care 16 Who Benefits from Reform Privatisation? A legal, economic and political Edited by Moazzem Hossain analysis and Justin Malbon Colleen Flood 17 Towards a Fair Global 25 Competition Policy Analysis Labour Market Edited by Einar Hope Avoiding the new slave trade Ozay Mehmet, Errol Mendes and Robert Sinding 26 Culture and Enterprise 34 The Economics and The development, Management of Technological representation and morality of Diversification business Edited by John Cantwell, Don Lavoie and Alfonso Gambardella and Emily Chamlee-Wright Ove Granstrand 27 Global Financial Crises and 35 Before and Beyond EMU Reforms Historical lessons and future Cases and caveats prospects B.N. Ghosh Edited by Patrick Crowley 28 Geography of Production and 36 Fiscal Decentralization Economic Integration Ehtisham Ahmad and Vito Miroslav N. Jovanovi´c Tanzi 29 Technology, Trade and 37 Regionalisation of Globalised Growth in OECD Countries Innovation Does specialisation matter? Locations for advanced Valentina Meliciani industrial development and 30 Post-Industrial Labour disparities in participation Markets Edited by Ulrich Hilpert Profiles of North America and Scandinavia 38 Gold and the Modern World Edited by Thomas P. Boje and Economy Bengt Furaker Edited by MoonJoong Tcha 31 Capital Flows without Crisis 39 Global Economic Institutions Reconciling capital mobility Willem Molle and economic stability Edited by Dipak Dasgupta, 40 Global Governance and Marc Uzan and Dominic Financial Crises Wilson Edited by Meghnad Desai and Yahia Said 32 International Trade and National Welfare 41 Linking Local and Global Murray C. Kemp Economies The ties that bind 33 Global Trading Systems at Edited by Carlo Pietrobelli and Crossroads Arni Sverrisson A post-Seattle perspective Dilip K. Das 42 Tax Systems and Tax 50 Working Time and Workers’ Reforms in Europe Preferences in Industrialized Edited by Luigi Bernardi and Countries Paola Profeta Finding the balance Edited by Jon C. Messenger 43 Trade Liberalization and APEC 51 Tax Systems and Tax Edited by Jiro Okamoto Reforms in New EU Members Edited by Luigi Bernardi, 44 Fiscal Deficits in the Pacific Mark Chandler and Region Luca Gandullia Edited by Akira Kohsaka 52 Globalization and the Nation 45 Financial Globalization and State the Emerging Market The impact of the IMF and the Economies World Bank Dilip K. Das Edited by Gustav Ranis, James Vreeland and 46 International Labor Mobility Stephen Kosak Unemployment and increasing returns to scale 53 Macroeconomic Policies and Bharati Basu Poverty Reduction 47 Good Governance in the Era Edited by Ashoka Mody and of Global Neoliberalism Catherine Pattillo Conflict and depolitization in Latin America, Eastern Europe, 54 Regional Monetary Policy Asia and Africa Carlos J. Rodríguez-Fuentez Edited by Jolle Demmers, Alex E. Fernández Jilberto and 55 Trade and Migration in the Barbara Hogenboom Modern World Carl Mosk 48 The International Trade System 56 Globalisation and the Labour Alice Landau Market Trade, technology and less- 49 International Perspectives on skilled workers in Europe and Temporary Work and the United States Workers Edited by Robert Anderton, Edited by John Burgess and Paul Brenton and John Whalley Julia Connell 57 Financial Crises 63 The World Economy Socio-economic causes and A global analysis institutional context Horst Siebert Brenda Spotton Visano 64 Production Organizations in 58 Globalization and Self- Japanese Economic Determination Development Is the nation-state under siege? Edited by Tetsuji Okazaki Edited by David R. Cameron, Gustav Ranis and Annalisa 65 The Economics of Language Zinn International analyses Edited by Barry R. Chiswick 59 Developing Countries and the and Paul W. Miller Doha Development Round of the WTO 66 Street Entrepreneurs Edited by Pitou van Dijck and People, place and politics in Gerrit Faber local and global perspective Edited by John Cross and 60 Immigrant Enterprise in Alfonso Morales Europe and the USA Prodromos Panayiotopoulos 67 Global Challenges and Local Responses 61 Solving the Riddle of The East Asian experience Globalization and Edited by Jang-Sup Shin Development Edited by Manuel Agosín, 68 Globalization and Regional David Bloom, George Integration Chapelier and Jagdish Saigal The origins, development and impact of the single European 62 Foreign Direct Investment aviation market and the World Economy Alan P. Dobson Ashoka Mody 69 Russia Moves into the Global Economy John M. Letiche Russia Moves into the Global Economy John M. Letiche First published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2007 John M. Letiche This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-94658-8 Master e-book ISBN ISBN10: 0-415-77054-8 (hbk) ISBN10: 0-203-94658-8 (ebk) ISBN13: 978-0-415-77054-5 (hbk) ISBN13: 978-0-203-94658-9 (ebk) Contents List of illustrations x Preface xii 1 Russia’s economic restructuring since the 1998 crisis 1 2 Transitional