Tuesday, July 29, 2008

Russian Riches

It’s easy to understand why Russia is able to flex its muscles in international affairs and why Vladimir Putin is so popular with the Russian people. At the end of 1999, the country was broke, with a sharply devalued currency. On Boris Yeltsin’s sudden resignation, Putin became acting president on December 31, 1999. Putin was elected president in his own right on March 26, 2000. During his two four-year terms in office, Russia recovered from a great contraction in the 1990s and, in the past few years, has recorded strong growth and become a major market for exporters and foreign investment from the West and Asia.

Russia’s international reserves were a paltry $12.5 billion at the end of 1999. Since then, they have risen steadily, sharply accelerating in the last few years. Except for the July 2008 entry, the numbers are for the last week in December of each year.

2000: $27.9 billion
2001: $36.5 billion
2002: $47.7 billion
2003: $77.8 billion
2004: $124.5 billion
2005: $182.2 billion
2006: $303.0 billion
2007: $474.0 billion
7/2008: $588.3 billion

At the current rate of accumulation, Russia’s reserves are likely to reach $700 billion at year’s end and perhaps $1 trillion in late 2009 or early 2010. Russia will soon join the superpowers of international reserves, which includes China with $1.75 trillion and Japan with just over $1 trillion. Russia has gone from bust to boom in a less than a decade, just as the United States and Western Europe struggle to avoid a lengthy period of no to slow growth.

In international affairs, as in most matters, the golden rule applies: He who has the gold rules!

1 comment :

Sridhar Gurivireddy said...

Power in this world does not come from gold (or) reserves of foreign currency. Free money generated from natural resources makes people lazy and eventually unproductive. Unless Russia spends that money wisely on educating its people, building infrastructure and privatize their economy, they are doomed! If not today, tomorrow.

I prefer deficit and growth to Gold.