What's the situation now?
Since then, oil prices have risen again, but not to the level they reached in the summer of 2008. So the state of the Russian economy today can't be compared to that of the years before the crisis; the improvement in prices has been enough to compensate for the drop experienced in 2008, but not sufficient to create a stimulus for further dynamic growth. Russia's economy lacks any alternative to oil as a driving force to carry other branches of industry along with it. For that reason, if oil prices remain at their current level, the rate of rise in GDP will probably drop or even stagnate.
Can we talk about another factor that could replace oil prices as an economic stimulus in Russia? If global demand for oil and gas remains steady, Russia has enough reserves to avoid economic crisis for another couple of decades. Putin is well aware of this, and has encouraged the construction of oil and gas pipe lines capable of supplying enough of these fuels to meet higher future demand from international customers. These include the ‘Northern Stream' (which can probably be considered a real success) and ‘Southern Stream' gas pipelines to Europe, and the ESPO (Eastern Siberia-Pacific Ocean) oil pipeline.
The Russian government has, however, failed to take into consideration the rapid development of shale gas production in the USA, which is creating a global market situation that is less favourable to Russia. 2012 saw, for example, a shutdown in production at the Shtokman gas condensate field in the Barents Sea, a project that Russia had great hopes for until very recently. And although Putin says that he will find investors for the Shtokman field in the near future, there can be no guarantee that this will happen. It may turn out that in the light of the changed situation in the gas market, its development is already unviable. The future of oil sales to China may also be shaky. The problem is that the ESPO pipe line takes oil to the northern regions of China, which are among the least developed parts of the country. Other areas, with a greater demand for oil, are just as easily supplied from further afield using tankers, so Russia will encounter stiff competition from other producers there.
Can Russia go on living off its oil and gas?
Russian economists have long since been talking about the need for Russia to abandon its dependence on oil and gas and develop other economic sectors. The current depressed investment climate, however, makes this difficult. For Russia to begin to live off a highly efficient industrial sector, rather than oil and gas revenues, it requires serious foreign investment. But as the last few years have shown, no one is investing in Russia. The country, moreover, has only itself to blame for this, since it has failed to provide any guarantee of ownership rights. This issue is covered in more detail in Pavel Usanov's article about the investment climate and Andrey Zaostrovtsev's about the so-called ‘Oprichnik Economy', named after Ivan the Terrible's bodyguards who, answerable only to him, felt free to lay whole regions of Russia to waste.
To keep up the growth in GDP, Putin will probably resort to more state regulation in the near future. This will, for instance, include an increase in the defence budget, in the hope of stimulating production in the military industrial sector. This approach will also strengthen his political position, since this sector's employees have been his core support group during the wave of protests that has shaken Russia over the last year. People in the defence industry realise that any development of democracy in Russia will mean cuts in military expenditure, and they are determined to keep Putin in power if they can.
The Russian government, however, simply doesn't have the money to increase defence spending to any extent. Conflict over this issue already led, a year ago, to the resignation of Finance Minister Aleksey Kudrin, who argued that today's Russia couldn't afford a more military-based economy. Putin accepted Kudrin's resignation, but still listens to him and won't let his government allocate more than a reasonable amount to defence spending.
One has to conclude that unless oil prices go up, Russia can probably expect a lower rate of growth in GDP. A new economic miracle is just not on the cards.