Petrodollars to ruin Russian economy despite high oil prices

[lovuian]

http://english.pravda.ru/main/18/89/357/15687_petrodollars.html

Russia is not able to sell more than it sells at the moment, although oil prices continue their way up

The growing amount of petrodollars against the background of increasing oil prices, may eventually damage the Russian economy. Experts pointed out the problem long ago, but the question was left unnoticed, until it attracted the attention of the Russian president.

Vladimir Putin acknowledged during yesterday's meeting with the Mexican president in Moscow that the growing volume of petrodollars was not very helpful in the struggle against poverty. "It helps as much as it replenishes the budget," Putin specified.

The inflow of petrodollars creates certain difficulties for both the Central Bank and the government of Russia in terms of restraining inflation on the set levels. It also leads to the excessive strengthening of the national currency, which does not make for the successful activity of Russian exporters and the processing industry, Vladimir Putin said.

Experts of the Russian Ministry for Economic Development and Trade share Putin's opinion on the matter. According to latest analytical reports, which the ministry released, the growth of world prices on oil does not exert a positive influence on the Russian economy. The analysis showed that the Russian economy benefits from increasing oil prices best, when the prices reach the level between 30-38 dollars per barrel. Higher prices on oil do not affect the economic growth, experts say.

It is the Russian fuel and energy complex, which created such circumstances. Despite the incredibly favorable conjuncture on the world market of oil, investments in modernization and enlargement of production capacities (the mining and the processing) are lessening. In fact, a lot of Russian oil companies make their profits from high prices on raw materials without having an eye for the future at all.

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Its the refining capabilities of the world and they are not out there!!! We are very screwed for at least a few years till more refineries are built!!!

[Igel]

1. Russia has reasonable reserves, but can't get to it quickly

enough. Not enough investment. They even had a squabble with Ukraine about the cut-rate oil they were providing Ukraine with; Ukraine was refining it and then selling it, competing with Russia's foreign trade.

Russia also has oil swamps. Areas where there have been so many ruptured pipelines over the years that the ground's thick with oil over large areas. Remediation? Not very likely.

Then there is the economic downside. Petrostates aren't economically healthy.