A Comparison of the Russian and Saudi Arabian Economies

May 18, 2009, by Shinichiro Tabata  

Shinichiro Tabata wrote a paper entitled “The Influence of High Oil Prices on the Russian Economy: Comparison with Saudi Arabia” for Eurasian Geography and Economics (2009, Vol. 50, No. 1, pp. 75-92). It was a special issue on Russian oil and gas, edited by Clifford Gaddy. Other contributors to this issue include Philip Hanson, Pekka Sutela, Richard Ericson, Barry Ickes, Michael Alexeev and others

Tabata’s paper was a first attempt to compare the economies of the two largest oil producers and exporters in the world. He conducted this research in preparation for the application for ongoing Scientific Research on Innovative Areas, “Comparative Research on Major Regional Powers in Eurasia.”

A preliminary draft of this paper was presented at the 10th Biannual Conference of the European Association for Comparative Economic Studies held at the Higher School of Economics in Moscow on August 28-30, 2008. His research was assisted by Takeru Hosoi, an associate professor at Kokugakuin University and a young specialist on Saudi Arabian and other Gulf economies.

Tabata concluded in his paper that in order to cope with increasing oil export revenues, Russia has established a more liberalized and more transparent system than its counterpart in Saudi Arabia. In Saudi Arabia, Saudi Aramco, a state-owned company, has monopolized oil production and export, and has transferred about 80 percent of oil export revenues to the state budget in dollars. Thus, these oil dollars have not flowed into the exchange markets and the Saudi riyal has been pegged against the US dollar since 1981. Consequently, Saudi Arabia is immune from Dutch disease and inflation rates have remained low. In contrast, in Russia, because of the rapid appreciation of the ruble, GDP, budget revenues and personal income converted into US dollars have increased tremendously, while household consumption has grown due to rises in imports. In 2007, Russia ranked third in the world after China and Japan in terms of foreign reserves. The growth in money supply and inflation in Russia caused by increases in interventions in the exchange markets by monetary authorities may be viewed as a cost associated with opting for a liberalized system.


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