Policy Memos

The Exchange Rate in a Resource-Based Economy: The Case of Russia

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In 2005, Russia exported about 150 million tons of oil and 150 billion cubic meters of gas worth about $100 billion (all numbers are rounded for simplicity). The price of oil and gas varied greatly. In just less than a decade, oil prices went from $10 to over $60 per barrel (from $60 to $360 per ton), and gas prices changed accordingly as they are strongly correlated with oil prices. Imagine a not unrealistic scenario, in which oil prices would drop to $10 a barrel and would stay at this level for five years. Annual Russian revenues from exports of hydrocarbons would fall to about $20 billion instead of $100 billion, resulting over five years in an accumulated $400 billion shortfall. Russian gross domestic product at the official exchange rate in 2005 totaled $600 billion. How could Russia adjust to such a negative trade shock and deterioration in terms of trade? [...]

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About the author

Research Director, Dialogue of Civilizations Research Institute (Berlin); Principal Researcher, Russian Academy of Sciences; Professor Emeritus, New Economic School (Moscow); Adjunct Research Professor, Institute of European and Russian Studies, Carleton
Dialogue of Civilizations Research Institute, Berlin