Russia’s economic growth has been heavily reliant on the energy sector and is, therefore, vulnerable to price and technology changes in the global energy landscape. As the US and Europe are moving increasingly towards natural gas, domestic production of shale gas and alternative energy sources, diversification has become a slogan in some quarters of Russia.
The reality, however, is that Russia continues both to suffer and benefit from its Soviet economic legacy – the USSR was an autarchy with a fully diversified economy aimed at providing self-sufficiency. Modernising Russia to deliver on its competitive advantage and reach a fuller capacity of its various sectors requires it to:
- improve its institutional framework,
- enable development of its regions, and
- continue actively to work on attracting both domestic and foreign investors.
It is the Russian regions that are driving reform. In particular, those without oil and gas resources are building stronger institutions and decreasing red tape, as well as arguing for more consistent long-term policies and fighting local corruption. These improvements are local but due to the competitive nature of the regional markets, if the right balance of power is struck between the local and federal levels, the regions may prove to be the pivotal drivers of the national economy.
The World Economic Forum (WEF) Moscow Meeting took place on Sunday 20 October 2013 under the title Russia’s Regions: Drivers of Growth. The Forum gathered to discuss and develop the findings of Scenarios for the Russian Federation, a Forum publication produced in cooperation with 350 business, policy and academic leaders and launched in January this year at WEF’s Annual Meeting in Davos.
The publication explored possible future scenarios for the Russian economy, outlining three main uncertainties: ongoing developments in the global energy market, the quality of Russia's domestic institutional environment and the dynamics of social cohesion.
The report highlighted the potential for Russia’s regions to drive institutional and economic reform, as one of the most sustainable and positive scenarios for the country’s development.