L. Fituni, I. Abramova Resource Potential of Africa and Russia's ...
L. Fituni, I. Abramova Resource Potential of Africa and Russia's ... L. Fituni, I. Abramova Resource Potential of Africa and Russia's ...
tion in the global division of labor which is very similar to that of Africa. Since approximately the beginning of the 2000s, Moscow has been desperately trying to change this situation, but encounters strong resistance from old rivals (now main buyers of its export commodities), new competitors (which develop more dynamically and are more adroit and agile in occupying new opening market niches) and indigenous oligarchs, whose fortunes depend on the raw material specialization of their country. In may be a coincidence, but the general “disappointment” of the West with the end results of democratization processes in Russia coincided with the shift in the Russia’s attitude of its subordinate role in the international division of labor. Though on the whole Russia’s metamorphosis at the end of the 20th century was disappointing, that cloud had some silver lining too. In the 21st century, the global economy began to experience a more pronounced relative shortage of various kinds of natural resources. That means that international market prices are due to increase, thus broadening the opportunities for mobilizing the savings for development. But with that came the first signs of the so called Dutch disease, though in our view it was a very specific type of the illness. In accordance with the classical economic theory, in simple trade models, a country ought to specialize in industries that it has a comparative advantage in. So, theoretically, Russia, as a country rich in natural resources, would be better off specializing in the extraction of natural resources. But it is not. The reliance on natural resources under a free reign market economy is slowly killing the national manufacturing industries by making any investment alternative to mining less attractive. This challenge was manageable under the Soviet planned economy, since then it were the non-market factors, that determined the areas, types and levels of investment. At that time Gosplan’s decision making was based on the priority of the macroeconomic efficiency of the Soviet economy as a whole. For that it was prepared to sacrifice the level of profitability of individual projects and even whole branches. The balanced development of 61
the diversified modern economic complex as a whole took priority over inflow of currency. The considerations of economic independence and self-sufficiency at that time were more important than a possibility to get additional incomes from selling raw materials abroad. The logic of the Soviet leadership was that the preference of currency inflows from abroad over the domestic material production would increase the level of USSR’s dependence from the West and would support foreign producers on the expense of the national ones. As the evolution of the Russian economy showed later those fears were not entirely without foundation. The situation became detrimental under the market economic conditions. The disappearance of central planning and the prevalence of the pro- (microeconomic) profit approaches brought about a shift away from manufacturing. A free investor in these conditions is less interested in putting his money into a manufacturing project, where the return on investment is lower and potentially riskier than the predictable extraction of raw materials easily sold at world markets. But such an approach is detrimental in the long run. If the natural resources begin to run out or if there is a downturn in prices, competitive manufacturing industries do not return as quickly or as easily as they left. This is because technological growth is smaller in the booming sector and the non-tradable sector than the nonbooming tradable sector. 1 Since there has been less technological growth in the economy relative to other countries, its comparative advantage in non-booming tradable goods will have shrunk, thus leading firms not to invest in the tradables sector. 2 Also, volatility in the price of natural resources, and thus the real exchange rate, may prevent more investment from firms, since firms will not invest if they are not sure what the future economic conditions will be. 3 In the Russian case, the problem lies not so much with the ruble getting stronger (it is still stably weak against major currencies), but with “excessive” amounts of inflowing foreign currency not used for productive purposes in the country. Under the “usual” Dutch disease an increase in revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that 62
- Page 12 and 13: cations, including monographs 1 and
- Page 14 and 15: arena by the loftiest goals and ide
- Page 16 and 17: quence, their role in the world eco
- Page 18 and 19: thus the last seller of the commodi
- Page 20 and 21: Table 1.1.2. World chromium product
- Page 22 and 23: Table 1.1.3. World cobalt productio
- Page 24 and 25: shore in many parts of the world. L
- Page 26 and 27: Though US totally depends on import
- Page 28 and 29: isk of supply shortage in the next
- Page 30 and 31: long been obsolete, do exist and te
- Page 32 and 33: a European-African energy forum; th
- Page 34 and 35: upon the same ideology: the new roa
- Page 36 and 37: Force. At the request of the UN Sec
- Page 38 and 39: - The United States has sole jurisd
- Page 40 and 41: uses to track terrorists. Algerian
- Page 42 and 43: sum, in exchange for terminating th
- Page 44 and 45: UK, Greece, Italy and Spain during
- Page 46 and 47: ing Angola’s large oil resources
- Page 48 and 49: China concluded two major M&A deals
- Page 50 and 51: the continent. To help African coun
- Page 52 and 53: egy with regard to Sudan and Zimbab
- Page 54 and 55: some price-related difficulties for
- Page 56 and 57: 100,000 students from almost every
- Page 58 and 59: 15 U.S. Geological Survey, Mineral
- Page 60 and 61: CHAPTER 2 Natural Resource Potentia
- Page 64 and 65: of other nations (manifest in an ex
- Page 66 and 67: The mineral resource base (MRB) of
- Page 68 and 69: In Nigeria, the smelter at Ikot Aba
- Page 70 and 71: ite production at Komi to reach 6.5
- Page 72 and 73: depletion. In South Africa, output
- Page 74 and 75: 25-26 thousand tons of copper conce
- Page 76 and 77: Country 75 Cost Ranges Namibia 0 20
- Page 78 and 79: The Elkon district, Southern Yakuti
- Page 80 and 81: ites and Miocene sediments extendin
- Page 82 and 83: South, Etango and Valencia alaskite
- Page 84 and 85: of competitiveness by similar produ
- Page 86 and 87: tive scenario, the above goals will
- Page 88 and 89: The concept of resource efficiency
- Page 90 and 91: vately owned. The leading enterpris
- Page 92 and 93: In this respect African and Russian
- Page 94 and 95: Table 2.2.2. Distribution of capita
- Page 96 and 97: will allow the project to overcome
- Page 98 and 99: World prices on all types of minera
- Page 100 and 101: 2.3. Competitors or Partners? Russi
- Page 102 and 103: Soviet organizations supplied Alger
- Page 104 and 105: that the gas crisis between Russia
- Page 106 and 107: The second LUKOIL project in Egypt
- Page 108 and 109: The agreement was finally signed du
- Page 110 and 111: pany “Slavneft” would join a co
the diversified modern economic complex as a whole took priority<br />
over inflow <strong>of</strong> currency. The considerations <strong>of</strong> economic independence<br />
<strong>and</strong> self-sufficiency at that time were more important than a<br />
possibility to get additional incomes from selling raw materials<br />
abroad. The logic <strong>of</strong> the Soviet leadership was that the preference <strong>of</strong><br />
currency inflows from abroad over the domestic material production<br />
would increase the level <strong>of</strong> USSR’s dependence from the West <strong>and</strong><br />
would support foreign producers on the expense <strong>of</strong> the national<br />
ones. As the evolution <strong>of</strong> the Russian economy showed later those<br />
fears were not entirely without foundation.<br />
The situation became detrimental under the market economic<br />
conditions. The disappearance <strong>of</strong> central planning <strong>and</strong> the prevalence<br />
<strong>of</strong> the pro- (microeconomic) pr<strong>of</strong>it approaches brought about a<br />
shift away from manufacturing. A free investor in these conditions is<br />
less interested in putting his money into a manufacturing project,<br />
where the return on investment is lower <strong>and</strong> potentially riskier than<br />
the predictable extraction <strong>of</strong> raw materials easily sold at world markets.<br />
But such an approach is detrimental in the long run. If the natural<br />
resources begin to run out or if there is a downturn in prices,<br />
competitive manufacturing industries do not return as quickly or as<br />
easily as they left. This is because technological growth is smaller in<br />
the booming sector <strong>and</strong> the non-tradable sector than the nonbooming<br />
tradable sector. 1 Since there has been less technological<br />
growth in the economy relative to other countries, its comparative<br />
advantage in non-booming tradable goods will have shrunk, thus<br />
leading firms not to invest in the tradables sector. 2 Also, volatility in<br />
the price <strong>of</strong> natural resources, <strong>and</strong> thus the real exchange rate, may<br />
prevent more investment from firms, since firms will not invest if<br />
they are not sure what the future economic conditions will be. 3<br />
In the Russian case, the problem lies not so much with the ruble<br />
getting stronger (it is still stably weak against major currencies), but<br />
with “excessive” amounts <strong>of</strong> inflowing foreign currency not used for<br />
productive purposes in the country. Under the “usual” Dutch disease<br />
an increase in revenues from natural resources (or inflows <strong>of</strong> foreign<br />
aid) will make a given nation's currency stronger compared to that<br />
62
Change language