Report - UNDP Russia

trends continued the damage would approachcatastrophic levels. However, full significance ofthese consequences can only be grasped inconjunction with other processes, initiated,supported and intensified by hypertrophicdevelopment of the fuel & energy sector. We listall of the relevant factors (Box 7.1) without goinginto detail (such detail can be found in previouschapters of this Report and in other publications:[Danilov-Danilyan, 2001, 2003], etc.) 21 .It is easy to see that the points listed inBox 7.1 are interlinked. The first five refer mainlyto negative economic consequences ofhypertrophic development of the raw materialssector, while the other four emphasize socialconsequences of this process. The trends, whichhave been described, can undermine humandevelopment, creative social practices, and thestrengthening of civil society.7.10. Energy and environmentalmalaise and ways of overcoming itThe current state of Russian energyproduction, characterized by unacceptably highand increasing adverse impacts of the fuel &energy industry on the environment andsquandering of energy in the economy, could bequalified as ‘energy and environmental malaise’.We have described how this situation has comeabout, but a few more important aspects areworth pointing out.The ‘big money’ to be made from oildiscourages the development of long-rangeinterests among business groups, particularlythose dealing directly with oil. Their focus onmaximum gains while market conditions arehighly favorable is understandable: they wouldhave to make much greater efforts in order toobtain many times smaller profits if world fuelprices were lower, so it is important to seize theopportunity while it is there. But this approachentails disregard for environmental protection,sustainable use of mineral resources,technological innovation, and energy andresource saving. There was no time or need forsuch details in the mid–2000s environment ofsuper-profits from record oil prices (even a priceof about USD 70 dollars per barrel triggersdisregard for nature conservation, which dropsout of account completely at higher price levels).Individual and clannish interests of oil magnatesdiverge radically from national interests. Andartificially low domestic energy prices, which,essentially, result from exorbitant world prices,undermine progress to energy saving in powerconsumingindustries.State regulation of oil production (and ofmineral resource use in general) is inefficient:licensing commitments have token status andare not properly enforced; tax issues have beenleft unresolved; distribution of resource rent doesnot meet long-term national interests or theinterests of the fuel & energy sector itself; and asearch for ‘direct’ methods of rent expropriationlead to economic deadlock (see [Danilov-Danilyan, 2004]) 22 ; the government is notimplementing any amortization policy, but haswashed its hands of the major challenges ofcapital repair and renovation (unlike the situationin developed countries, where these issues aregiven equal priority with tax collection).It is hard to expect resolution ofenvironmental problems if the government has noenvironmental policy: since abolition in 2000 of theRussian State Committee for EnvironmentalProtection (Goskomgeologiya), there have beenalmost no attempts to define and start consistentimplementation of such a policy. Approval by thegovernment in 2002 of the Russian EnvironmentalDoctrine has had no practical consequences andno other documents related to environmentalpolicy have been issued since 2000. The economic21E.g. see: V.I.Danilov-Danilyan, The Run for the Market: 10 Years Later, M., MNEPU, 2001, 232p.; V.I.Danilov-Danilyan, Power Efficiency-theKey Route of Russia’s Economic Development // Economic Issues of Environmental management on the Fringe of the XXI-st Century, M., TEIS,2003, pp.580-593.22See: V.I.Danilov-Danilyan, The Natural Resource Rent and Utilization of Natural resources // Economics and Mathematic Methods, 2004,vol.40, No.3, pp.3-15.133