Report - UNDP Russia

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countries, as seen at the start of the 1970s, whiledeveloping countries face serious burdens ontheir balance of payments, driving up levels ofnational debt. The theory of market economicsportrays this as natural utilization of comparativeadvantages, which is neither threatening norunjust. But it adds to systemic risk in the worldeconomy, for example by threatening energyimbalance if supplier countries do not obtainsufficient investments to support required levelsof energy production. Because it has afundamental (not occasional) nature, thisphenomenon can lead not only to temporarydrops in world GDP, but to long-term negativeconsequences for human development in thesocial and environmental spheres.These are the main problems, which areusually highlighted when considering thepresent state of the world energy sector from theviewpoint of human development. They arerelevant to Russia too, but with specificqualifications.1.2. Russia’s energy industryin conditions of global economicgrowth and crisisThe Russian economy had not begunbroad modernization before onset of the globalrecession in the middle of 2008. Recovery of GDPto 1989 levels by 2007 was largely based on oil rent,so it is unsurprising that the crisis pulled Russia’sGDP down by 8% in 2009. In the years of economicgrowth (1999–2008) dependence on export ofhydrocarbons increased, and this was particularlytrue of the country’s budget. The dependencereflected depth of the transition crisis, whichbrought 43% decline of the country’s old-fashioned(Soviet-vintage) GDP, and a large measure ofdeindustrialization. Energy and semi-products (witha large part of energy in their value) became crucialfor the country’s industry and exports.The role of Russia’s energy industry(designed for the needs of the old Soviet bloc) inthe world economy today tends to beunderestimated. Russia produces about 11.5% ofthe world’s primary energy, which is five timesmore than its share of world population or GDP.So the country should spend five times more ofits GDP than other countries on maintenance anddevelopment of its fuel & energy industry. In fact,the overall investment ratio in Russian economyin 1999–2006 was about 17% of GDP, which ismuch lower than the world average (20-24%),and even in 2007–2008 the ratio only reached21% of GDP with investments in the fuel andenergy sector representing 4.5 percentage pointsout of the total. The country invested much lessthan its neighbors and rivals in worldcompetition in human capital, the processingindustries, and rehabilitation of infrastructurecreated in the 1960s–1980s.Rapid growth of the world economy inthe 2000s caused demand for power toskyrocket. Developing countries, whoseeconomies are relatively energy inefficient, madea particularly large contribution to growth(Figure 1.1). Half of the world’s increase inconsumption of primary energy and about 40%of increase in oil consumption in 2001–2008 weredue to China’s fast-growing economy, which ismore energy intensive than economies ofdeveloped countries. Measured by purchasingpower parity (PPP), US GDP outran that of Chinaby two times in 2008 (20.6% vs. 11.4% of worldGDP), while the difference in energyconsumption was only 15%.Growing demand for energy and theresulting energy price boom significantlyincreased income of countries specializing inenergy exports, enhancing their economic andpolitical status. This was particularly true forRussia, which accounted for nearly half of worldincrease in oil production in the first half of the2000s, becoming one of the resource mainstaysof global economic growth during the period. If,at the beginning of the decade, Russia had notbeen able to carry out rapid increase of fuelproduction (following the 1990 recession), it ispossible that world energy prices would haverisen much further by the mid–2000s. That couldhave entailed a major slowdown of worldeconomic growth (Table 1.1).14 National Human Development Report in the Russian Federation 2009
By 2008 Russia had increased its share inworld oil production from 9% to 12.4%. Itovertook the US in 2002 and almost drew levelwith the world’s leading oil producer, SaudiArabia, in 2007, producing only 5% less. Includingits natural gas and coal exports, Russia is theworld’s leading exporter of energy. Increase in oilproduction by 1.5 times and increase of oil priceson the world market by more than three timesdid much to restore Russia’s economy to the levelof the late 1980s by size of GDP. Revenue fromexports of oil and oil products alone had grownfrom USD 36.2 billion in 2000 to USD 241 billionin 2008. The latter figure exceeds Russia’s entireGDP in 1999.In addition to its oil exports, Russiaconsistently supplied around one third of allnatural gas imported to Europe and about 20%of total world production of gas through the2000s. Since long-term contracts bind natural gasprices to prices for oil, Russia’s natural gasindustry has also received major dividends frombooming oil prices.The energy market suffered the mostamong commodity markets as a result of theFigure 1.1World energy consumption and industrialproduction (1981-2008)M.t. oil equiv.700060005000400030002000100001981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008Energy consumption, developed countriesEnergy consumption, developing countriesGrowth of industrial production, developed countries (right scale)Growth of industrial production, developing countries (right scale)Source: World Bank (World Development Indicators Online Database),British Petroleum (BP Statistical Review of World Energy, June 2009)crisis, and Russia’s economy was bound to beseriously affected. After explosive growth in2007–2008 to a level of USD 147/barrel the oilprice plummeted to USD 30/barrel by the end of2008, posing a major threat to budget stabilityand the overall Russian economy. Despitestabilization of oil prices in the range around USD70/barrel the national currency, which is closelytied to energy prices, was devalued, foreigninvestments flowed out of the Russian financial121086420-2-4%Table 1.1Average annual growth of energy consumption and GDP (%, 1986–2008)GDPPrimary energyconsumptionOil consumption1986-2002 2003-2008 1986-2002 2003-2008 1986-2002 2003-2008World 2.9 3.5 1.7 2.9 1.6 1.4Developed countries 2.7 2.2 1.5 0.5 1.5 -0.1USA 3.0 2.5 1.5 0.1 1.4 -0.3EC 2.4 2.3 0.4 0.1 0.7 0.0Japan 2.2 1.7 1.9 0.1 1.1 -1.6Developing countries 3.8 6.7 1.9 5.7 1.8 3.6Brazil 2.3 4.0 3.1 3.7 2.9 2.5Russia (GDP since 1990) -2.5 7.0 -1.4 1.3 -3.8 1.2India 5.5 8.7 5.1 5.9 5.9 3.3China 9.5 10.7 4.1 11.2 6.5 7.1Average real oil price,USD per barrel, 200828.7 63.2Source: World Bank (World Development Indicators Online Database), British Petroleum (BP Statistical Review of World Energy, June 2009)15
Page 1 and 2: National Human Development Reportin
Page 3 and 4: National Human Development Reportin
Page 5 and 6: ACKNOWLEDGEMENTSThe authors express
Page 7 and 8: Dear Reader,You have before you the
Page 9 and 10: PREFACEThis is the 13 th National H
Page 11 and 12: country’s fuel & energy regions r
Page 13 and 14: environmental degradation and enhan
Page 15: Chapter 1The Energy Sector,the Econ
Page 19 and 20: the share of energy in the national
Page 21 and 22: exported, increased. However, this
Page 23 and 24: elimination of structural and terri
Page 25 and 26: • Establishment of competitive me
Page 27 and 28: number of developed countries, incl
Page 29 and 30: Although the United Nations Climate
Page 31 and 32: industrial region of the Urals - Sv
Page 33 and 34: 2.2. Budget capacityand structure o
Page 35 and 36: (the Federal State Statistics Servi
Page 37 and 38: Immigration by young and highly ski
Page 39 and 40: energy regions exacerbate the incom
Page 41 and 42: Khanty-Mansi and Yamal-Nenets Auton
Page 43 and 44: the Ministry for Regional Developme
Page 45 and 46: various other long-term problems in
Page 47 and 48: is also associated with the fuel an
Page 49 and 50: Republic of Mordovia 8051 0.732 68.
Page 51 and 52: Legislative control of impact audit
Page 53 and 54: Chapter 3Personal Incomes, the Ener
Page 55 and 56: than any other sources of income -
Page 57 and 58: Are wages now the main instrument f
Page 59 and 60: comparison of month-on-month develo
Page 61 and 62: • The unemployed, people who aree
Page 63 and 64: Employment in the energy sector acc
Page 65 and 66: The share of household expenditures
Page 67 and 68:
subsidization practices in the regi
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in power use between regions now de
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Electricity prices for households h
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• Steady decrease in the percenta
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1. The number of graduates with eng
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As well as requiring better fuelcom
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Box 4.1. The village of Kolvain Uss
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continue to use solid fuel for a lo
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Box 4.3. Ambient air pollution andp
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either by large power generating fa
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Box 4.6. A city at riskNovocherkass
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In order to assess impact of thesee
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generation facilities through safer
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achieved in developed countries. So
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equires 2-6 times more capital inve
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government) should set targets and
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networks. In 2007 government budget
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enhancement is also important. Ener
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energy efficiency of the transport
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Box 5.1. Programme of the Ministry
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educational and informational suppo
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mechanism for using national quota
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Figure 6.2Share of electricity gene
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One of the major benefits of renewa
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odies; outdoor air; rocks and soil;
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Design and construction of geotherm
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Box 6.3. Prospects for nuclear powe
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consists of out-dated equipment at
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ConclusionThe world’s nuclear pow
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7.1. Impact of the fuel& energy sec
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Table 7.5Solid waste from productio
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Table 7.7Areas of disturbed and rec
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nature of the impact (atmospheric e
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Further, the economic cost ofenviro
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trends continued the damage would a
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What the government needs to do ino
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Figure 7.2.1Specific atmospheric em
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money value of industrial output) c
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Figure 7.2.4Trends in specific atmo
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Chapter 8The Energy Industry and Su
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eing equal) it only reflects that p
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(MDGs), issued by the UN in 2000. T
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8.4. The energy factorin integral i
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Canada, the USA and Great Britain h
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Box 8.2. Energy efficiencyindicator
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Box 8.4. Energy efficiency rating o
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41 Penza Region 116.0 -35.2 -4.542
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Appendix to Chapter 1Table 1.1. GDP
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Attachment to Chapter 4Table 4.1Rus
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Attachment to Chapter 4Volga Federa
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Attachment to Chapter 4Belovo Belov
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The previous National Human Develop
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