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Russia's Power Surge
With an area of more than 10.6 million square miles (almost twice the size of the United States), Russia is the largest country in the world and has even bigger ambitions. Though it has suffered tremendous political and social upheaval throughout the last 100 years, its vast natural resources and strategic location between the Far East and Europe have always sustained it. Demoted to “former” superpower status in the 1990s, Russia is now solidifying its place among the world’s economic elites. Fueling this change of fortunes has been the rising price of fossil energy sources and Russia’s rather substantial reserves (79.5 billion barrels of crude oil, 1.7 trillion cubic feet of natural gas, and 157 billion tons of coal).
Since overcoming its financial crisis in 1998, Russia is now the world’s largest exporter of natural gas and the second largest exporter of oil (after Saudi Arabia). The European Union depends on Russia for approximately a quarter of its natural gas and oil, and China and other Asian countries also import significant amounts. And like its competitors in the Organization of Petroleum Exporting Countries, the Russian government will use pipeline diplomacy when needed. In some ways, it is much more effective than saber-rattling, and Russia’s trading partners are well aware of the economic deprivation that a tightened oil and gas supply could bring.
The inflow of petro dollars has bolstered Russia’s hard currency reserves to nearly $300 billion and helped compile a government reserve fund measuring more than $115 billion. All of this export income contributes to Russia’s tremendous economic growth (an average of 6.5 percent per year over the last five years). But despite rising electricity demand and a booming economy, investment in Russia’s electricity sector has not kept pace. To reinvigorate the sector, the government has begun an aggressive restructuring effort of the Russian electricity market that involves the continued privatization of the state-controlled electricity monopoly, RAO UES (Unified Energy System).
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