Russia’s morbid addiction to resource politics

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Russia’s morbid addiction to resource politics

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...and 30% off your gas bill

Energy discounts for allies are driving Russia deep into the red

Last Friday Vladimir Putin, the Russian prime minister, addressed the Finance and Economic Development ministries calling for a “complete revision of our current obligations and a cut in ineffective and secondary spending” over the next three years.

What many Russians will be asking, however, is how in the teeth of such brutal spending cuts, Putin’s government felt able to offer a 30% discount in gas prices to the Ukraine last month.

From its low in July last year, the MSCI Russia stock index has rallied sharply, suggesting sentiment has markedly improved on the country’s prospects. It also indicates that fears over structural problems revealed by the collapse of the oil price in 2008 have been largely assuaged.

The economic picture, however, does not appear to reflect this bullish outlook. Over 2009 Russia’s GDP shrank 7.9%, its largest fall since

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