The Russian Transition to Capitalism
by The demise of the economically stagnant, politically redundant Soviet Union brought major and fundamental economic changes within its unpredicted wake. The end of the Soviet Union came in December 1991 following on from the collapse of communism in Central and Eastern Europe as well as the end of the Cold War era.
During the Soviet – era of the planned central economy very little or no steps had been taken to increase the efficiency of oil and gas production as the Soviet economic planners had been as unconcerned by the profit motive as they had been with preventing environmental pollution. The old Soviet crude oil and natural gas refineries and installations were wasting valuable fuel resources as well as causing high levels of industrial pollution. The economic reform and industrial efficiency measures that were introduced in the late 1980s were too little too late to save the antiquated Soviet economic system.
The re – introduction of capitalism into Russia after 1991 certainly introduced the profit motive into the Russian crude oil and natural gas production industries, although a few Russians that became wealthy overnight or Western multinational corporations either made these profits. Russian capitalism seemed as corrupt and incomplete as its political moves towards liberal democracy.
With Russia becoming a capitalist economy virtually overnight and therefore joining in with the global economic system after its independence in 1991 the gaining of export revenues was perceived to have become very important within the Kremlin. The liberalisation of the Russian economy led to its government seeking a sound relationship with the EU alongside major economic powers such as China, Japan and perhaps most importantly the US. Internally the Russian government brought in economic reforms during 1992 and 1993 that quickly dismantled what remained of the old Soviet – era command economy yet transferred vast state owned enterprises including oil refineries into the hands of a few very wealthy business executives and entrepreneurs.
The early 1990s allowed Russians such as Roman Abramovich to make personal fortunes through their involvement in the exporting of Russian crude oil, petroleum, and also natural gas. The Russian oil companies wasted no time at all in forming business and trading links with Western multinational corporations, including the EU owned or based British Petroleum (BP) and Royal Dutch Shell. These Western oil corporations often had to take steps to increase the maintenance and technological standards of Russian fuel installations and refineries, whilst making sure that they made considerable profits. In the 1990s the weakness of the Russian government meant that the so –called Russian oligarchs and to a lesser extent foreign oil companies had a strong influence over Russia’s economic and foreign policies.
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