Paul Roderick Gregory: Putin’s promises to eastern Ukraine could bankrupt Russia
As the moniker Petrostate implies, the Russian economy and state have an extreme dependence on energy: One half of budget revenues come from taxes and levies on oil and gas. Energy exports currently bring in a quarter trillion dollars annually and the energy sector accounts for 20 percent of GDP. Petrodollars enable Putin to avoid the economic reforms that could modernize and diversify the economy. The Russian Petrostate will remain dependent on energy as long as Putin remains in power. As the North American fracking revolution advances and spreads and energy prices fall, Russia faces the double whammy of falling production (without Western investment) and shrinking prices.