The oil and gas industry in the Russian economy: A social accounting matrix approach

The Russian oil and gas industry is prominent in the economy. However, the general view has been that the industry has contributed less than expected to economic growth, mainly because of its disinclination to invest domestically. Although this view is probably true, it is not clear whether the reluctance to invest domestically is unique to the oil and gas industry. To answer this question, a social accounting matrix (SAM) which includes the institutional accounts for the oil and gas companies separated from those for other companies was constructed. Using the SAM, the behaviours of the oil and gas and other companies were compared. The analysis showed that non-oil and gas companies were also inclined to make financial investments overseas. This implies that redistributing the oil and gas rent would not activate fixed investment. Investment in a social and productive infrastructure would be needed to implement change. How the oil and gas rent can be most effectively used to accelerate economic growth needs to be investigated using more sophisticated policy analysis tools to take into consideration the effects from price and exchange rate changes.