Condoleezza Rice, who served as both National Security Advisor and Secretary of State under former President George W. Bush, recently gave a candid assessment of the state of the Russian economic system at TD Ameritrade Institutional’s annual conference in San Diego.
The former secretary spoke along with other prominent public figures such as Alan Simpson and Erskine Bowles, who co-chaired a much-discussed panel on deficit reduction during President Obama’s first term.
The central topic of discussion was how America can remain competitive in the 21st century and Rice highlighted the fact that many nations currently perceived to be rising competitors, such as Russia and China, have significant developmental issues that must be resolved before they can truly challenge the United States’ economic primacy.
In explaining the problems that face Russia, Rice noted that smooth functioning of the country’s economy continues to be almost entirely dependent on profits from the extraction of natural resources.
According to Rice, “fully 80 percent of the [Russian] economy is oil, gas and minerals.”
Last year, at Everest Capital’s Emerging Markets Forum, Rice suggested that a sharp drop in the price of oil could prove highly disruptive to the broader Russian economy, as well Moscow’s ability to control the country politically.
At the same time, she conceded that such a shock may be necessary in order to get the government to focus on encouraging growth in other sectors. But, for the foreseeable future, any development will need to be financed with petrodollars.
This means producers in Russia will continue to be under pressure to achieve maximum output and profitability. Energy companies in other countries face similar demands.