Economic Aspects of the Energy Sector in CIS Countries
The outcome of this project is a study analysing the macroeconomic aspects of energy sector development in the Commonwealth of Independent States (CIS). These high energy intensive and energy dependent economies rely heavily on energy production, trade and transportation. For net energy exporters (e.g., Russia, Azerbaijan, Turkmenistan, Kazakhstan and - to a lesser extent - Uzbekistan), the energy sector contributes a major part of GDP (around 20% in Russia, above 40% in Azerbaijan) and a substantially bigger share of exports (around 90% in the case of Azerbaijan) and fiscal revenues (more than 50% in some countries). For net importers, high energy consumption due to high energy intensity implies trade dependence and a substantial cost burden that can determine their current and future international competitiveness. However, some of these countries (e.g., Ukraine, Belarus, Georgia) are able to benefit in various ways from energy transit, processing and re-exports. Under-priced energy in the domestic market constitutes a substantial indirect subsidy to the manufacturing industry, agriculture, transportation and households consumption in all CIS countries. High dependence on and continuous distortions in the energy sector result in complex and often negative outcomes in the economic, social, institutional and political economy spheres.
The study first assesses the macroeconomic importance of each CIS country's energy sector in terms of - but not restricted to - GDP, investment, employment, budgetary revenues contribution and balance of payments using a static and dynamic approach. Complementing the macroeconomic analysis, the specific features of the energy industry, viz., its reserves, exporting capabilities, prices and destinations, investment level, ownership and market structure of the energy sector, are analysed.
The second part of the study takes a closer look at related macroeconomic issues and macroeconomic policy instruments, and at the latter's effectiveness in addressing current challenges. This section also investigates the political economy dimension, i.e., do large deposits of energy resources and high international energy prices encourage and enable economic growth and modernisation, reduce poverty and income inequalities? Or on the contrary, do they slow down the necessitated reforms, contribute to increasing income inequalities and introduce various structural and institutional distortions and temptation to rent-seeking?
Finally, the study examines strategic options related to the energy sector itself and its current and potential role in the future, especially as it regards the EU (trade and investment flows between the EU and CIS countries and EU economic strategy towards CIS). Alternative strategies and policy options for the future development of the energy sector in the CIS countries finalize the study, with special attention paid to investment climate and foreign investment policies in each country.
Related publications, events and news:
Report on: The economic aspects of the energy sectors in CIS countries
News: CASE co-hosting the Energy Workshop, 12 June 2008
Moscow Energy Workshop, 27 June 2008
Warsaw Policy Research Seminar, 22 September 2008
European Commission, Directorate General for Economic and Financial Affairs