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. Last Updated: 07/27/2016

Russia Needs PSA Now For Prosperity in Future

Last Wednesday, President Boris Yeltsin delivered an important speech to the Federation Council. He confirmed the successful establishment of free market reforms introduced during his first five years in office. He noted that industrial production has been increasing monthly since spring and declared, "A return to the old ways is impossible. A free economy has been firmly established. ... Even our opponents no longer question our reforms."

Yeltsin also announced that the government must give direction to the continued development of the free market in Russia to insure that the benefits of economic reform are felt by more than the fortunate few in Moscow. He declared that Russia needed a national economic strategy to get development into the regions, those very regions whose powerful and increasingly independent leaders constituted his audience.

Yeltsin recognizes that the absence of the benefits of his reforms in the regions is a threat to the economy and to democracy in Russia, and understands he must have the support of the Federation Council and Duma to implement a workable long-term national economic strategy.

To succeed in bringing economic development to the regions, the government must have a national strategy that stimulates billions of dollars of direct investment into Russia now.

A principal component of this economic strategy will be implementation of Russia's production sharing law. This law is now almost two years old. When implemented, it will immediately stimulate at least $100 billion in direct investment in the oil and gas sector alone. Pending PSA projects will generate tens of thousands of jobs and an estimated $600 billion in revenues for the government.

Importantly, there are no PSAs planned for Moscow. There is no known oil under Moscow. A national economic strategy that implements the PSA law will provide economic development, jobs and a strengthening of democracy in the resource-rich regions far from Moscow.

The exploitation of oil and other natural resources is not the future of Russia. But bringing in the billions in new investment now planned for PSAs is the engine that will take Russia into the 21st century. This investment, by domestic and international oil firms, will bring economic and political development to all of Russia.

A Russian economic strategy that includes implementation of the PSA law will power the next few years of the Russian Miracle. During this time, the incredibly talented Russian work force will develop the industries of the future -- aerospace, telecommunications, computer software, biotechnology and whatever else individual Russians will find productive and profitable in the dynamic Russian economy of the 21st century.

Bruce Bean is the managing partner of Coudert Brothers in Moscow.