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. Last Updated: 07/27/2016

EBRD Says Russia Must Diversify

Russia must cut state interference in the economy and push ahead with reform to diversify away from dependence on oil, the European Bank for Reconstruction and Development said in an annual report published this week.

While praising strong economic growth and prudent fiscal policies, the EBRD said reforms may have slowed, state interference in the economy has increased and the legal case against Yukos has raised uncertainty about property rights.

"Events surrounding the legal case against the Yukos oil company and its principals, combined with the authorities' ambiguous attitude to previous privatizations, have increased uncertainties about property rights and the overall rules for the private sector, especially for large businesses," the EBRD said in its Transition Report for 2004.

The EBRD, the biggest investor in the former Soviet Union, will invest as much as $1.2 billion to $1.3 billion in Russia in 2005, EBRD President Jean Lemierre said last month.

The economy is growing for a sixth straight year on high commodity prices and soaring domestic demand, though the EBRD forecasts growth will slow this year and next.

The EBRD expects growth will slow to 6 percent next year from 6.9 percent this year and 7.3 percent in 2003.

Average growth in the Commonwealth of Independent States is forecast at 7.5 percent this year and 6.3 percent in 2005.

The private sector accounts for about 70 percent of Russia's gross domestic product, according to the EBRD.

Yet the EBRD faulted gas giant Gazprom for continuing to resist allowing private companies to develop gas pipelines to sell gas to major customers.