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. Last Updated: 07/27/2016

Gaidar Says Boom Will Survive Lower Oil Prices

NEW YORK -- Russia's economic boom is based on more than just high oil prices and will continue even as energy prices subside, former Prime Minister Yegor Gaidar said at a forum in New York.

"It's a bit disingenuous to think Russia's economic growth has been only a function of oil," Gaidar told journalists after a panel at Columbia University on Friday.

"The Russian economy started to expand at a fast pace a couple of years ago before the rise in oil prices."

The country's gross domestic product rose by 7.9 percent in the first quarter of 2007, while industrial output rose by 8.4 percent.

The country sold $102.3 billion worth of oil in 2006, and its oil and gas sectors accounted for 45 percent of its government budget revenue last year.

"Granted, oil is extremely important for the budget. But the energy sector is not the one that is expanding the most," Gaidar said. "Look at the materials, industry and consumer sectors."

Gaidar, who was one of the architects of Russia's market reforms in the early 1990s and now is a director of the Moscow-based Institute for Economy in Transition, added that many have an "inflated" perception of Russia's oil-generated power.

In his annual state-of-the-nation address to the Federal Assembly on Thursday, President Vladimir Putin said the state should spend some of its oil windfall to encourage pension-saving. State pensions will rise by 65 percent through 2009.

"It makes us powerful, but not too powerful," Putin said. "A lot of this money needs to be and will be spent inside Russia to address problems such as those in the pension system."

Gaidar said he attributed much of today's economic expansion in Russia to the success of market reforms first launched by former President Boris Yeltsin, who died last week.

Both Gaidar and Yeltsin met with severe criticism in the 1990s as many Russians associate the former president's eight years in power with a series of reforms that led to economic meltdown, lawlessness, and the ill-fated military campaign against separatists in Chechnya.

"The breakup of the Soviet Union was not easy, and Russians paid a tremendous price for it," he said. "But the magnitude of such a task had no precedent, and Yeltsin managed to do it without bloodshed. It was a tremendous feat."

"It's easy to forget that when Yeltsin left power, he also left behind a vibrant and dynamic economy," Gaidar said. "But if we want to talk about mistakes, then his one real mistake was Chechnya."

Gaidar stressed that U.S. and Western pressure on Russian politics and internal affairs was "counterproductive."

"Yes, things are not perfect in Russia and it's true that Putin has a tight rein on the country," Gaidar said. "But the more the West meddles in Russia, the more America lectures Russia about democracy, the more difficult it makes [the situation]."