BASEES Annual Conference 2022

“Cheap Energy” and Putin’s “Social Contract”

Fri8  Apr04:20pm(20 mins)
Auditorium Lounge


Adnan Vatansever


Russia remains as one of the world's largest provider of energy subsidies. While extensive subsidies for consumers is peculiar for hydrocarbon-rich states, why these subsidies have persisted in Russia has remained largely unexplored. Relying on an extensive analysis of Russian stakeholders along with household surveys in several Russian regions, this paper explores key factors that have contributed to the resilience of Russia’s consumer subsidies. By examining subsidies for both natural gas and electricity, the paper exposes key factors that have yielded similar results despite the distinct organizational structure of these two sectors. The paper examines several areas. First, it looks at past efforts for subsidy reform, and suggests that gaps between how the political leadership framed the reforms and how households perceived them affected success. Second, the study tests the institutionalist argument whereby “weak institutions” have yielded energy subsidies as a convenient tool to redistribute natural resource rents to society. Third, through household surveys, the paper explores how public support for increase in energy prices has affected the reform process in Russia. Finally, the study applies Acemoglu’s “social contract theory” whereby incumbents ability to guide the distributional consequences of institutional change can affect the success of energy subsidy reform.