Mineral resources

Russia is extremely well endowed in mineral resources. It is rich in coal and oil, and in most raw materials required by a modern industrial nation. A determined effort was made in the 1930s to survey and map mineral wealth. Vast deposits of coal, oil, and natural gas were discovered. Soviet geologists reported that the nation contained more than one-half of the world's total reserves of coal and lignite. They also reported that the Soviet Union contained two-fifths of the world's crude petroleum and natural gas reserves. Under Stalin and Khrushchev, coal was the single most important energy source in the Soviet Union. Of the surveyed coal reserves, 65 percent were either anthracite (a hard coal) or bituminous (a softer coking coal). The remaining 35 percent of coal reserves were subbituminous coal and lignite. Coal deposits were not found in all regions of the country. More than 90 percent was in Russia, east of the Ural Mountains. During the first Five-Year Plan, the Kuzbass (or Kuznetsk Basin, southeast of Novosibirsk) was put into production. This unique basin had huge deposits of high-grade coal in very thick and accessible coal seams. Soviet geologists also reported that the Tunguska Basin and the Lena Basin, both in north-central Siberia, contained the world's largest untapped coalfields.

Recognizing the significance of the Soviet Union's vast reserves of oil and natural gas, Soviet planners decided that coal should no longer be the nation's most important energy source. In the late 1960s, 1970s, and 1980s, development focused on new oil and natural gas fields and on pipelines. In the 1980s, Soviet geologists reported that the Soviet Union contained 25 percent of the world's oil reserves. From tsarist times until the late 1940s, the Baku Field on the western shore of the Caspian Sea was the leading oil field. In the late 1950s, the Volga-Ural Field in Russia became the Soviet Union's largest producer. In the 1980s, the West Siberian Field became the leading source of Soviet oil. Oil had been discovered in the West Siberian Field (Tyumen-Surgut area) in the late 1950s. Commercial production began in the mid-1960s. Development of this vast oil field in the 1980s was one of the most spectacular achievements of Soviet industry after World War II. Oil reserves in the Lena Field are limited. The Lena area is also very remote. There are large offshore deposits in the Arctic region beneath the Sea of Okhotsk (primarily between Sakhalin Island and the Kamchatka Peninsula). Increased oil and natural gas production led to a rapid expansion of the Soviet Union's petrochemical industry. In 1991, the Soviet Union was the world's largest coal and oil producer.

Russia, in the early years of the twenty-first century, is selfsufficient in energy and is a leading world producer of energy fuels. Russian oil and natural gas output equaled about 20 percent of the world's total in the 1990s. Today, Russia exports more than 35 percent of all oil and natural gas extracted. In contrast, the United States imports nearly 25 percent of the energy it needs. The United States produces about 30 percent less oil than Russia and 20 percent less natural gas.

Energy, primarily oil and natural gas, represents Russia's largest source of revenue. As the second-largest exporter of oil, after Saudi Arabia, Russia has managed to fill its coffer with hard currency in recent years. In 2004, for example, oil companies produced 9.27 million barrels per day, of which 6.67 million barrels were exported. Unexpectedly high oil and natural gas prices contributed to a vast budget surplus allowing the government to create an account that has grown to billions of dollars. This money, called a stabilization fund, is used to repay foreign debt, which is still more than 100 billion in U.S. dollars, and for various reconstruction projects. By the end of 2006, it is expected to reach $75 billion. Financial benefits from high energy prices have helped the country to establish the world's fourth-largest gold and foreign currency reserves.

Serious issues exist, however, in regard to the energy sector. First, Russia's economy is overwhelmingly dependent upon oil and natural gas revenues. Were a major decrease in production to occur, or if energy prices dropped sharply, the whole economy could suffer serious damage. Second, most of the energy infrastructure suffered from years of inadequate maintenance and requires modernization. Finally, and seemingly paradoxical, the stabilization fund must be carefully, and slowly, distributed or otherwise Russia may experience yet another economic crisis.

One would imagine that more money spent means that life will be better for Russians, but the economic reality is often much different. If the government opens the fund in order to promote public projects (such as infrastructure and transportation) and does that rapidly, sudden inflation will be triggered. Such conditions ultimately would lead to economic destabilization and a further decrease in the quality of life of ordinary Russians.

Mineral resources vary greatly from one region to another within Russia. Iron ore is widely distributed. The most important deposits are in the Ural Mountains,within the Kuzbass (Kuznetsk Basin) of southwestern Siberia, and at Tula (south of Moscow). Russia has the largest iron ore reserves in the world. Chrome ore, used in the manufacture of metals, is mined in the Ural Mountains.

Nickel comes from the town of Nikel in the Kola Peninsula (south of Murmansk), from the southern Ural Mountains, and from Norilsk (at the mouth of the Yenisey River in Siberia). Russia ranks second in the world in the production of nickel. Nonferrous other metals are also plentiful. Copper is mined at numerous sites in the Ural Mountains and in eastern Siberia. Significant deposits of bauxite (aluminum) are found in the Kola Peninsula, southwest of St. Petersburg, and in the northern Ural Mountains. Gold and magnesium are mined in Siberia and the Far East. Russia was once the world's second-largest producer of gold but now is the fifth largest. The location of resources and their climates hinder Russia from increasing the production of oil, natural gas, and minerals. Most of Russia's fuel reserves and mineral reserves are located in Siberia and the Far East. These regions have cold, harsh climates. They are also far from major market centers.