Claim in 2021: Putin is “sitting on top of an economy that has nuclear weapons and oil wells and nothing else.”
Source of the claim: U.S. President Joe Biden (July 2021)
In making his statement, President Joe Biden built on a claim by former U.S. President Barack Obama, who said in 2016 that Russia “doesn’t produce anything that anybody wants to buy except oil and gas and arms.” Biden’s claim is more hyperbolic than his ex-boss’s, since it ignores two major Russian exports, conventional arms and natural gas (only 12.8% of which came from oil wells in 2019, according to Energy Ministry figures). Moreover, while Russia does have the largest stockpile of nuclear weapons in the world, how much they contribute to the country’s GDP is difficult to calculate, given the increasing secrecy shrouding the Russian nuclear arsenal.
It’s worth noting that Biden made the comment about Russia’s economy not in a well-researched, tightly edited speech on the topic but during wide-ranging remarks at the Office of the Director of National Intelligence, full of jokes (“my very close friend, Vladimir Putin. (Laughter.)” and self-interruption (“their economy is—what?—the eighth smallest in the world now—largest in the world?”). So, there’s a chance the U.S. president, in fact, knows that Russia’s economy is not as bare-boned as oil and nukes. But his words offer us a good opportunity to dig into the claim, variations of which regularly pop up in comments by U.S. policymakers and other influential figures.
In 2020, Russia had the world’s 13th-largest economy with a GDP of some $1.4 trillion and exports worth $431.5 billion in inflation-adjusted constant 2015 U.S. dollars, according to World Bank data;1 and the country ranked sixth in the world when GDP2 was further adjusted for purchasing power parities. Hydrocarbons account for a substantial share of that success, if not of GDP itself: In 2020, with global demand falling due to the pandemic, oil and gas accounted for 15.2% of Russian GDP, down from 19.2% in 2019 and 21.1% in 2018, according to Pavel Maximov, a deputy department head at the Federal State Statistics Service, known as Rosstat. (The World Bank puts the percentages even lower.3)
The role of hydrocarbons is much more significant, however, for Russia’s federal budget4 and exports. In 2020, about 28% of total budget revenue came from oil and gas, based on Finance Ministry figures, down from nearly 39.3% in 2019 and close to 46.4% in 2018; indeed, the ministry’s revenue data is broken into two main categories: “oil-and-gas revenue” and “non-oil-and-gas revenue.” In terms of exports, in 2019 petroleum products made up about 52%-53% by value, according to the World Bank and the Observatory of Economic Complexity (OEC).
Nonetheless, other goods and services also contribute significantly to Russia’s economy:
Leading producer of nuclear reactors and related services: Russian state-owned nuclear technologies company Rosatom says it holds “first place in terms of the number of simultaneously implemented nuclear reactor construction projects” in the world, with total foreign orders worth over $138 billion5 as of 2020—the most of any nuclear company in the world, according to German broadcaster DW. As of August 2021, the World Nuclear Association counted 38 active nuclear reactor projects in Rosatom’s portfolio, spanning 11 countries: 10 operating, 11 under construction, 10 under contract and 7 in the planning stage. Russia is likewise actively involved in producing fuels6 for use in nuclear power reactors: As DW points out, the country is responsible for some 43% of uranium enrichment worldwide, as well as 20% of uranium conversion and 8% of uranium production. A Rosatom subsidiary, Atomflot, operates what it calls the world’s largest, most powerful icebreaker, the Arktika, part of Russia’s “strategic task” of “ensuring regular year-round and safe navigation through the entire Northern Sea Route,” according to a 2020 statement by a senior Rosatom official.
World’s second largest exporter of conventional arms in 2016-2020: According to the Stockholm International Peace Research Institute (SIPRI), from 2016 to 2020 Russia delivered major conventional arms to 45 states and accounted for 20% of total global arms exports, second only to the United States. Though Russia has lost market share since 2011-2015 by SIPRI’s count, two Russian arms-producing and military services companies—manufacturer of air defense systems Almaz Antey and United Shipbuilding Corp—are on SIPRI’s latest list of Top 25 Arms Producing Companies, together accounting for about $13.9 billion in arms sales in 2019.7 In 2020, Russia’s exports of arms and military technologies rose to more than $15 billion, TASS quoted Russian officials as saying, with a portfolio of export orders worth over $50 billion.8
NASA’s sole means of launching American astronauts to space from 2011 to 2020: For a decade, until 2020, NASA relied exclusively on Russian spacecraft to transport astronauts to and from the International Space Station (ISS) as a result of terminating its U.S. Shuttle program in 2011. Although the recently demonstrated success of Space X’s Crew Dragon provides NASA with a new vehicle for transporting crew, the space agency still signed a contract in March 2021 to fly an American astronaut to the ISS on the Russian Soyuz MS-18 the following month. In this case, NASA did not pay Russia directly, working instead through a commercial U.S. intermediary, Houston-based Axiom Space, that has been promised a seat on a future U.S. flight; it is not publicly known how much Axiom paid Roscosmos, but, earlier, the cost of Soyuz MS-18 seats had reportedly risen as high as $90 million each.9
Supplier of engines critical to U.S. national security and space programs from 2000 to present: In 2000, an Atlas III rocket launched into space from Cape Canaveral with an RD-180 engine designed and built in Russia, marking the first time a Russian engine had powered an American rocket. Almost 20 years later, in 2019, Boeing’s CST-100 Starliner, one of the Soyuz crew craft’s American rivals, was launched by an Atlas V rocket (a successor to the Atlas III) that still relies on Russian RD-180s as its main engine. This rocket also launches critical U.S. national security payloads to space. In a recent article for NASASpaceFlight.com, author William Graham wrote that the “RD-180 has been an extremely reliable engine for the Atlas family, powering all 87 Atlas V missions to date—as well as six earlier Atlas III rockets—without any mission-affecting anomalies.” The use of RD-180s is expected to continue through 2022 after a special amendment to the 2015 U.S. National Defense Authorization Act allowed the use of 18 more rocket engines “designed or manufactured” in Russia, instead of banning them across the board, as the U.S. tries to end its reliance on Russian-produced space technologies. In addition, Russia has had other high-tech achievements in the space sector, including those that generate income: Though significantly diminished from a decade ago, the number of Russia’s space launches ranked third in the world in 2020, with 17 successful launches and no failures, according to Spaceflight Now; in 2012, Russia’s Electro-L satellite produced what Gizmodo magazine described as the highest-resolution, “definitive photograph of planet Earth.”
World’s largest exporter of wheat in 2020-2021: Between July 2020 and June 2021, according to the U.S. Department of Agriculture, Russia exported 38.5 million metric tons of wheat and wheat products, more than any other country in the world and the European Union as a whole, with prices toward the end of that period rising above $300 per metric ton.
Major coal producer: Russia is the world’s sixth largest coal producer by volume, according to the International Energy Association, with 2019 exports of coal briquettes valued at $17.6 billion by the OEC’s count. (OEC figures are in current U.S. dollars.)
Major miner and exporter of metals and gems: In 2019, Russia’s exports of metals, precious metals, gems and related goods totaled $61 billion, in the OEC’s estimate. According to global mining data compiled by the Austrian government, Russia is the world’s fifth largest producer of iron, second largest producer of aluminum, gold and platinum, sixth largest of copper, third of nickel and the world’s top producer of diamonds.
Home to major domestic players in the services sector: The service industry accounts for over 50% of Russia’s GDP, according to data compiled by Statista and others. While oil-and-gas services may contribute to this number, Rosstat calculations suggest they are not the lion’s share. Major Russian taxpayers hail from sectors including finance, retail, telecommunications, electricity and transportation. For example, Russia’s largest bank, state-controlled but internationally traded Sberbank, did not make it into the top 50 of the world’s largest banks as ranked by S&P in 2020 but “plays a significant role in the Russian economy,” in the U.N.’s assessment. In both 2016 and 2020, it was the only non-oil-and-gas-related company among Russia’s top five taxpayers, according to Russian media. Another example is state-controlled Russian Railways—a major contributor both to state coffers and to the economy overall, with railroads in 2020 accounting for 87%10 of domestically shipped goods (not counting pipeline-transported oil and gas), according to Rosstat data.
In addition to the major contributors to Russia’s economy listed above, the country has generated some commercially successful innovations in digital services—including at least two internationally popular ride-hailing apps, InDriver and Yandex Taxi, which were among the world’s most downloaded ride-sharing/taxi apps in early 2020, according to market analyst SensorTower. While technological innovation does not necessarily translate into economic success, it seems safe to say that, overall, Russia’s economy stands on more pillars than just “nuclear weapons and oil wells.”
- Earlier measurements, made in constant 2010 dollars and available in the World Bank databank until late October 2021, placed Russia’s GDP for 2020 at No. 10 globally, totaling some $1.7 trillion, with exports worth $544.1 billion.
- Over $3.9 trillion in constant 2017 international dollars.
- The World Bank gives data for “oil rents,” “natural gas rents” and “mineral rents”—each as “% of GDP”; the totals for the three were 12.4% in 2019, 14.4% in 2018 and 9.7% in 2017.The bank estimates such rents by calculating “the difference between the price of a commodity and the average cost of producing it.” Rosstat’s Maximov argues in his May 2021 report that this methodology reflects only part of oil and gas revenue; his calculations, meanwhile, try to account for value added in the sector, looking at both producers and a “secondary subsector” of goods and services related to exploration, refining, transport and retail.
- The federal budget officially includes Russia’s two state-owned investment funds, the National Wealth Fund and the Reserve Fund, the latter of which is funded through the production and export of oil and gas. For the National Wealth Fund, oil prices of $70 a barrel result in an inflow of about $48 billion a year, while $80 a barrel brings in as much as $70 billion a year, a lead economist at investment consultancy Renaissance Capital recently told The Bell.
- It may be difficult to pin down this sector’s precise role in Russia’s economy: For one thing, nuclear reactor projects take many years to complete; for another, Russia’s construction of nuclear reactors abroad includes generous state financing for client countries and, in some cases, Russian partial ownership of the completed project—as with the Akkuyu nuclear power plant in Turkey. Nonetheless, Rosatom has been one of Russia’s top taxpayers in recent years, including in 2016 and 2020, according to Russian media.
- The World Nuclear Association writes that at the start of 2015 various forms of nuclear fuel accounted for about one-third of the dollar value of Rosatom’s portfolio of foreign orders, which then stood at $101.4 billion.
- Putin said in December 2019 that Russia’s exports of arms and military technologies for the year had totaled $13 billion. Here it is worth stating the obvious—that different methodologies can produce different figures. It is also worth noting that while SIPRI has been seeing a downward trend in Russian arms sales, Putin told senior officials that 2019 arms exports were $2 billion higher than the previous year’s.
- Andrew Bowen, an analyst with the Congressional Research Service, notes in an October 2021 report on Russian arms sales that official Russian statements on the topic “are often contradictory or unsupported.”
- Axiom’s CEO, asked about the prices paid by space tourists for a seat, said “tens of millions” of dollars is a figure he “wouldn’t argue with.”
- Calculated in tons per kilometer.