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Is Russia's economy running out of gas?

With Europe finding new sources of natural gas, and Asian economies looking at Canadian markets, the Russian economy is starting to retreat behind the former Iron Curtain, Graeber writes.

By Daniel J. GraeberGuest blogger / September 26, 2013

Russia's President Vladimir Putin arrives to attend the Enniskillen G8 summit, at Belfast International Airport, Northern Ireland in June.

Peter Muhly/Reuters/File

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The head of the World Bank in Russia said Wednesday he was alarmed by the slowdown in the Russian economy.  The bank said the Russian economy was slow to emerge from a recession still gripping parts of the eurozone despite recovery elsewhere in the world. It said the government's investment activities slowed down in part because of the completion of the Nord Stream natural gas pipeline through the Baltic Sea. Its dependence on oil and natural gas exports, meanwhile, exposed the Russian economy to additional risks. With Europe finding new sources of natural gas, and Asian economies looking at Canadian markets, the Russian economy is starting to retreat behind the former Iron Curtain.

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The World Bank said it revised its growth projection for the Russian economy from its May estimate of 2.3 percent to 1.8 percent for 2013.

"The economy appears to be growing close to its capacity, constrained by feeble investment activities and a tight labor market," Birgit Hansl, World Bank coordinator for economic policy in Russia, said in a statement. (Related article: Why Canada's Oil Future isn't Going South)

The report said Russia's dependence on oil and natural gas exports left its economy exposed to volatility on the global commodity market. Major oil price indices continued a steady decline on word Libyan oil production was on the rebound. Natural gas prices on the New York Mercantile Exchange, meanwhile, are near their lowest level since December. The World Bank said trade in global markets did not provide the expected level of relief to the Russian economy. 

"The recent economic tendencies in Russia are quite alarming," Mikhail Rutkovsky, head of the World Bank in Russia, said.

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