Russia has been producing and exporting oil and gas at maximum capacity for the past decade. It is consistently the world's largest producer and exporter of natural gas, and competes with Saudi Arabia to be the world's top oil producer. The petroleum sector employs less than 3 percent of the working population, but contributed 28 percent of Russia's budgetary revenue in 2010. As a whole, Russia's petroleum and mining industries made up 22 percent of gross domestic product (GDP) and 64 percent of merchandise exports in 2011.

Russia's Performance on the Resource Governance Index

Russia received a "partial" score of 56, ranking 22nd out of 58 countries, despite a "failing" score on the Enabling Environment component.

Institutional & Legal Setting (Rank: 38th/58, Score: 57/100)learn more

Russia's ineffective legal framework leaves room for arbitrary decision-making in the licensing process, resulting in a "partial" score of 57.

Petroleum and mineral legislation is publicly available, but laws are often ambiguous, outdated, and marred by multiple amendments. Rosnedra, an agency within the Natural Resources Ministry, grants licenses through a mixture of auctions, direct negotiations, and transfers of strategic deposits to state-owned companies. Although nominally all companies have equal access to resources, preference is given to those owned by the state; private companies often have to engage in lobbying efforts to obtain licenses.

Petroleum companies operate under a variety of fiscal arrangements, including production-sharing agreements and joint ventures with state companies. Taxes are centrally collected by the Federal Tax Service and managed by the Finance Ministry; all revenues are deposited in the treasury.

Environmental impact assessments are required, but environmental groups suspected of acting under foreign influence are regularly excluded from the process. Assessments are easily politicized, and there is no requirement to publish the results. Russian law requires disclosure of information, but an exception for "state secrets" is widely applied to information on the oil and gas industries.

Reporting Practices (Rank: 20th/58, Score: 60/100)learn more

Russia received a "partial" score of 60, reflecting a lack of contract transparency and incomplete government reporting on most aspects of the extractive sector.

The Finance Ministry publishes poorly organized annual reports on prices, export values, production stream values, revenues from production-sharing agreements, and petroleum sector taxes. The Federal Subsoil Resources Management Agency regulates the industry but produces no regular reports. The central bank publishes more detailed information on monetary policy, including petroleum production volumes, prices, and export values. The Federal Statistical Agency of the Natural Resources Ministry issues annual reports on reserves, production volumes, exports, and special taxes.

Safeguards & Quality Controls (Rank: 24th/58, Score: 62/100)learn more

Despite significant audit requirements, the government does not actively oversee petroleum licensing or the natural resource fund, resulting in a "partial" score of 62.

Legal provisions intended to limit the discretionary powers of licensing officials are often ignored, making the system vulnerable to corruption. Similarly, legal mechanisms to appeal licensing decisions are rarely effective. Lawmakers may launch ad hoc investigations of the process, which sometimes bring abuses to light, but such inquiries are also susceptible to politicization.

The national auditor reviews oil and gas revenues, but lacks true independence. Audit reports are presented to the legislature, but the special committee on natural resource revenues rarely provides effective scrutiny.

Enabling Environment (Rank: 26th/58, Score: 39/100)learn more

Despite a relatively high global ranking on budgetary transparency, Russia performed poorly on measurements of corruption control, democratic accountability and the rule of law, receiving a "failing" score of 39.

State-Owned Companies (Rank: 5th/45, Score: 92/100)learn more

The government owns controlling stakes in Gazprom, the largest gas producer in the world, and Rosneft, Russia's largest oil producer. Both companies are managed as private corporations and comply with national reporting and governance requirements. They publish comprehensive audited reports and regularly disclose industry information and revenue data. Nevertheless, opposition leaders have raised concerns about corruption and opacity. In a recent case, Rosneft was challenged in court when it refused to disclose its management protocols and information about secretive contract negotiations with China.

Natural Resource Funds (Rank: 13th/23, Score: 46/100)learn more

In 2008 the Stabilization Fund was divided into the Russian Reserve Fund and the National Wealth Fund. The funds are designed to conserve resource wealth by receiving petroleum revenues exceeding 3.7 percent of GDP. There are rules for deposits and expenditures. In 2010 Russia suspended most reporting on the funds' finances, citing emergency powers to use the funds to cover national expenses during the global economic crisis. Only basic information on monthly financial balances is currently available. Reviews by the state auditing agency have also been suspended.

Subnational Transfers (Rank: 15th/30, Score: 64/100)learn more

Local governments in petroleum-producing regions receive a portion of resource revenues by collecting taxes directly from extractive companies. The central government also sends about half of federal oil and gas revenues to regional governments, but these transfers are based on need rather than local contributions to production. The central government publishes only aggregated data on the payments; regional governments do not report the amounts they receive.

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