Vladimir Putin

The re-election of Vladimir Vladimirovich Putin last week means even more crony capitalism in Russia.

With Putin in power nothing will change.

In fact, it's laughable that Russia is still even considered among the group of the world's most glamorous emerging markets - otherwise known as the "BRICs."

The truth is Russian prosperity will last only as long as the price of oil keeps rising by 25% a year, and not one second longer.

Of course, that hasn't stopped one of Russia's boosters, Moscow broker Prosperity Capital Management from claiming that Russia is the third fastest growing economy in the world.

But since Russian growth is only expected to be 3.2% in 2012, according to The Economist, Prosperity's definition of the word "world" is as little suspect.

Presumably Prosperity is only including the wealthy countries, most of which are much richer than Russia and should be expected to grow more slowly.

The Economist actually ranks Russia 18th of the 58 countries it surveys, based on projected 2012 growth rate.

That looks reasonably impressive, until you realize that this modest growth is being achieved in a period of sharply rising oil prices. Oil is Russia's largest export.

After all, one of the countries that beat Russia, with a 4.2% growth rate, is Venezuela. Needless to say, few people outside Hugo Chavez' immediate family would claim that country was economically well run.

Apart from corruption and cronyism, Russia's main problem is its state budget, which depends crucially on oil revenues and hence on the oil price.

Before 2008, its budget was balanced at an oil price of around $90 per barrel, already up from a break-even of $30 per barrel earlier in the decade. Now according to the Finance Ministry as reported in Atlantic Monthly, today the oil price must be $117 per barrel for Russia to balance its budget.

In reality, since Putin announced $260 billion of spending programs during the election, plus a defense program totaling $763 billion, the oil price needed for balancing next year's budget is likely to be around $140 a barrel, rising continually thereafter.

Needless to say, the rest of the world is likely to be tipped into recession by any oil price that will make Russian budget managers happy.

In terms of oil, Russia is playing a game that will never add up.