Analysis of the Development of the Subsoil Use System in Russia (On the Necessity of Hardening Institutional Conditions)

Abstract

A peculiarity of the subsoil use system that is currently being formed in Russia is the neglect of development of complementary institutions such as norms and rules of the subsoil use or conflict resolution procedures. Instead, soft institutional conditions are emerging that allow subsoil-using companies to manipulate business rules and extract quasi-rents. As a result the property rights assignment process in the petroleum industry is biased towards the private form of ownership to the detriment of its public form. This also undermines the due process of key capital assets’ reproduction including reserves development.