Russia is the world's second largest producer and exporter of oil. It is also the largest producer and exporter of natural gas. At times of low world market prices for oil and natural gas, such as 1986–88 (for natural gas 1987–89) and 1998, it experiences economic crises. The balance of payments crisis caused by the low energy prices during the first of these periods contributed to the failure of Gorbachev's perestroika and the collapse of the USSR. The second period of low energy prices was an element in the macroeconomic crisis of 1998 when the exchange rate fell sharply, the government defaulted on its internal debt and was forced to reschedule its external debt, many Russian entities defaulted on their external commitments, and real wages and living standards fell sharply. When prices are high, as in 2004–05, it enjoys a bonanza. The budget is in surplus, public sector salaries are increased and paid on time, there is an enormous surplus on the current account of the balance of payments, foreign exchange reserves shoot up, and living standards rise as the population consumes imported consumer goods and foreign holidays.

Any visitor to Moscow or St. Petersburg in 2005 might have taken it for granted that for Russia high world market prices for energy are an unmixed blessing.