Roubini: It Would Take a Crisis to Change Russia

It would take a sharp fall in the price of oil or another crisis to change Russia's economic system for the long term, Nouriel Roubini, economist and New York University Professor, told CNBC Thursday.

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Once considered among the fastest-developing strong emerging markets, Russia was put on an equal footing with Brazil, China and India by Goldman Sachs economist Jim O'Neill who coined the acronym "BRIC" for the four countries.

But last year the country's economy contracted by more than 8 percent, as revenues from energy exports dwindled because of the fall in oil prices.

Recovery is around the corner, but long term Russia faces the same problems, Roubini said.

"Last year was a disaster, a collapse of economic activity, recession, now there's the beginning of recovery, that's the good news," he said. "The main trouble with Russia is long-term."

Russia's economy, which had been worth $1.7 trillion in 2008, fell to $1.2 trillion because of the effects of the crisis, while China's economy grew by around 9 percent last year.

Critics say this is because of the country's over-reliance on exports of oil and gas and little progress in areas such as manufacturing, technology or infrastructure.

"I think it's a political economy problem, there are vested interest that are essentially extracting rents through corruption and otherwise from these high oil revenues and gas revenues," Roubini said.

"Its not going to change until there's another shock like either a crisis or a collapse in oil prices or a political shift that's going to lead to a radical change in this basic economic regime," he added.

But as oil prices are likely to remain high, there does not seem to be a motivation for change "for the foreseeable future" and existing politicians are not strong enough to initiate reforms, according to Roubini.

"I don't think they have yet the political power to trigger the political change that's going to go against these vested interests," he said.

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