Russia's Economy Is Tiny But It Packs A Punch Due To Oil And Gas

Russia isn't a superpower, at least not when it comes to the global economy. Its gross domestic product (GDP) puts it as only the 12th largest economy in the world according to the International Monetary Fund (IMF), about 25% smaller than Italy and more than 20% smaller than Canada, two countries with a fraction of its population, Chris Isidore reported for CNN Business.

Photo Insert: Gazprom is one of the world's biggest natural gas companies and is partly state-owned.

So, in the face of its invasion of Ukraine, why is the West reluctant to hit it with the full range of available economic sanctions as has been done with other rogue states? The answer is simple: Oil and natural gas.

Russia is the world's largest exporter of natural gas and one of the largest exporters of oil. Some experts say cutting off those exports could drive up the prices of those commodities as much as 50% by some estimates, far more than far more modest single-digit spikes in prices experienced this past week.

Russia also has a rich supply of other natural resources, including lumber and many minerals. It is the second-largest producer of titanium, which is crucial for aircraft production, and Ukraine is the fifth-largest producer of the metal.

But Russia is not a huge market for western nations' exports. The US exported only $6.4 billion in goods to Russia last year, according to Commerce Department data, which may sound like a lot but is actually less than one-fifth of the exports going to tiny Belgium. By comparison, US goods exported to China last year came to $151 billion.

"Russia is incredibly unimportant in the global economy except for oil and gas," Jason Furman, who chaired the Council of Economic Advisers in the Obama administration, told the New York Times this week. "It's basically a big gas station."

Right now European countries, which are far more dependent on Russian oil and natural gas, are not willing to take that step, said Gary Clyde Hufauer, senior fellow at the Peterson Institute of International Economics, an advocate of tougher measures against Russia's energy exports.

"Europe would have had to resort to price controls and rationing," he said. "That would be very unpopular. They weren't willing to pay the price."

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