With the cost of oil regularly breaking $70 a barrel, the chorus of voices warning of the negative impact on economic growth is getting louder by the day.

The International Monetary Fund has already estimated that higher crude prices are likely to contribute to a 0.8 per cent fall in global economic output this year.

And the International Energy Agency recently gave warning that the world economy "has yet to feel the full force of this year’s increase" in oil prices.

But while increasing energy costs are undoubtedly proving a drag on most of the global economy it is a different story for Russia, the world's second largest exporter of oil.

In 1998 Russia’s economy was in crisis: GDP was shrinking at a rate of 5 per cent a year; the stock market was falling through the floor; inflation was rocketing towards triple figures; and a partial default on government debt led to a 45 per cent devaluation of the rouble by the end of the year.

But just seven years later Russia's finances are in rude health and output is expanding at a rate to rival the fastest-growing economies of the world.

In a recent research briefing, Irina Topa-Serry, an investment strategist at AXA Investment Managers, noted that Russia's economic malaise in the late 1990s coincided with the oil price falling to $12 a barrel. And she argues that the recent turnaround is a direct result of the now spiralling price of crude.

"The country’s economic growth has always been intimately linked to oil price trends. Today, black gold accounts for 55 per cent of Russia’s exports," she says. "Moreover, Russia picks up additional market share with each passing year: 12 per cent of world oil production in 2004, compared with 9 per cent in 1997."

The statistics appear to support her argument. GDP growth was almost 6 per cent last year and is expected to be 4.5 per cent this year, with most of the gain coming from investments in the oil industry.

Meanwhile, surging oil exports mean Russia’s balance of payments surplus is a massive 12.5 per cent of GDP. The oil boom has also given the federal government a budget surplus of 7 per cent of GDP. The country’s foreign exchange reserves are now at $146 billion, considerably more than its external debt stock of $100 billion.

These positive figures led Standard & Poors, the respected credit ratings agency, to upgrade Russian sovereign debt to "investment grade". Russia has even started the early repayment of its bilateral or "Paris Club" debt with a $15 billion deposit just a fortnight ago.

Alia Yousuf, an emerging markets portfolio manager at First State, is in no doubt that high oil prices have salvaged the Russian economy.

"Russia’s renaissance is certainly not down to economic reforms because there have not really been any. The banking system is very fragile and the government does not seem to want to address the pensions problem," she says.

"Private consumption has only started growing recently while public spending has remained constant – so without oil revenues Russia would be in trouble."

Ms Yousuf adds that with oil revenues running at record levels, President Putin has missed a good opportunity to diversify the economy and implement the structural reforms the country desperately needs.

"Russia is not a civil society - it suffers from growing income inequality, corruption, the media is not sufficiently free and property rights are not good.

"Putin is in a very powerful position so it is sad and disappointing that he is not implementing the reforms that would increase the country’s growth potential."

Ms Topa-Serry agrees. "Being blessed with oil gives Russia a trump card over its emerging rivals over the medium term. But public policymakers must embark on the road to structural reform if the Russian economy is to develop."