Russia: General

General

The Russian Federation inherited a Marxist-Leninist command economy from the Union of Soviet Socialist Republics (USSR). Chief among the characteristics of the economy was an almost total absence of private productive capital. All enterprises were owned by the state, with each person receiving a salary for his or her efforts. Farmland was also almost entirely state-owned: 95% of all farmland was either state-owned or collectivized. All economic planning was done by government officials based in Moscow. Market forces played no part in their decision-making. The workforce was estimated at about 70 million persons in 1989.

During the Gorbachev era many of the basic elements of the Soviet command economy were weakened. The policies of glasnost and perestroika loosened social controls. Limited private ownership of businesses and land was granted, and prices were allowed to rise in accordance with market forces.

Following the failed August Coup and independence, the assets of the Communist party were seized and a new era of a market-based economy was proclaimed. Companies were given permission to become private entities, except for those enterprises employing over 10,000 workers or providing gas, oil, or pharmaceuticals. In 1991, Russia joined with other countries of the Commonwealth of Independent States (CIS) in a loose affiliation aimed in part at establishing a coordinated economic policy. The rapid change from a severely controlled system to the beginnings of a market economy created chaotic conditions; some Russians profited greatly, but most suffered economic hardship as privatization and other economic reforms progressed. By late 1997, inflation appeared to have been brought under control and industrial production had begun to slowly increase.

The country was once again plunged into economic upheaval, however, when the ruble plummeted in May, 1998, following a crisis in Asian financial markets. Unable to pay its foreign debts, Russia struggled to restructure loans and keep its new financial services sector from collapsing. By 2001, however, the Russian economy recovered and benefited from economic reforms and a rise in oil prices, and raw material exports, especially, oil and natural gas, have become more important economically since then. In July, 2003, a law permitting the sale of farmland was passed by the parliament; foreigners are banned from purchasing agricultural land but may lease it. Privatization of state-owned companies has continued, but more slowly, and under President Putin the government intervened more freely in economic affairs, for example, to solidify state ownership of Russia's energy industry. Because of this, foreign investment in the economy has remained relatively low. In 2006 the ruble became fully convertible when the government ended restrictions on currency transactions, and oil revenues enabled the government to pay off some $23 billion in foreign debt ahead of schedule.

The Russian Federation possesses a well-developed road and rail network in its European third, a more limited network in Siberia, and still fewer roads and rail lines in the Russian Far East. Barges on the vast network of inland waterways can carry a huge amount of traffic. In E Siberia, ships carry virtually all heavy freight. Most of Russia's cities and towns are connected by air. Exports are dominated by natural resources, particularly oil, natural gas, nickel, and timber; chemicals and military manufactures are also important exports. Imports include machinery and equipment, consumer goods, medicines, meat, sugar, and metal products. The main trading partners are Germany, Ukraine, China, and Italy.

Physioeconomically, the Russian Federation may be conveniently divided into 9 major regions: the Central European Region, the North and Northwest European Region, the Volga Region, the North Caucasus, the Ural Region, Western Siberia, Eastern Siberia, Northern and Northwestern Siberia, and the Russian Far East.

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