Economy of Russia

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Economy of Russia
Kutuzov Avenue.jpg
Rank 8th (nominal) / 6th (PPP)
Currency Russian ruble (RUB)
calendar year
Trade organizations
WTO, CIS, APEC, EURASEC, G-20, G8 and others

$2.118 trillion (2013) (nominal; 8th)[1][2]
$2.556 trillion (2013) (PPP) (IMF)[3]

$2.022 trillion (2012-2014) (nominal; 8th)[4]
$3.386 trillion (2012-2014) (PPP) (WB) [5]
GDP growth
1.3% (2013) [6]
GDP per capita

$14,818 (2013) (nominal)[3]
$17,884 (2013) (PPP) (IMF)[3]

$14,037 (2012-2014) (nominal)[7]
$23,589 (2012-2014) (PPP) (WB)[8]
GDP by sector
agriculture: 4.4% industry: 37.6% services: 58% (2012 est.) [9]
6.5% (2013) [10]
Population below poverty line
11.2% (Rosstat March 2013 on 2012) [11]
Labour force
75.5 million (quarter I, 2013) [12]
Labour force by occupation
Agriculture: 4.4% Industry: 37.6% Services: 58% (2012 est.)
Unemployment 4.9% (May 2014) [13]
Average gross salary
33,280 Rubles (May 2014) [14]
Main industries
complete range of mining and extractive industries producing coal, oil, gas, chemicals, and metals; all forms of machine building from rolling mills to high-performance aircraft and space vehicles; defense industries including radar, missile production, and advanced electronic components, shipbuilding; road and rail transportation equipment; communications equipment; agricultural machinery, tractors, and construction equipment; electric power generating and transmitting equipment; medical and scientific instruments; consumer durables, textiles, foodstuffs, handicrafts
92nd (2013) [15]
Exports $542.5 billion (2012 est.) [16]
Export goods
petroleum and petroleum products, natural gas, metals, wood and wood products, chemicals, and a wide variety of civilian and military manufactures
Main export partners
 Netherlands 14.6%
 People's Republic of China 6.8%
 Germany 6.8%
 Italy 6.2%
 Turkey 5.2%
 Ukraine 5.2%
 Belarus 4.7% (2012 est.)[17]
Imports $358.1 billion (2012 est.) [18]
Import goods
machinery, vehicles, pharmaceutical products, plastic, semi-finished metal products, meat, fruits and nuts, optical and medical instruments, iron, steel
Main import partners
 People's Republic of China 16.6%
 Germany 12.2%
 Ukraine 5.7%
 Japan 5%
 United States 4.9%
 France 4.4%
 Italy 4.3% (2012 est.)[19]
$455.2 billion (31 December 2012 est.)
Public finances
7.9% of GDP (2013 est.)[20]
Revenues $469 billion (2012 est.)
Expenses $414 billion (2012 est.)
Foreign reserves
$467.2 billion (1 June 2014)[24]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.
GDP per capita (PPP) in 2009 - 2013,[25] showing countries who have a higher or lower GDP per capita than Russia. Despite being considered as a developing country according to some sources, Russia has one of the highest per-capita incomes in Eastern Europe.[citation needed]

Since 2013, the economy of Russia has been the eighth-largest in the world[1][2] and the sixth/ fifth largest by purchasing power parity (PPP).[3]

The Russian economy is currently labeled as a high-income economy and by extension, as a developed country by the World Bank.[26] The country has an abundance of natural resources, including timber, precious metals, and particularly fossil fuels (oil, natural gas, and coal) that can be developed without the constraint of OPEC production quotas and other rules (Russia is not an OPEC member).[27]

Since the collapse of the Soviet Union, Russia has undergone significant changes, moving from a centrally planned economy to a more market-based and globally integrated economy. Economic reforms of the shock therapy in the late 1980s and during 1990s privatized many sectors of industry and agriculture, with notable exceptions in the energy and defense-related sectors. Nonetheless, the rapid privatization process, including a much criticized "loans-for-shares" scheme that turned over major state-owned firms to politically connected "oligarchs", has left equity ownership highly concentrated. As of 2011, Russia's capital, Moscow, had the highest number of billionaires of any city in the world.[28][29]

In late 2008 and early 2009, Russia experienced the first recession after ten years of growth, until stable growth resumed in late 2009.[30][31] Despite the deep but brief recession, the economy has not been as seriously affected by the global financial crisis, largely because of the integration of short-term macroeconomic policies that helped the economy survive, as well as low levels of sovereign debt. The World Bank predicts growth rates of 1.1 and 1.2% of GDP in 2014 and 2015, respectively.[32] These weak figures are a consequence of continued depressed domestic demand and low investment activities. The World Bank's analysis did not take into account any assumed scenario relating to the ongoing Russia-Ukraine crisis. However, the related events are considered to have led to political risks that may entail further negative economic consequences.


By the 1970s the Soviet Union entered the era of stagnation. The complex demands of the modern economy and inflexible administration overwhelmed and constrained the central planners. The volume of decisions facing planners in Moscow became overwhelming. The cumbersome procedures for bureaucratic administration foreclosed the free communication and flexible response required at the enterprise level for dealing with worker alienation, innovation, customers, and suppliers. During 1975–85 coruption and data fiddling became common practice among bureaucracy to report satisfied targets and quotas thus entrenching the crisis. Since 1986 Mikhail Gorbachev attempted to address the economic issue by moving towards a market-oriented socialist economy.

Economic history[edit]

After the Soviet disintegration in 1991, the Russian Federation underwent wide-ranging reforms including privatization and market and trade liberalization were undertaken. The two important and independent goals – macroeconomic stabilization and economic restructuring – are indicators for a transition from central planning to a market-based economy. The macroeconomic stabilization goal entailed the implementation of fiscal and monetary policies that promote economic growth in an environment of stable prices and exchange rates. The latter, economic restructuring, required the establishment of commercial, and institutional entities – banks, private property, and commercial legal codes— that permit the economy to operate efficiently. The opening domestic markets to foreign trade and investment, thus linking the economy with the rest of the world, was an important aid in reaching those goals, a goal the Gorbachev regime failed to address. At the time of the Soviet Union's demise, the Yeltsin government of the Russian Republic had begun to attack the problems of macroeconomic stabilization and economic restructuring. By mid-1996, results were mixed.[citation needed] The GDP declined until the end of the financial crisis and finally rose in the last year of Yeltsin's administration by 6.5% and continued at about 7% for the next nine years.

Since the collapse of the Soviet Union in 1991, Russia has tried to develop a market economy and achieve consistent economic growth. In October 1991, Yeltsin announced that Russia would proceed with radical, market-oriented reform characterized as "shock therapy", as recommended by the United States and IMF.[33] This policy resulted in economic collapse, with millions being plunged into poverty and corruption and crime spreading rapidly.[34] Hyperinflation resulted from the removal of Soviet price controls and again following the 1998 Russian financial crisis. Assuming the role as the sequel to the legal personality of the Soviet Union, Russia took up the responsibility for settling the USSR's external debts, even though its population made up just half of the population of the USSR at the time of its dissolution.[35] Formerly, all enterprises belonged to the state and were supposed to be equally owned by all citizens. Now, they instead fell into the hands of a few, who became immensely rich. Stocks of state-owned enterprises were issued, and these new publicly traded companies were quickly handed to the members of Nomenklatura or known criminal bosses, under an economic system known as State monopoly capitalism (stamocap) theory. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. During the same period, violent criminal groups often took over state enterprises, clearing the way by assassinations or extortion. Corruption of government officials became an everyday rule of life. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government. Many took billions in cash and assets outside of the country producing an enormous capital flight.[36] In addition, there were corporate raiders such as Andrei Volgin engaged in hostile takeovers of corrupt corporations by the mid-1990s.[citation needed] The final stages of the move towards stamocap came under Vladimir Putin as the state moved against oligarchs who didn't have the blessing of the central government, and consolidated economic power under Putin.

The largest state enterprises were privatized by President Boris Yeltsin amid great controversy and subsequently came to be owned by insiders[37] for far less than they were worth.[33] Many Russians consider those infamous "oligarchs" to be thieves,[38] but they are now formally operating under the protection of the state in a stamocap economy.


Russian public debt

The Russian economy underwent tremendous stress as it moved from a centrally planned economy to a free market system. Difficulties in implementing fiscal reforms aimed at raising government revenues and a dependence on short-term borrowing to finance budget deficits led to a serious financial crisis in 1998. Lower prices for Russia's major export earners (oil and minerals) and a loss of investor confidence due to the Asian financial crisis exacerbated financial problems. The result was a rapid decline in the value of the ruble, flight of foreign investment, delayed payments on sovereign and private debts, a breakdown of commercial transactions through the banking system, and the threat of runaway inflation.[citation needed]

Financial stabilization, monetization, and devaluation were the main catalysts behind Russia's high and steady growth of nearly 7% a year from 1999.[39] As of 2009 real GDP increased by the highest percentage since the fall of the Soviet Union at 8.1%, the ruble remains stable, inflation has been moderate, and investment began to increase again. In 2007 the World Bank declared that the Russian economy had achieved "unprecedented macroeconomic stability".[40] Russia is making progress in meeting its foreign debts obligations. During 2000–01, Russia not only met its external debt services but also made large advance repayments of principal on IMF loans but also built up central bank reserves with government budget], trade, and current account surpluses. The FY 2002 Russian Ggvernment budget assumes payment of roughly $14 billion in official debt service payments falling due. Large current account surpluses have brought a rapid appreciation of the ruble over the past several years. This has meant that Russia has given back much of the terms-of-trade advantage that it gained when the ruble fell by 60% during the debt crisis. Oil and gas dominate Russian exports, so Russia remains highly dependent upon the price of energy. Loan and deposit rates at or below the inflation rate inhibit the growth of the banking system and make the allocation of capital and risk much less efficient than it would be otherwise.[citation needed]

In 2003, the debt has risen to $19 billion due to higher Ministry of Finance and Eurobond payments. However, $1 billion of this has been prepaid, and some of the private sector debt may already have been repurchased. Russia continues to explore debt swap/exchange opportunities.[citation needed]

In the June 2002 G8 summit, leaders of the eight nations signed a statement agreeing to explore cancellation of some of Russia's old Soviet debt to use the savings for safeguarding materials in Russia that could be used by terrorists. Under the proposed deal, $10 billion would come from the United States and $10 billion from other G-8 countries over 10 years.[citation needed]

On 1 January 2004, the Stabilization fund of the Russian Federation was established by the Government of Russia as a part of the federal budget to balance it if oil price falls. Now the Stabilization fund of the Russian Federation is being modernized. Stabilization Fund of the Russian Federation will be divided into two parts on 1 February 2008. The first part will become a reserve fund equal to 10% of GDP (10% of GDP equals to about $200 billion now), and will be invested in a similar way as Stabilization Fund of the Russian Federation. The second part will be turned into the National Prosperity Fund of Russian Federation. Deputy Finance Minister Sergei Storchak estimates it will reach 600–700 billion rubles by 1 February 2008. The National Prosperity Fund is to be invested into more risky instruments, including the shares of foreign companies. Shyhkin, Maxim. "Stabilization Fund to Be Converted into National Prosperity". Retrieved 2 August 2007. 

Putin's first presidency[edit]

Russian economy since fall of the Soviet Union.

When Vladimir Putin became president in 2000, he continued the market reforms that had been formulated in 1996–97, and his parliamentary majority allowed him to legislate them as Yeltsin never could.[39] The three years from 2000 to 2002 were characterized by progressive economic reforms including comprehensive, radical tax reform; and in 2002 a broad effort at deregulation improved the situation for small and medium-sized enterprises.[39] In 2003, however, Putin's economic policy started a wave of renationalization, which has had a limited, but negative impact on the economy.[39] In 2004, the international oil prices took off, filling the Russian state treasury and boosting its international reserves.[39] Until October 2007, Putin maintained impressive fiscal discipline with budget surpluses every year from 2000.[39]

Between 2000-2008, Russia's economy saw the nominal gross domestic product (GDP) double, climbing from 22nd to 11th-largest in the world. The economy made real gains of an average 7% per year ( 1999: 6.5%, 2000: 10%, 2001: 5.7%, 2002: 4.9%, 2003: 7.3%, 2004: 7.2%, 2005: 6.4%, 2006: 8.2%, 2007: 8.5%, 2008: 5.2% ), making it the 6th largest economy in the world in GDP(PPP). In 2007, Russia's GDP exceeded that of 1990, meaning it has overcome the devastating consequences of the recession in the 1990s.[41]

The industry grew by 75%, investments increased by 125%,[41] and agricultural production and construction increased as well. Real incomes more than doubled and the average salary increased eightfold from $80 to $640.[citation needed] The volume of consumer credit between 2000–2006 increased 45 times,[42][43] and during that same time period, the middle class grew from 8 million to 55 million, an increase of 7 times. The number of people living below the poverty line also decreased from 30% in 2000 to 14% in 2008.[41][44][45]

Inflation remained a problem however, as the government failed to contain the growth of prices. Between 1999–2007 inflation was kept at the forecast ceiling only twice, and in 2007 the inflation exceeded that of 2006, continuing an upward trend at the beginning of 2008.[41]

The Russian economy is still commodity-driven despite its growth. Payments from the fuel and energy sector in the form of customs duties and taxes accounted for nearly half of the federal budget's revenues. The large majority of Russia's exports are made up by raw materials and fertilizers,[41] although exports as a whole accounted for only 8.7% of the GDP in 2007, compared to 20% in 2000.[46]

Unemployment Rate Of Russia Since the Fall of the Soviet Union.

Medvedev's presidency[edit]

Under Dmitry Medvedev presidency, Russia tried to diversify away from oil dependence and foster a high-technology sector.[47] Arms sales have increased to the point where Russia is second (60% of US arms sales) in the world in sale of weapons, the IT industry has recorded a record year of growth concentrating on high-end niches like algorithm design and microelectronics; Russia is now the world's third biggest destination for outsourcing software behind India and China. The space launch industry is now the world's largest[48] and nuclear power plant companies are going from strength to strength, selling plants to China and India, and recently signed a joint venture with Toshiba to develop cutting edge power plants.[citation needed]

The civilian aerospace industry has developed the Sukhoi Superjet, as well as the upcoming MS-21 project to compete with Boeing and Airbus.

The recent global economic downturn hit the Russian economy hard, resulting in three major shocks to Russia's long-term economic growth, though. Oil prices dropped from $140 per barrel to $40 per barrel, a decrease in access to financing with an increase in sovereign and corporate bond spreads, and the reversal of capital flow from $80 billion of in-flows to $130 billion in out-flows have all served to crush fledgling Russian economic growth. In January 2009, industrial production was down almost 16% year to year, fixed capital investment was down 15.5% year to year, and GDP had shrunk 9% year to year.[49] However, in the second quarter the GDP rose by 7.5% on a quarterly basis indicating the beginning of economic recovery. Responses to the recovery has been fast – industrial production growth remains one of the highest in the world, Billionaires have grown vastly, and Moscow now boasts the highest billionaire population, ahead of New York City. More recently, after 16 years of negotiations, Russia's membership to the WTO was accepted.[50] In January 2012, Russia hit a record low of inflation of just 4.2%. This record was broken only a month later in February 2012 with inflation dropping to 3.7%. The Russian government, however, expects inflation to be at an aggregate of approximately 6% in 2012.[51]

Macro economy[edit]

Gross domestic product[edit]

GRP per capita, 2008 (US dollars):
  50 000 and over
  30 000 – 50 000
  20 000 – 30 000
  9 750 (Russian average) – 20 000
  7 500 – 9 750
  5 000 – 7 500
  3 000 – 5 000
  under 3 000
Gross domestic product (PPP) per capita in 2012

This is a chart of trend of gross domestic product of Russia at market prices estimated by the International Monetary Fund with figures in millions of Russian Rubles.[52]

Year Gross domestic product US dollar exchange
1995 1,428,500 4.55 rubles
2000 7,305,600 28.13 rubles
2005 21,665,000 28.27 rubles
2008 39,952,177 23.52 rubles
2009 39,952,177 30.20 rubles

For purchasing power parity comparisons, the US dollar is exchanged at 13.63 rubles only. Average wages in 2007 hover around $42–51 per day.

Russia's GDP, estimated at $1,250 billion at 2007 exchange rates, increased by 8.1% in 2007 compared to 2006. Continued average inflation of approximately 10% and strict government budget led to the growth, while lower oil prices and ruble appreciation slowed it. As of November 2007, unemployment in Russia was at 5.9%,[53] Russia's GDP expanded 2.90% in the third quarter of 2012 over the same quarter of the previous year. GDP annual growth rate in Russia is reported by the Federal State Statistics Service. Historically, from 1996 until 2012, Russia GDP annual growth rate averaged 3.9% reaching an all-time high of 12.1% in December 1999 and a record low of −11.2% in June 2009. Russia is the fifth largest economy in the world and is a leading exporter of oil and natural gas. In Russia, services are the biggest sector of the economy and account for 58% of GDP. Within services the most important segments are: wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods (17% of total GDP); public administration, health and education (12%); real estate (9%) and transport storage and communications (7%). Industry contributes 40% to total output. Mining (11% of GDP), manufacturing (13%) and construction (4%) are the most important industry segments. Agriculture accounts for the remaining 2%.

Monetary policy[edit]

The exchange rate stabilized in 1999; after falling from 6.5 rubles/dollar in April 1998 to about 25 rubles/dollar by August 1998, one year later it had further depreciated only to about 28.5 rubles/dollar. As of June 2002, the exchange rate was 31.4 rubles/dollar, down from 29.2 rubles/dollar the year before. After some large spikes in inflation following the August 1998 economic crisis, inflation has declined steadily. Cumulative consumer price inflation for 2001 was at 18.6% slightly below the 20.2% inflation rate of the previous year but above the inflation target set in the 2001 budget. The Central Bank's accumulation of foreign reserves drove inflation higher and that trend is expected to continue. By 2009, the estimated inflation rate had decreased to 11.7%.[54] Since that time Russian economic institutes start to provide politic of "flexible" ruble. Step by step it is going to be realized. As a result of the activity of Russian Central Bank, Russian inflation reaches its record low after the breakup of the Soviet Union in April 2012, at 3.6%.[55]

Fiscal policy[edit]

Central and local government expenditures are about equal. Combined they come to about 38% of GDP. Fiscal policy has been very disciplined since the 1998 debt crisis. The overall budget surplus for 2001 was 2.4% of GDP, allowing for the first time in history for the next year's budget to be calculated with a surplus (1.63% of GDP). Much of this growth, which exceeded most expectations for the third consecutive year, was driven by consumption demand. Analysts remain skeptical that high rates of economic growth will continue, particularly since Russia's planned budgets through 2005 assume that oil prices will steadily increase. Low oil prices would mean that the Russian economy would not achieve its projected growth. However, high oil prices also would have negative economic effects, as they would cause the ruble to continue to appreciate and make Russian exports less competitive. The 2007 budget law incorporates a 25% increase in spending, much of it for public-sector salary increases, pension increases and social work. Spending on education is targeted to increase by 60%, based on 2006 legislation, and spending on healthcare is to increase by 30%. Funding for the four "national projects", undertakings in agriculture, education, housing and healthcare, will increase by 85 billion roubles over the 2006 figure to 230 billion rubles.[citation needed]

Public debt[edit]


Before the 2008 global economic crisis, when the federal budget was in surplus, annual government domestic debt issuance was a relatively small figure at 170–250 billion roubles annually. Federal government bonds (OFZ) were being issued for technical reasons (maintaining the functioning of the market, building-up the government yield curve etc.), rather than financial considerations. The situation changed in 2009 when the federal budget turned to deficit, and 2010 saw another deficit. Although the year 2011 ended with a small surplus, the government expects the budget to be in the red from 2012 till at least 2014. In 2009 and 2010 government bond issues amounted to 401 and 716 billion rubles, respectively. In the first half of 2011, bonds worth 600 billion rubles were issued, with an average maturity of five years.

Natural resources[edit]

Oil and natural gas pipelines in Europe

The mineral-packed Ural Mountains and the vast oil, gas, coal, and timber reserves of Siberia and the Russian Far East make Russia rich in natural resources, which dominate Russian exports. Oil and gas exports, specifically, continue to be the main source of hard currency.

The petroleum industry in Russia is one of the largest in the world. Russia has the largest reserves, and is the largest exporter, of natural gas. It has the second largest coal reserves, the eighth largest oil reserves, and is the largest exporter of oil in the world in absolute numbers.[citation needed] Per capita oil production in Russia, though, is not that high. As of 2007, Russia was producing 69.603 bbl/day per 1,000 people, much lessCanada (102.575 bbl/day), Saudi Arabia (371.363 bbl/day), or Norway (554.244 bbl/day), but more than two times the USA (28.083 bbl/day) or the UK (27.807 bbl/day).[56]

Russia is also a leading producer and exporter of minerals and gold. Ninety % of Russian exports to the United States are minerals or other raw materials.[citation needed] Russia is the largest diamond-producing nation in the world, estimated to produce over 33 million carats in 2013, or 25% of global output valued at over $3.4 billion, with state-owned ALROSA accounting for approximately 95% of all Russian production.[57]

Expecting the area to become more accessible as climate change melts Arctic ice, and believing the area contains large reserves of untapped oil and natural gas, Russian explorers on 2 August 2007 in submersibles planted the Russian flag on the Arctic seabed, staking a claim to energy sources right up to the North Pole. Reaction to the event was mixed: President Vladimir Putin congratulated the explorers for "the outstanding scientific project", while Canadian officials stated the expedition was just a public show.[58]

Under the Federal Law "On Continental Shelf Development" upon proposal from the federal agency managing the state fund of mineral resources, or its territorial offices, the Russian government approves the list of some sections of the mineral resources that are passed for development without any contests and auctions, some sections of federal importance of the Russian continental shelf, some sections of the mineral resources of federal importance that are situated in Russia and stretch out on its continental shelf, some gas deposits of federal importance that are handed over for prospecting and developing mineral resources under a joint license. The Russian government is also empowered to decide on the handover of the previously mentioned sections of the mineral resources for development without any contests and auctions.

The Russian fishing industry is the world's fourth-largest, behind Japan, the United States, and China.[citation needed]

Russia has more than a fifth of the world's forests, which makes it the largest forest country in the world.[59][60] However, according to a 2012 study by the Food and Agriculture Organization of the United Nations and the government of the Russian Federation,[61] the considerable potential of Russian forests is underutilized and Russia's share of the global trade in forest products is less than four%.[62][63]

Main article: Forestry in Russia


Industrial sector[edit]

Russia's industrial growth per year (%), 1992–2010

Industrial Production in Russia decreased 2.10% in February 2013 over the same month in the previous year. Industrial Production in Russia is reported by the Federal State Statistics Service. Historically, from 2006 until 2013, Russia Industrial Production averaged 2.82% reaching an all-time high of 12.60% in May 2010 and a record low of −16.90% in January 2009. In Russia, industrial production measures the output of businesses integrated in industrial sector of the economy such as manufacturing, mining, and utilities. Russia is one of the most industrialized of the former Soviet republics. In the 2000s, Russia's industry, due to increasing demand and improved state finances, emerged from a deep crisis caused by the dissolution of the Soviet Union. However, years of low investment continue to leave their mark on the industry's capabilities and a lot of its equipment is in need of modernization.[citation needed]

Besides its resource-based industries, Russia has developed large manufacturing capacities, notably in machinery. The defense and aircraft industries are important employers and are able to offer internationally competitive products for export.[citation needed]

Defense industry[edit]

Russia's defense industry employs 2.5 – 3 million people, accounting for 20% of all manufacturing jobs.[64] Russia is the world's second largest conventional arms exporter after the United States.[65] The most popular types of weaponry bought from Russia are Sukhoi and MiG fighters, air defense systems, helicopters, battle tanks, armored personnel carriers and infantry fighting vehicles.[65] The research organization Centre for Analysis of Strategies and Technologies ranked the air defense system producer Almaz-Antey as the industry's most successful company in 2007, followed by aircraft-maker Sukhoi. Almaz-Antey's revenue that year was $3.122 billion, and it had a work force of 81,857 people.[66]

Aircraft industry[edit]

The Sukhoi Superjet 100 is Russia's most recent Civilian Aviation Product of her industry. The Regional Passenger Plane was ordered around 280 times for various Airlines and Leasing Companies.

Aircraft manufacturing is an important industry sector in Russia, employing around 355,300 people. The Russian aircraft industry offers a portfolio of internationally competitive military aircraft such as MiG-29 and Su-30, while new projects such as the Sukhoi Superjet 100 are hoped to revive the fortunes of the civilian aircraft segment. In 2009, companies belonging to the United Aircraft Corporation delivered 95 new fixed-wing aircraft to its customers, including 15 civilian models. In addition, the industry produced over 141 helicopters. It is one of the most science-intensive hi-tech sectors and employs the largest number of skilled personnel. The production and value of the military aircraft branch far outstrips other defense industry sectors, and aircraft products make up more than half of the country's arms exports.[67]

Space industry[edit]

Space industry of Russia consists of over 100 companies and employs 250,000 people.[68] The largest company of the industry is RKK Energia, the main manned space flight contractor. Leading launch vehicle producers are Khrunichev and TsSKB Progress. Largest satellite developer is Reshetnev Information Satellite Systems, while NPO Lavochkin is the main developer of interplanetary probes.[citation needed]

Automotive industry[edit]

A normal Lada Kalina of the second generation. Lada is the brand of AvtoVAZ, the largest Russian car manufacturer in the Russian automotive industry.

Automobile production is a significant industry in Russia, directly employing around 600,000 people or 0.7% of the country's total work force. In addition, the industry supports around 2–3 million people in related industries. Russia was the world's 15th largest car producer in 2010, and accounts for about 7% of the worldwide production. In 2009 the industry produced 595,807 light vehicles, down from 1,469,898 in 2008 due to the global financial crisis. The largest companies are light vehicle producers AvtoVAZ and GAZ, while KAMAZ is the leading heavy vehicle producer. 11 foreign carmakers have production operations or are constructing plants in Russia.[citation needed]

Railroad industry[edit]

Russian Railways accounts for 2.5% [69] of Russia's GDP. The percentage of freight and passenger traffic that goes by rail is unknown, since no statistics are available for private transportation such as private automobiles or company-owned trucks. In 2007, about 1.3 billion passengers [70] and 1.3 billion tons of freight [71] went via Russian Railways. In 2007 the company owned 19,700[citation needed] goods and passenger locomotives, 24,200 passenger cars (carriages) (2007) and 526,900 freight cars (goods wagons) (2007).[72] A further 270,000 freight cars in Russia are privately owned[citation needed]. In 2009 Russia had 128,000 kilometres of common-carrier railroad line, of which about half was electrified and carried most of the traffic; over 40% was double track or better.[73][74]


Russia is experiencing a regrowth of microelectronics, with the revival of JCS Mikron.[75][76] An example of a successful Russian consumer electronics company is Telesystems, whose products are sold in over 20 countries.[citation needed]


Russia's telecommunications industry is growing in size and maturity. As of 31 December 2007, there were an estimated 4,900,000 broadband lines in Russia.[77] Over 72% of the broadband lines were via cable modems and the rest via DSL.[citation needed]

In 2006, there were more than 300 BWA operator networks, accounting for 5% of market share, with dial-up accounting for 30%, and Broadband Fixed Access accounting for the remaining 65%.[78] In December 2006, Tom Phillips, chief government and regulatory affairs officer of the GSM Association stated:

"Russia has already achieved more than 100% mobile penetration thanks to the huge popularity of wireless communications among Russians and the government's good work in fostering a market driven mobile sector based on strong competition."[79]

The financial crisis, which had already hit the country at the end of 2008, caused a sharp reduction of the investments by the business sectors and a notable reduction of IT budget made by government in 2008–2009. As a consequence, in 2009 the IT market in Russia declined by more than 20% in ruble terms and by one third in euro terms. Among the particular segments, the biggest share of the Russian IT market still belongs to hardware.[80]


Main article: Agriculture in Russia

Russia comprises roughly three-quarters of the territory of the former Soviet Union. Following the breakup of the Soviet Union in 1991 and after nearly 10 years of decline, Russian agriculture began to show signs of improvement due to organizational and technological modernization. Northern areas concentrate mainly on livestock, and the southern parts and western Siberia produce grain. The restructuring of former state farms has been an extremely slow process. The new land code passed by the Duma in 2002 should speed restructuring and attract new domestic investment to Russian agriculture. Private farms and garden plots of individuals account for over one-half of all agricultural production.[citation needed]


Main article: Insurance in Russia

According to the Central Bank of Russia 422 insurance companies operate on the Russian insurance market by the end of 2013. The concentration of insurance business is significant across all major segments except compulsory motor third party liability market (CMTPL), as the Top 10 companies in 2013 charged 58.1% premiums in total without compulsory health insurance (CHI).[81] Russian insurance market in 2013 demonstrated quite significant rate of growth in operations. Total amount of premiums charged (without CHI) in 2013 is RUB 904.9 bln (increase on 11.8% compared to 2012), total amount of claims paid is RUB 420.8 bln (increase on 13.9% compared to 2012). Premiums to GDP ratio (total without CHI) in 2013 increased to 1.36% compared to 1.31 a year before. The share of premiums in household spending increased to 1.39%. Level of claims paid on the market total without CHI is 46.5%, insufficient increase compared to 2012. The number of polices in 2013 increased on 0.1% compared to 2012, to 139.6 mln policies . Although relative indicators of the Russian insurance market returned to pre-crisis levels, the progress is achieved mainly by the increase of life insurance and accident insurance, the input of these two market segments in premium growth in 2013 largely exceeds their share on the market. As before, life insurance and accident insurance are often used by banks as an appendix to a credit contract protecting creditors from the risk of credit default in case of borrower’s death or disability. The rise of these lines is connected, evidently, with the increase in consumer loans, as the total sum of credit obligations of population in 2013 increased on 28% to RUB 9.9 trillion. At the same time premium to GDP ratio net of life and accident insurance remained at the same level of 1.1% as in 2012. Thus, if “banking” lines of business are excluded, Russian insurance market is in stagnation stage for the last four years, as premiums to GDP ratio net of life and accident insurance remains at the same level of 1.1% since 2010.[82]


Share of Russia's exports in 2013 according to the ITC. As can be seen the US market for Russia is on Africa Levels significance thanks to failed US Policies and the delay of Russia joining the WTO. Russia is the most independent G20 country when it comes to dealing with US Foreign Policy.
Russian current account due to trade surplus

Russia recorded a trade surplus of 17742 USD Million in January 2013. Balance of Trade in Russia is reported by the Central Bank of Russia. Historically, from 1997 until 2013, Russia Balance of Trade averaged 8338.23 USD Million reaching an all-time high of 20647 USD Million in December 2011 and a record low of −185 USD Million in February 1998. Russia runs regular trade surpluses primarily due to exports of commodities. Russia main exports are oil and natural gas (58% of total exports), nickel, palladium, iron and chemical products. Others include: cars, military equipment and timber. Russia imports food, ground transports, pharmaceuticals and textile and footwear. Main trading partners are: China (7% of total exports and 10% of imports), Germany (7% of exports and 8% of imports) and Italy. This page includes a chart with historical data for Russia Balance of Trade.Exports in Russia decreased to 39038 USD Million in January 2013 from 48568 USD Million in December 2012. Exports in Russia is reported by the Central Bank of Russia. Historically, from 1994 until 2013, Russia Exports averaged 18668.83 USD Million reaching an all-time high of 51338 USD Million in December 2011 and a record low of 4087 USD Million in January 1994. Russia is the fifth largest economy in the world and is a leading exporter of oil and natural gas. In Russia, services are the biggest sector of the economy and account for 58% of GDP. Within services the most important segments are: wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods (17% of total GDP); public administration, health and education (12%); real estate (9%) and transport storage and communications (7%). Industry contributes 40% to total output. Mining (11% of GDP), manufacturing (13%) and construction (4%) are the most important industry segments. Agriculture accounts for the remaining 2%. This page includes a chart with historical data for Russia Exports.Imports in Russia decreased to 21296 USD Million in January 2013 from 31436 USD Million in December 2012. Imports in Russia is reported by the Central Bank of Russia. Historically, from 1994 until 2013, Russia imports averaged 11392.06 USD Million reaching an all-time high of 31553 USD Million in October 2012 and a record low of 2691 USD Million in January 1999. Russia main imports are food (13% of total imports) and ground transports (12%). Others include: pharmaceuticals, textile and footwear, plastics and optical instruments. Main import partners are China (10% of total imports) and Germany (8%). Others include: Italy, France, Japan and United States. This page includes a chart with historical data for Russia Imports.

In 1999, exports were up slightly, while imports slumped by 30.5%. As a consequence, the trade surplus ballooned to $33.2 billion, more than double the previous year's level. In 2001, the trend shifted, as exports declined while imports increased. World prices continue to have a major effect on export performance, since commodities, particularly oil, natural gas, metal, and the timber comprise 80% of Russian exports. Ferrous metals exports suffered the most in 2001, declining by 7.5%. On the import side, steel and grains dropped by 11% and 61%, respectively.[citation needed]

Most analysts predicted that these trade trends would continue to some extent in 2002. In the first quarter of 2002, import expenditures were up 12%, increased by goods and a rapid rise of travel expenditure. The combination of import duties, a 20% value-added tax and excise taxes on imported goods (especially automobiles, alcoholic beverages, and aircraft) and an import licensing regime for alcohol still restrain demand for imports. Frequent and unpredictable changes in customs regulations also have created problems for foreign and domestic traders and investors. In March 2002, Russia placed a ban on poultry from the United States. In the first quarter of 2002, exports were down 10% as falling income from goods exports was partly compensated for by rising services exports, a trend since 2000. The trade surplus decreased to $7 billion from well over $11 billion the same period last year.[citation needed]

Russian exports in 2006

Foreign trade rose 34% to $151.5 billion in the first half of 2005, mainly due to the increase in oil and gas prices which now form 64% of all exports by value. Trade with CIS countries is up 13.2% to $23.3 billion. Trade with the EU forms 52.9%, with the CIS 15.4%, Eurasian Economic Community 7.8% and Asia-Pacific Economic Community 15.9%.[83]

Russian Export Treemap from Harvard Atlas of Economic Complexity

Trade volume between China and Russia reached $29.1 billion in 2005, an increase of 37.1% compared with 2004. China’s export of machinery and electronic goods to Russia grew 70%, which is 24% of China’s total export to Russia in the first 11 months of 2005. During the same time, China’s export of high-tech products to Russia increased by 58%, and that is 7% of China’s total exports to Russia. Also in this time period border trade between the two countries reached $5.13 billion, growing 35% and accounting for nearly 20% of the total trade. Most of China’s exports to Russia remain apparel and footwear.[citation needed]

Russia is China’s eighth largest trade partner and China is now Russia’s fourth largest trade partner.[citation needed]

China now has over 750 investment projects in Russia, involving $1.05 billion.[citation needed] China’s contracted investment in Russia totaled $368 million during January–September 2005, twice that in 2004.[citation needed]

Chinese imports from Russia are mainly those of energy sources, such as crude oil, which is mostly transported by rail, and electricity exports from neighboring Siberian and Far Eastern regions. Exports of both of these commodities are increasing, as Russia opened the Eastern Siberia–Pacific Ocean oil pipeline's branch to China, and Russian power companies are building some of its hydropower stations with a view of future exports to China.[citation needed] Despite all this Russia still exports more to China by amount of 21.23 billion US dollars in comparison to an import of 17.52 Billions in 2009.[84]

Information technology[edit]

Russia has more academic graduates than any other country in Europe. (And world leader in percentage of population with associate's degree or higher: 54%, compared to 31% in UK[85])

The IT market is one of the most dynamic sectors of the Russian economy. Russian software exports have risen from just $120 million in 2000 to $3.3 billion in 2010.[86] Since the year 2000 the IT market has started growth rates of 30–40% a year, growing by 54% in 2006 alone. The biggest sector in terms of revenue is system and network integration, which accounts for 28.3% of the total market revenues.[87] Meanwhile the fastest growing segment of the IT market is offshore programming.

Currently Russia controls 3% of the offshore software development market and is the third leading country (after India and China) among software exporters[citation needed]. Such growth of software outsourcing in Russia is caused by a number of factors. One of them is the supporting role of the Russian Government. The government has launched a program promoting construction of IT-oriented technology parks (Technoparks) – special zones that have an established infrastructure and enjoy a favorable tax and customs regime, in seven different places around the country: Moscow, Novosibirsk, Nizhny Novgorod, Kaluga, Tumen, Republic of Tatarstan and St. Peterburg Regions. Another factor stimulating the IT sector growth in Russia is the presence of global technology corporations such as Intel, Google, Motorola, Sun Microsystems, Boeing, Nortel, Hewlett-Packard, SAP AG, and others, which have intensified their software development activities and opened their R&D centers in Russia.[86]

Under a government decree signed On June 2013, a special "roadmap" is expected to ease business suppliers’ access to the procurement programs of state-owned infrastructure monopolies, including such large ones as Gazprom, Rosneft, Russian Railways, Rosatom, and Transneft. These companies will be expected to increase the proportion of domestic technology solutions they use in their operations. The decree puts special emphasis on purchases of innovation products and technologies. According to the new decree, by 2015, government-connected companies must double their purchases of Russian technology solutions compared to the 2013 level and their purchasing levels must quadruple by 2018.[88]


In its push to diversify Russia's research and development in emerging technologies, the Putin government has announced a massive $7 billion investment program in nanotechnology.[89] As part of the program, during 2007, $5 billion is being invested into a new state corporation, Rosnanotech, that will be responsible for overseeing and coordinating research in the area.[citation needed]

In criticism of the initiative, it has been noted that the Russian nanotech program will receive three times more state funding than the rest of Russia's scientists put together.[90]

Apart from public funding, Mikhail Prokhorov, a leading Russian metals and banking tycoon, has announced the creation of a $17.5 billion holding company that will focus on high-tech investments, including alternative energy and nanotechnology.[citation needed]


Construction market[edit]

In 2009 the Russian construction industry survived its most difficult year in more than a decade. The 0.8% reduction recorded by the industry for the first three quarters of 2010 looked remarkably healthy in comparison with the 18.4% slump recorded the previous year, and construction firms became much more optimistic about the future than in previous months. The most successful construction firms concluded contracts worth billions of dollars an planned to take on employees and purchase new building machinery. The downturn served to emphasise the importance of the government to the construction market.[91]


As of 2013, Russians spent 60% of their pre-tax income shopping, the highest percentage in Europe. This is possible because many Russians pay no rent or house payments, owning their own home after privatization of state-owned Soviet housing. Shopping malls were popular with international investors and shoppers from the emerging middle class. 82 malls had been built near major cities including a few that were very large. A supermarket selling groceries is a typical anchor store in a Russian mall.[92]


Oil price records, prompt higher FDI inflows

In 1999, investment increased by 4.5%, the first such growth since 1990. Investment growth has continued at high rates from a very low base, with an almost 30% increase in total foreign investments in 2001 compared to the previous year. Higher retained earnings, increased cash transactions, the positive outlook for sales, and political stability have contributed to these favorable trends. Foreign investment in Russia is very low. Cumulative investment from U.S. sources of about $4 billion are about the same as U.S. investment in Costa Rica. Over the medium-to-long term, Russian companies that do not invest to increase their competitiveness will find it harder either to expand exports or protect their recent domestic market gains from higher quality imports.[citation needed]

Foreign direct investment, which includes contributions to starting capital and credits extended by foreign co-owners of enterprises, rose slightly in 1999 and 2000, but decreased in 2001 by about 10%. Foreign portfolio investment, which includes shares and securities, decreased dramatically in 1999, but has experienced significant growth since then. In 2001, foreign portfolio investment was $451 million, more than twice the amount from the previous year. Inward foreign investment during the 1990s was dwarfed by Russian capital flight, estimated at about $15 billion annually. During the years of recovery following the 1998 debt crisis, capital flight seems to have slowed. Inward investment from Cyprus and Gibraltar, two important channels for capital flight from Russia in recent years, suggest that some Russian money is returning home.[citation needed]

A significant drawback for investment is the banking sector, which lacks the resources, the capability, and the trust of the population that it would need to attract substantial savings and direct it toward productive investments. Russia's banks contribute only about 3% of overall investment in Russia. While ruble lending has increased since the August 1998 financial crisis, loans are still only 40% of total bank assets. The Central Bank of Russia reduced its refinancing rate five times in 2000, from 55% to 25%, signaling its interest in lower lending rates. Interest on deposits and loans are often below the inflation rate. The poorly developed banking system makes it difficult for entrepreneurs to raise capital and to diversify risk. Banks still perceive commercial lending as risky, and some banks are inexperienced with assessing credit risk.[citation needed]

Money on deposit with Russian banks represents only 7% of GDP. Sberbank receives preferential treatment from the state and holds 73% of all bank deposits. In March 2002, Sergei Ignatyev replaced Viktor Gerashchenko as Chairman of the Russian Central Bank. Under his leadership, necessary banking reforms, including stricter accounting procedures and federal deposit insurance, were implemented.[citation needed]

Strategic sectors and enterprises[edit]

In the Russian law, there are sectors of the economy which are considered to be crucial for national security and foreign companies are restricted from owning them. Investments in the so-called Strategic Sectors are defined in a law adopted by the Federal Assembly of Russia. Strategic enterprises are a list of state owned corporations which privatization and new share issues of require explicit approval of the President. It began with a Presidential Decree with list of more than 1000 state owned firms dated from 2004, which was amended several times.

Mergers and acquisitions[edit]

From 1993 to 2010, Russian companies have been involved as either an acquirer or acquired company in 13,834 mergers and acquisitions with a total known value of 613 bil. USD.[93] The number of deals that happened in 2010 have been 3,662, which is a new record; compared to 2009 this was an increase of 12%. The value of deals in 2010 was US$100 billion, which was the second highest number ever; compared to 2009 this was an increase of 143%.[citation needed]


Retail sales in Russia[94]

Year 2002 2003 2004 2005 2006 2007
Total retail sales (RUB tr) 3.77 4.53 5.64 7.04 8.69 10.76

Key data on the telecommunications market in Russia[78]

Year 2004 2005 2006 2007 2008 2009
Telecommunications market value (€ bn) 12.9 16.0 20.9 25.0 28.0 24.2
Telecommunications market growth rate (%) 32.0 23.5 30.6 20.2 11.5 −13.4

Exchange rates[95]

Year 2008 2009 2010
EUR/RUR 41.44 43.39 40.33
USD/RUR 29.38 30.24 30.48

Types of legal entities in Russia[edit]

  • IP (Индивидуальный предприниматель) – Russian "Individual entrepreneur"
  • OOO (Общество с ограниченной ответственностью, ООО) – Russian "Limited liability company"

LLC is set up by one or several persons (legal entities and/or individuals), its charter capital is divided into participatory shares, and LLC participants are not liable for company’s obligations and bear the risk of losses to the extent of the contributions made by them. The number of shareholders may not exceed 50.[96]

  • ZAO (Закрытое акционерное общество, ЗАО) – Russian "Private joint-stock company"

In a PrivJSC shares are distributed only among its founders or another predetermined group of persons. A closed company has the right to conduct a closed subscription to its shares, while the shareholders of a closed company have a pre-emptive right to purchase shares sold by other company shareholders. The number of company’s shareholders should not exceed 50.[97]

  • OAO (Открытое акционерное общество, ОАО) – Russian "Public joint-stock company"

An open company has the right to conduct open subscription to its shares – among an unlimited group of persons and closed subscription (a limited predetermined group of persons), if the opportunity to conduct a closed subscription is not limited by company’s charter or legal acts. Shareholders do not have a pre-emptive right to purchase shares sold by other shareholders of the company. The number of shareholders is unlimited.[97]

  • ANO (Автономная некоммерческая организация, АНО) – Russian "Autonomous non-profit organization"
  • GP or GUP (Государственное унитарное предприятие, ГП or ГУП) – Russian "Unitary state enterprise"
  • Фонд – Russian "Fund"
  • PK (Производственный кооператив, ПK) – Russian "Production Cooperative"
  • PP (Политическая партия, ПП) – Russian "Political party"

See also[edit]


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External links[edit]