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Course contents
- Introduction
- Russian economy
- Negotiating in Russia
Available Languages :
Learning Unit Summary
A decade after the implosion of the Soviet Union in December 1991, Russia is still struggling to establish a
modern market economy and achieve strong economic growth. In contrast to its trading partners in Central Europe - which were able to overcome the initial production declines that accompanied the launch of market reforms within three to five years - Russia saw its economy contract for five years, as the executive and legislature dithered over the implementation of many of the basic foundations of a market economy. Russia achieved a slight recovery in 1997, but the government's stubborn budget deficits and the country's poor business climate made it vulnerable when the global financial crisis swept through in 1998. The crisis culminated in the August depreciation of the ruble, a debt default by the government, and a sharp deterioration in living standards for most of the population.
The economy subsequently has rebounded, growing by an average of more than 6% annually
in 1999-2001 on the back of higher oil prices and the 60% depreciation of the ruble in 1998. The ruble's real appreciation back to its 1998 level is making Russian goods exports less competitive both domestically and abroad. Economic growth fell to
4% during 2002. These GDP numbers, along with a renewed government effort to advance lagging structural reforms, have raised business and investor confidence over Russia's prospects in its
second decade of transition.
Yet serious problems persist. Russia remains heavily dependent on exports of
commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of exports, leaving the country vulnerable to swings in world prices.
Russia's industrial base is increasingly dilapidated and must be replaced or modernized if the country is to maintain vigorous economic growth.
Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions.
Russia has proven oil reserves of 60 billion barrels, most of which are located in Western Siberia, between the Ural Mountains and the Central Siberian Plateau. In the 1980s, this prolific region, also known as the "Russian Core," made the Soviet Union a major world oil producer, allowing for peak production of 12.5 million bbl/d in 1988 (most of which came from Russia).
Russia holds the world's largest natural gas reserves, with 1,680 trillion cubic feet (Tcf)--more than twice the reserves in the next largest country, Iran.
With 173 billion short tons in estimated recoverable coal reserves, Russia holds the world's second largest coal reserves, behind only the United States which holds roughly 274 billion short tons. Russia's power sector includes over 440 thermal and hydropower plants (approximately 77 of which are coal-fired) plus 30 nuclear reactors.
More Information about Doing Business in Russia
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