Since the dissolution of the Soviet Union, the Russian Federation is considered a market economy, and in 2016 the country was the sixth largest economy in the world. However, economy and business are still characterized by Soviet economic policy. Business is adversely affected by the fact that the banks are not sufficiently independent of political and economic power, that the so-called oligarchs have a strong influence and it is difficult for SMEs to obtain financing.
The legacy of the Soviet era.
In the Soviet Union, so-called five – year plans were used, which would increase the state’s control over the country’s resources. One consequence was that production was focused on heavy industry and energy and mineral extraction. Soviet industries and agriculture were large. This is as a result of the government trying to maintain control over production and increase efficiency. Even today, this is noticed by the fact that small and medium-sized industries and agriculture are not common.
Since the Soviet system failed to distribute goods efficiently, there was a shortage of both raw materials for industry and everyday goods for citizens. For ordinary people, personal networks became important to obtain the necessary products. The pricing of goods did not reflect supply and demand as in a market economy. When the Soviet Union disintegrated and the Russian Federation introduced market prices, this was something new for citizens, which contributed to the economic turmoil in the early 1990s.
The 1990s posed several major challenges and changes in the Russian economy. See also Digopaul.com. In addition to the fact that the production and corporate structure has not been reformed since the Soviet era, high levels of inflation contributed to making the situation unsustainable.
Extensive reforms were implemented to stabilize the price level, among other things. The decisions were subsequently criticized for being too hastily and ill-prepared.
Privatization was carried out to transfer large parts of the business sector to private ownership. State-owned assets would be distributed through a system of coupons, vouchers, and auctions. In principle, all Russian citizens were able to participate in privatization, but as citizens did not receive sufficient information about the processes, many lost the government assets.
Privatization was the fastest in trade, while it took longer to privatize the large Soviet industrial companies. In 1996, Russian authorities announced that 70 percent of GDP was generated outside the state sector.
At the beginning of 1995, a certain stabilization of the Russian economy was noticed. Over a few years, production increased in certain industries, mainly smaller operations.
In 1998, however, the country was again hit by an acute financial crisis. The International Monetary Fund granted the Russian Federation a loan of USD 11.2 billion. As a result of the financial crisis, the economic progress and stabilization achieved in 1995-98 were lost. Inflation for 1998 was estimated at 85 percent. The economically turbulent years hit the Russian citizens hard.
Putin in power.
From the turn of the millennium, the Russian economy grew stronger. Growth averaged 7 percent per year. Exports benefited from Russian goods becoming cheaper on the world market at the same time as the price of oil rose, which significantly increased Russian export earnings. The period of economic success coincided with the appointment of Vladimir Putin as President.
The Russian industry and the service sector had been modernized, but the business sector was still dominated by large companies. Small and medium-sized businesses were difficult to establish. The fact that the Russian Federation is highly dependent on commodity exports means that the country is sensitive to changes in world market prices. This became evident during the international financial crisis of 2008 and 2009 when the Russian Federation was hit by falling oil prices. The Russian central bank lowered the value of the ruble twice.
Russian Federation and the outside world.
The Russian economy stabilized in the years 2010-12 and the country had a GDP growth of almost 5 percent. The recovery was interrupted in 2014, when the economy again deteriorated and the currency lost in value. This was mainly a consequence of the financial sanctions imposed by the outside world in response to the Russian Federation’s annexation of the Ukrainian Crimean Peninsula and the entry into eastern Ukraine (see Donbass conflict).
In 2014, the world market price of oil fell by almost 40 percent and the Russian currency fell in value by 22 percent against the US dollar. The ruble continued to weaken further thereafter. At the same time, the proportion of people with incomes below the poverty line increased.
Opinion surveys conducted in Russia in 2018 show that there is widespread pessimism and that the country’s economy is described as chaotic. The country is also considered to have major problems with corruption and great economic inequality (see human rights).
After many years of negotiations, the Russian Federation became a member of the World Trade Organization (WTO) in 2011.
Russian agriculture has shown poor returns for a long time. The main agricultural areas are located in the southern part of the European Russian Federation.
Good soils, but with a short vegetation season and limited rainfall, are also found in southwestern Siberia. The conditions for livestock management are relatively good, but modern animal production is often limited by the supply of forage crops. The distribution of agricultural products, especially fresh produce, is hampered by large distances and a lack of suitable transport and storage facilities. In general, rural infrastructure is a major obstacle to development.
Traditionally, cereals, potatoes, beets and root vegetables are the most important crops. Feed and oil plants and flax also occur to a significant extent. From being a major exporter of cereals during the Tsarist era, the situation changed during the Soviet period. Low productivity and long-time waste, combined with an increased investment in animal production, contributed to the country’s emergence as a leading import nation in the 1970s, a pattern that could not break out until the turn of the 2000s. In the early 2000s, it was the first time in almost a hundred years that the Russian Federation exported more grain than it imported. During the 2010s, grain exports increased and the country became one of the world’s leading wheat exporters.
For Soviet agriculture, the first five-year plan (1928) meant a large-scale transition to collective forms of farming, often introduced under duress. In addition to the state farms (dormitories), the peasants were organized into collective farms (dormitories). In addition to these two types of agricultural units, machine and tractor stations were also set up, on which the kolchos had to rely on their supply of machinery and agricultural technical expertise. Taken together, these units were said to secure rural access to goods and services, while promoting productivity through the introduction of modern or industrial methods. In fact, they served primarily as a control body and in addition offered the state good opportunities to transfer resources from the kolchos to the country’s industry.
Programs for cultivation of new land and the introduction of new crops and production forms have been launched on several occasions. Throughout the Soviet period, state and collective agriculture as well as central production planning remained the organizational foundations of the system. The system has only slowly been replaced by private farming practices, and only then with a cautious and little comprehensive reform effort during the second half of the 1980s. The dissolution of the Soviet Union allowed for a more offensive policy, and at the beginning of 1993, most of the former state and collective agriculture was at least nominally organized so that the privatization of agricultural land could take place. Despite this, privatization has not been fully implemented.
By virtue of its vast assets in forests, the Russian Federation has long been one of the world’s leading producers of timber, sawn timber, pulp and paper. It is mainly the coniferous forest belt, the tajgan, which forms the basis for the forest industry. The Tajgan goes south into a mixed forest belt, whose more varied flora of species is used for, among other things. furniture, matches and tools.
During the post-war period, especially in the western parts of the country, a decrease in the supply of raw materials and rising production costs have been recognized as a result of the fact that easily accessible forest areas have been subjected to excessive harvesting and in some cases also environmental degradation.
The extent of inshore fishing is hampered by the limited access to temperate seas. Nevertheless, the local fishery and fish processing industry is of great importance. This is especially true when coastal fishing is combined with high sea fishing, for which purpose the Russian Federation has taken over numerically large fleets of trawlers and floating canning factories from the Soviet Union. Residents, especially in the Kaliningrad exclave, on the Barents Sea and on the coast of the Russian Far East, have a large radius of action and have sometimes had the opportunity to exploit the territorial waters of former Soviet republics. Accusations of predatory behavior occur.
Moreover, as one of a small number of countries, the Russian Federation is still catching elections. Inland fishing is also primarily of local importance. However, as in so many other cases, large distances and poor transport capacity limit access to the national market.
In many places, environmental degradation has gone so far that conditions have drastically deteriorated.
Few countries can exhibit as extensive and diverse assets of metals and minerals as the Russian Federation. Even after the dissolution of the Soviet Union, the Russian Federation is largely self-sufficient in this regard. The exception is bauxite and chromium, where most of the Soviet Union’s production came from the then Soviet Republic of Kazakhstan. The Russian Federation is regarded as the world’s leading producers of iron ore, nickel, cobalt, platinum, tin, copper and gold. Beryllium, manganese, molybdenum and silver are also extensively mined. However, earlier large deposits of lead and zinc have been partially exhausted. In addition, the Russian Federation also has good assets on barium, diamonds, emeralds, sulfur and phosphates, and clay for ceramics and building purposes.
So today’s problems are not the size and diversity of the assets, but rather are found in the often neglected technology in extraction and processing as well as bureaucratic organizational forms. Moreover, since the deposits are in many cases located in peripheral regions (the Kola Peninsula, the northern parts of central and eastern Siberia, the Russian Far East), the long transports offer both technological and economic difficulties. The exceptions are mainly the iron ore fields, the most important of which are found in the southern central part of the European Russian Federation, and the Ural region with various metals and minerals.
The Russian Federation is well stocked with energy raw materials. Although the country’s industry is a large and often inefficient user of energy, there is considerable room for export, especially of oil and gas. Since 1900, the country has been one of the world’s leading producers of oil. The largest deposits are found in the central part of Western Siberia, while the previously dominant mining areas between Volga and Ural have been difficult to maintain production volume. Oil is also extracted elsewhere in the Russian Federation, for example in Sakhalin.
For a long time, however, the Soviet leadership, especially under Stalin, chose to invest in coal as its primary source of energy. Of the dissolved Union’s three largest coalfields, one is found, Kuzbass in central Siberia, in its entirety within the borders of the Russian Federation. In addition, the coal fields around the Petjora River are an important asset. Smaller deposits are distributed throughout the country, but are usually of local importance only. Low-grade lignite deposits are also extracted where deemed necessary, primarily in the Moscow region.
In addition to oil and coal, natural gas has since the 1970s developed into an important source of energy and export revenue. Very large deposits are found, for example, in northern West Siberia and the areas around Volga and southern Ural. Water energy also plays a role in the country’s energy supply, and some of the world’s largest hydropower plants are located in the Russian Federation. However, water energy has the disadvantage that most of the capacity is in the Asian parts of the country. To compensate for this, the major rivers in the European part of the Russian Federation have also been expanded, with significant consequences for the environment, fishing and river transport. In addition, high-voltage technology for long-distance transmission of electricity has been invested and nuclear energy has been expanded.
During the Soviet period, the manufacturing industry, and especially the heavy engineering industry, was a priority. The iron and steel industry was particularly favored. Of the more than sixty companies in this industry that accounted for the supply of iron and steel to the Soviet Union, about half are found in the Russian Federation today. The geographical emphasis has been in the Urals and Kuzbass during the 20th century, but due to the ore deposits in Kursk and the increased use of scrap as raw material, a large part of the modern steel industry is found today in the European part of the country. Other metallurgy is largely located in Ural and Siberia, partly due to proximity to the raw material sources and partly due to military considerations. The engineering industry, which is undergoing rapid transformation, has primarily been concentrated on a number of large and medium-sized cities within a base triangle along the line St. Petersburg – Kursk and its tip in Kuzbass. Thus, despite its geographically dispersed structure of industrial combination in the metropolitan cities of Moscow, Saint Petersburg, Nizhny Novgorod, Samara, Perm, Chelyabinsk and Yekaterinburg. Particularly noteworthy is that almost a quarter of this production comes from the Moscow area. Other branches of the engineering industry, such as manufacturing of agricultural machinery and mining equipment, are more tied to their immediate marketing markets.
The chemical industry was long overdue, but in pace with increased fossil fuel extraction, the petroleum-based production in particular has expanded. For the most part, refineries and other processing plants are located near the sources, with a significant center of gravity between Volga and western Siberia. Production of, for example, plastics, synthetic fibers, artificial fertilizers, solvents and paints usually also follows this pattern. However, more specialized industries (pesticides, pharmaceuticals and cosmetics) are often found in Moscow or other metropolitan regions.
The other process industry is strikingly often raw material oriented. This may be mainly the case for paper and pulp production. However, as the harvesting of forest for domestic consumption and exports has progressed, the supply of raw materials has become a problem. In addition, like many others, this industry is characterized by outdated production equipment and transport problems.
While the engineering industry in general benefited, consumer goods production ended up in the cloud for a long time. Although this has a regionally more fragmented structure than other industries, some industries are geographically concentrated. By tradition, textiles and clothing have been dominated by the medium-sized cities of the middle region. However, wool and linen have had to give way to Central Asian cotton and synthetic fiber as the prevailing material. Another peculiarity, which is partly a legacy from the epoch of central planning, partly a result of the attempts to convert the military industry to civilian production, is that, above all, consumer capital goods are often produced by companies with heavy workshop products or weapons as a real specialty.
In the Soviet economy, foreign trade was of secondary importance. Trade was organized through a foreign trade monopoly, and its orientation and scope were usually regulated through bilateral agreements with other states. For the trade in the Eastern Bloc, the nominally supranational organization, SEV (COMECON), was used, within whose framework transactions and goods flows were organized.
The Russian Federation is therefore facing the task of reorganizing foreign trade. Already during the late 1980s increased leeway was given to world market pricing, but it was only with the dissolution of the Union that trade with the outside world was liberalized. The structure of the Russian Federation’s foreign trade has only partially changed compared to the Soviet period. Above all, one can note the great dependence on commodity exports. Energy (oil and gas) and minerals as well as forest raw materials and sawn timber are important components in this regard. The dissolution of SEV has entailed a certain reorientation of these exports, as the countries outside the old eastern bloc today constitute the most important market. At the same time, the former Soviet republics have been recognized as having a reduced supply of, in particular, energy supplies from the Russian Federation.
According to Countryaah, other export goods include furs, food and engineering products (including transport). The greatest successes are likely to have been noted in the arms exports, whose sales market has expanded.
As in the Soviet period, many industrial products are imported from the Western world. The previous embargo on technology exports to the Russian Federation has been lifted, which has enabled increased Russian use of the electronics products of the Western world. At the same time, imports of consumer goods have increased significantly in scale, and the country still relies on food imports for its supply. Imports of raw materials have decreased in scale as industrial production has declined, but the Russian Federation is still dependent on imports of mainly bauxite and some inputs for the chemical industry. As a whole, imports have been reoriented to increasingly rely on Western European, North American and East Asian suppliers. Trade with the former Eastern bloc and the Third World is declining.
Tourism and gastronomy
In 1994, the Russian Federation was visited by 900,000 foreign tourists, in 2015 the number of visitors was 33.7 million. About 65 percent of these come from other former Soviet states, but some are believed to be guest workers.
The two largest tourist destinations are Saint Petersburg, with stately architecture and history as the capital of the last tsars, as well as Moscow, the country’s economic and political center. Other historically interesting cities include Yaroslavl 250 km northeast of Moscow, one of the oldest Russian cities, Novgorod 150 km southeast of Saint Petersburg, with one of the country’s oldest fortifications and the Byzantine Sofia Cathedral from the 1040s and 1050s, Ekaterinburg on the east side of the Ural Mountains, Astrachan 70 km north of the Caspian Sea, with fortifications from the 16th century, and Irkutsk in southeastern Siberia, an old hub of trade with China and cultural center for the whole of eastern Siberia.
The Trans-Siberian Railway, whose first section was opened in 1905, is one of the major tourist attractions. The railway is just over 9,300 km long, and today you can choose between several different routes. A trip from Moscow to Vladivostok takes six and a half days. You can also combine with stops in cities along the way. The world’s largest freshwater lake, Lake Baikal in Siberia, is about to become a major attraction for nature enthusiasts.
Its beaches and surrounding forests have been set aside as a national park. Traveling on the Russian Federation’s huge river and canal network is also popular.
Russian cuisine, which at the turn of the 1900s could be equated with the French in refinement and finesse, rests on a wealth of raw material from different regions and climatic types today, wiped out by the major political changes. The basic features date from the peasantry of the 16th century. The rye turned into sour rye bread, the grits into porridge. Mushrooms, fish and vegetables depleted the diet and were preserved to last all year. Meat was a luxury item, where game was more common than domestic sheep. The religion, which stipulated many fasting days during the year, forced the Russians to feed on vegetables, fish and mushrooms; meat and dairy products were prohibited during fasting. They usually did not mix raw materials, and pure flavors were long one of the most distinguishing features of Russian cuisine. Acidic and salty flavors were already prevalent then, as was the soup the most common dish.
During the 18th and 19th centuries, it became customary among the gentlemen to retrieve their chefs from abroad, and influences from mainly France, but also from Germany, the Netherlands and Scandinavia, made a marked mark. The impact was also reciprocal; Russian cuisine and its serving technology, ie. to serve one dish at a time, broke through in France and thereby throughout the rest of Europe. Now came the custom of drinking tea and eating starters, called zakuski. These were developed into veritable sandwich tables, which are traditionally served with vodka. They consist of salads on cabbage, beets, potatoes, apples and horseradish, herring in various forms, cooked fish, caviar, vegetable dishes, pies, pelmeni (ravioli with meat or cheese filling), syrniki (cheese balls in the smetana)), rastegaj (egg and salmon filled pies) and of course different types of bread.
The soup is still the basis in the food intake today, shtji (cabbage soups) is most common, borscht (beetroot soup) most knowledgeable.
Among the fish dishes are boiled jellies with horseradish. Eel and salmon can make kulebjaka, a pajrulle or pierogi with hard-boiled eggs. The game (eg bear and deer) still occupies a place of honor among the meat dishes, others are the cholod (meat baptism), kurnik (chicken and rice roasted) and solonina (salted beef with sauerkraut and potatoes). The desserts often contain fruits, nuts, berries and milk; chalva is walnut or sunflower seed pudding, silicon a cream made on berries. In addition to tea and vodka, you can drink kvass.