Economy of Russia
Russia is potentially one of the wealthiest countries with its natural resources, a well-educated population and a diverse industrial base. Although only half the size of the former Soviet economy, the Russian economy includes formidable assets. Russia possesses ample supplies of many of the world’s most valued natural resources to support a modern industrialized economy. It also has well-educated labor force with substantial technical expertise.
Nevertheless its economic situation deteriorated from the beginning of Perestroika in 1985, which announced moving from centrally planned economy to a market economy. The absence of a clear economic doctrine and means led to destruction of internal economic structure, declining of industries and significant raise of unemployment. Russian health and education system, which used to be of the highest standard during the Soviet times, were slowly deteriorating.
August 1998 brought a new serious crisis. Small businesses were almost devastated. Prices for consumer goods increased 4-5 times with the salaries increased only by 20-30%.
However, the crisis gave a boost to the development of national industries, which could compete with foreign goods with the low dollar rate. Now, the results have become visible with reviving the industrial enterprises, particularly in production of consumer goods and food processing.
Russia has demonstrated significant growth since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% and real personal incomes have realized average increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis. Strong oil export earnings have allowed Russia to increase its foreign reserves. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia’s economic prospect.
Natural Resources. Russia is one the world’s richest countries in raw materials, many of which are significant inputs for an industrial economy. Russia accounts for around 20 percent of the world’s production of oil and natural gas and possesses large reserves of both fuels.
However, most of resources are located in remote and climatically unfavorable areas that are difficult to develop and far from Russian ports.
This abundance has made Russia virtually self-sufficient in energy and large-scale exporter of fuels. Oil and gas were primary hard-currency earners for the Soviet Union, and they remain so for the Russian Federation. Russia also is self-sufficient in nearly all major industrial raw materials and has at least some reserves of every industrially valuable non-fuel mineral.
Tin, tungsten, bauxite, and mercury were among the few natural materials imported in the Soviet period. Russia possesses rich deposits of iron ore, manganese, chromium, nickel, platinum, titanium, diamonds, phosphates, and gold, and the forests of Siberia contain an estimated one-fifth of the world’s timber, mainly conifers.
The Russian fishing industry is the world’s fourth-largest, behind Japan, the US, and China. Russia accounts for one-quarter of the world’s productions of fresh and frozen fish and about one-third of world output of canned fish. Natural resources, especially energy, dominate Russian exports. Ninety percent of Russian exports to the US are mineral or other raw materials.
Industry and manufacturing. Russia is one of the most industrialized of the former Soviet republics. Much of Russia’s manufacturing industry is based in the west, in European Russia. Moscow and SPB are leading manufacturing cities, while other industrial centers are situated along the Volga and in the Ural Mountains region.
Manufacturing in the most valuable activity in Russia. Chemicals, chemical product and oil refining are important branches. Processed food, paper and textiles are other major manufacturing products.
In Soviet times the government developed many state-owned industries, producing heavy machinery, tractors and electrical equipment, as well as ships and other equipment. After the breakup of the Soviet Union in 1991, Russia began to convert its government-controlled industries into privately owned ones. Many new businesses and joint ventures with foreign partners have been set up since then.
Today Moscow area is Russia leading manufacturing centre. Its factories produce chemicals, electrical equipment, electronics, motor vehicles, processes foods, steel, and textiles. Ships and industrial equipment are manufactured in St.Petersburg. Metal processing and machinery production are important in the Urals. Most oil refining takes place in the Volga-Urals region. New industries are being developed in Siberia to make use of the region’s mineral and hydroelectric resources. Light industry, particularly textile production, in centered in the region around Moscow and along the Volga River. The paper industry operates along the southern edge of the forest belt.
Agricultures. Russia has vast areas of fertile land, especially in the black earth region in the southern steppes. However, most of Russia has s short growing season. Droughts periodically affect 60 percent of Russia’s best farmland, while occasional storms do much damage.
Northern areas concentrate mainly on livestock, and the southern parts and western Siberia produce grain.
Grains are among Russia’s most important crops, occupying more than 50 percent of cropland. Wheat is dominant in most grain-producing areas. Winter wheat is cultivated in the North Caucasus and spring wheat in Don Basin, in the middle Volga region and in southwestern Siberia.
Barley, second to wheat in gross yield, is grown mainly for animal feed and beer production in colder regions such as far north and well into the highlands of southern Siberia. Production of oats, which once ranked third among Russia’s grains, has declined as machines have replaced horses in farming operations.
Other major crops include flax, fruits, potatoes and other vegetables, sugar beet and sunflowers (for making sunflowers oil). Cattle, sheep and pig farming have become increasingly important, while people in the northern tundra have herds of reindeer.