Following the 2022 Russian invasion of Ukraine, the country has faced extensive sanctions and boycotts from the Western world and its allies which are aimed at isolating the Russian economy from the Western financial system.[54] Russia's economy has been affected by the sanctions but appears relatively resilient to them.[55][56][57][58]
The Russian economy is volatile. Since 1989 its institutional environment was transformed from a socialist command economy to a capitalistic market system. Its industrial structure dramatically shifted away from heavy investment in manufacturing and agriculture toward market services, oil, gas, and mining. Richard Connolly argues that for the last four centuries, there are four main characteristics of the Russian economy that have shaped the system and persisted despite the political upheavals. First of all the weakness of the legal system means that impartial courts do not rule and contracts are problematic. Second is the underdevelopment of modern economic activities, with very basic peasant agriculture dominant into the 1930s. Third is technological underdevelopment, eased somewhat by borrowing from the West in the 1920s. And fourth lower living standards compared to Western Europe and North America.[59]
Russian national income per capita increased and moved to closer to the most developed economies of Northern and Western Europe from the late 17th century to the 1740s.[60] After the 1740s, the Russian economy stagnated and declined. In the 18th century, Russian national income per capita was about 40-70% of British per capita income but higher than Poland's.[60] By 1860, Russian GDP per capita was similar to that of Japan; one-third of GDP per capita in the United States or the United Kingdom; and twice that of China or India.[60] Russia was a late industrializer.[60]
Serfdom, which held back development of the wage labor market and created a shortage of labor for industry, was abolished in 1861.[60] In the aftermath, GDP per capita was volatile and did not substantially increase.[60] Steady economic growth began in the 1890s, alongside a structural transformation of the Russian economy.[60] By the time World War I started, more than half the Russian economy was still devoted to agriculture.[60] By the early 20th century, the Russian economy had fallen further behind the American and British economies.[60] From the late 19th century to the early 20th century, the economy grew at a similar pace as the Japanese economy and faster than the Brazilian, Indian and Chinese economies.[60]
Beginning in 1928, the course of the Soviet Union's economy was guided by a series of five-year plans. By the 1950s, the Soviet Union had rapidly evolved from a mainly agrarian society into a major industrial power.[61]
By the 1970s the Soviet Union was in an 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.
From 1975 to 1985, corruption and data manipulation became common practice within the bureaucracy to report satisfied targets and quotas, thus entrenching the crisis. Starting in 1986, Mikhail Gorbachev attempted to address economic problems by moving towards a market-oriented socialist economy. Gorbachev's policies of Perestroika failed to rejuvenate the Soviet economy; instead, a process of political and economic disintegration culminated in the breakup of the Soviet Union in 1991.
Transition to market economy (1991–98)
Russian inflation rate 1993-2022Main Directorate of the Bank of Russia for the Central Federal DistrictRussia's GDP by purchasing power parity (PPP) in 1991–2019 (in international dollars)
Yeltsin's program of radical, market-oriented reform came to be known as a "shock therapy". It was based on the policies associated with the Washington Consensus, recommendations of the IMF and a group of top American economists, including Larry Summers[62][63][64] who in 1994 urged for "the three '-ations'—privatization, stabilization, and liberalization" to be "completed as soon as possible."[65] With deep corruption afflicting the process, the result was disastrous, with real GDP falling by more than 40% by 1999, hyperinflation which wiped out personal savings, crime and destitution spreading rapidly.[66][67] The jump in prices from shock therapy wiped out the modest savings accumulated by Russians under socialism and resulted in a regressive redistribution of wealth in favour of elites who owned non-monetary assets.[68]
Shock therapy was accompanied by a drop in the standard of living, including surging economic inequality and poverty,[69] along with increased excess mortality[70][71] and a decline in life expectancy.[72] Russia suffered the largest peacetime rise in mortality ever experienced by an industrialized country.[73] Likewise, the consumption of meat decreased: in 1990, an average citizen of the RSFSR consumed 63 kg of meat a year; by 1999, it had decreased to 45 kg.[74]
The majority of state enterprises were privatized amid great controversy and subsequently came to be owned by insiders[75] for far less than they were worth.[63] For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government.[76] Many of them promptly invested their newfound wealth abroad, producing an enormous capital flight.[77] This rapid privatization of public assets, and the widespread corruption associated with it, became widely known throughout Russia as "prikhvatizatisiya," or "grab-itization."[78]
Difficulties in collecting government revenues amid the collapsing economy and dependence on short-term borrowing to finance budget deficits led to the 1998 Russian financial crisis.
In the 1990s, Russia was a major borrower from the International Monetary Fund, with loan facilities totalling $20 billion. The IMF was criticised for lending so much, as Russia introduced little of the reforms promised for the money and a large part of these funds could have been "diverted from their intended purpose and included in the flows of capital that left the country illegally".[79][80]
On 24 September 1993, at a meeting of the Commonwealth of Independent States (CIS) Council of Heads of State in Moscow, Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Uzbekistan signed the Treaty on the creation of an Economic Union which reinforces by an international agreement the intention to create an economic union through the step-by-step creation of a free trade area, a customs union and conditions for the free movement of goods, services, capital and labor. All these countries have ratified the Treaty and it entered into force on 14 January 1994. Turkmenistan[81] and Georgia joined in 1994 and ratified the Treaty, but Georgia withdrew in 2009.[82]
On 15 April 1994, at a meeting of the Commonwealth of Independent States (CIS) Council of Heads of State in Moscow, all 12 post-Soviet states signed the international Agreement on the Establishment of a Free Trade Area in order to move towards the creation of an economic union. Article 17 also confirmed the intention to conclude a free trade agreement in services.[83] Article 1 indicated that this was "the first stage of the creation of the Economic Union", but in 1999 the countries agreed to remove this phrase from the agreement.
[84] Russia concluded bilateral free trade agreements with all CIS countries and did not switch to a multilateral free trade regime in 1999. Bilateral free trade agreements, except for Georgia, Azerbaijan and Turkmenistan[85][86] (all of these are in force as of 2024), ceased to apply only after 2012 with Russia's accession to the new multilateral CIS free trade area.
Further integration took place outside the legal framework of the CIS. Pursuant to the Treaty on the creation of an Economic Union, the Agreement on the Customs Union between the Russian Federation and the Republic of Belarus was signed on 6 January 1995 in Minsk.[87] The Government of the Republic of Belarus and the Government of the Russian Federation, on the one side, and the Government of the Republic of Kazakhstan, on the other side, signed an Agreement on the Customs Union in Moscow on 20 January 1995 in order to move towards the creation of an economic union as envisaged by the treaty.[88] The implementation of these agreements made it possible to launch the Customs Union of the Eurasian Economic Community in 2010. According to the database of international treaties of the Eurasian Economic Union, these agreements are still in force as of 2024 and apply in part not contrary to the Treaty on the Eurasian Economic Union.
[89][90][91]
International agreements such as the following have further deepened trade and economic relations and integration with Belarus. The Community of Belarus and Russia was founded on 2 April 1996. The "Treaty on the Union between Belarus and Russia" was signed on 2 April 1997. And finally the Treaty on the Creation of a Union State of Russia and Belarus was signed on 8 December 1999.
Recovery and growth (1999–2008)
Oil prices in the 2000s
Russia bounced back quickly from the August 1998 financial crash, partly because of a devaluation of the ruble, which made domestic producers more competitive nationally and internationally.
Between 2000 and 2008, Russian economy got a major boost from rising commodity prices. GDP grew on average 7% per year.[66] Disposable incomes more than doubled and in dollar-denominated terms increased eightfold.[93] The volume of consumer credit between 2000 and 2006 increased 45 times, fuelling a boom in private consumption.[94][95] The number of people living below poverty line declined from 30% in 2000 to 14% in 2008.[96][97]
Russia repaid its borrowing of $3.3billion from the IMF three years early in 2005.[98]
Inflation remained a problem however, as the central bank aggressively expanded money supply to combat appreciation of the ruble.[99] Nevertheless, in 2007 the World Bank declared that the Russian economy achieved "unprecedented macroeconomic stability".[100] Until October 2007, Russia maintained impressive fiscal discipline with budget surpluses every year from 2000.[92]
Russian banks were hit by the global credit crunch in 2008, though no long term damage was done thanks to proactive and timely response by the government and central bank, which shielded the banking system from effects of the global financial crisis.[101][102][103] A sharp, but brief recession in Russia was followed by a strong recovery beginning in late 2009.[66]
Between 2000 and 2012, Russia's energy exports fuelled a rapid growth in living standards, with real disposable income rising by 160%.[104] In dollar-denominated terms this amounted to a more than sevenfold increase in disposable incomes since 2000.[93] In the same period, unemployment and poverty more than halved and Russians' self-assessed life satisfaction also rose significantly.[105] This growth was a combined result of the 2000s commodities boom, high oil prices, as well as prudent economic and fiscal policies.[106] However, these gains have been distributed unevenly, as the 110 wealthiest individuals were found in a report by Credit Suisse to own 35% of all financial assets held by Russian households.[107][108] Russia also has the second-largest volume of illicit money outflows, having lost over $880 billion between 2002 and 2011 in this way.[109] Since 2008 Forbes has repeatedly named Moscow the "billionaire capital of the world".[110]
Rapid GDP and income growth continued until 2013. The most important topic of discussion in the economy for a decade was the middle-income trap. In 2013, the World Bank announced that Russia had graduated to a high-income economy based on the results of 2012[118][119][120] but in 2016 it was reclassified as an upper-middle income economy[121][122] due to changes in the exchange rate of the Russian ruble, which is a floating currency. While the UN Human Development Index, which assesses progress in the standard of living, health and education, ranks Russia among the 'very high human development' countries.[123][124]
Russian leaders repeatedly spoke of the need to diversify the economy away from its dependence on oil and gas and foster a high-technology sector.[125] In 2012 oil, gas and petroleum products accounted for over 70% of total exports.[126] This economic model appeared to show its limits, when after years of strong performance, the Russian economy expanded by a mere 1.3% in 2013.[66] Several reasons were proposed to explain the slowdown, including a prolonged recession in the EU, which is Russia's largest trading partner, stagnant oil prices, lack of spare industrial capacity and demographic problems.[127] Political turmoil in neighbouring Ukraine added to the uncertainty and suppressed investment.
2014–21
Countries by natural gas proven reserves (2014), based on data from The World Factbook. Russia has the world's largest reserves.
Following the annexation of Crimea in March 2014 and Russia's involvement in the ongoing War in Donbas, the United States, the European Union, Canada, and Japan imposed sanctions on Russia.[128] This led to the decline of the Russian ruble and sparked fears of a Russian financial crisis. Russia responded with sanctions against a number of countries, including a one-year period of total ban on food imports from the European Union and the United States.
According to the Russian economic ministry in July 2014, GDP growth in the first half of 2014 was 1%. The ministry projected growth of 0.5% for 2014.[129] The Russian economy grew by a better than expected 0.6% in 2014.[130] Russia is rated one of the most unequal of the world's major economies.[131]
As a result of the World Bank's designation of a high-income economy, Barack Obama issued a proclamation 9188: "I have determined that Russia is sufficiently advanced in economic development and improved in trade competitiveness that it is appropriate to terminate the designation of Russia as a beneficiary developing country effective October 3, 2014."[132] U.S. Customs and Border Protection (CBP) indicated that Russia formally graduated from the GSP program on 4 October 2014.[133]
As of 2015, real income was still lower for 99% of Russians than it was in 1991.[73]
The Russian economy risked going into recession from early 2014, mainly due to falling oil prices, sanctions, and the subsequent capital flight.[134] While in 2014 GDP growth remained positive at 0.6%,[135] in 2015 the Russian economy shrunk by 3.7% and was expected to shrink further in 2016.[136] By 2016, the Russian economy rebounded with 0.3% GDP growth and officially exited recession. The growth continued in 2017, with an increase of 1.5%.[137][138]
In January 2016, Bloomberg rated Russia's economy as the 12th most innovative in the world,[139] up from 14th in January 2015[140] and 18th in January 2014.[141] Russia has the world's 15th highest patent application rate, the 8th highest concentration of high-tech public companies, such as internet and aerospace and the third highest graduation rate of scientists and engineers.[139]
According to the British company BP (Statistical Yearbook 2018), proven oil reserves in Russia at the end of 2017 were 14.5 billion tons, natural gas was 35 trillion cubic meters.[142] Gold reserves in Russia's subsoil, according to the U.S. Geological Survey, were 5,500 tons at the end of 2017.[143]
In 2019, the Ministry of Natural Resources estimated the country's mineral reserves in physical terms. At the end of 2017, oil reserves were 9.04 billion tons, gas reserves were 14.47 trillion cubic meters, gold reserves were 1,407 tons, and diamonds reserves were 375 million metric carats. Then for the first time the Ministry evaluated the mineral reserves of Russia in terms of value. The value of oil reserves amounted to 39.6 trillion rubles, the value of gas amounted to 11.3 trillion rubles, coking coal amounted to almost 2 trillion rubles, iron ore amounted to 808 billion rubles, diamonds amounted to 505 billion rubles, gold amounted to 480 billion rubles. The combined value of all mineral and energy resources (oil, gas, gold, copper, iron ore, thermal and lignite coal, and diamonds) amounted to 55.24 trillion rubles (US$844 billion), or 60% of GDP for 2017. The assessment occurred after the adoption of a new classification of reserves in Russia and the object of the methodology was only those fields for which a license was issued, so the assessment of the Ministry of Natural Resources is less than the total volume of explored reserves. Experts criticized such "an unsuccessful attempt to estimate reserves," pointing out that "one should not take such an estimate seriously" and "the form contains an incorrect formula for calculating the value".[144][145]
2022–present
Like some other major economies like the United States, China, Brazil, Japan, Argentina and others, Russia has one of the world's lowest import dependence as a percentage of GDP among more than 200 countries and territories over the past 30 years. Sanctions, boycotts and disruption of supply chains in 2022 led to a drop of import from 20.7% (top-15) to 15.6% (top-5).[146]
According to most estimates, every day of the war in Ukraine costs Russia $500 million to $1 billion.[152][153][154]
On 27 June 2022, Russia defaulted on part of its foreign currency, its first such default since 1918.[155]
In November 2022, it was reported that Russia had officially entered a recession as the Federal State Statistics Service had reported a national GDP loss for the second consecutive quarter.[156]
As part of the sanctions imposed on Russia, on 2 September 2022, the finance ministers of the G7 group agreed to cap the price of Russian oil and petroleum products, designed to allow Russia to maintain production, but limiting the revenue from oil sales.[157][158]
In 2022, the Economist calculated that Russia did graduate into the category of high-income economies by 2022, if counted at purchasing power parity rather than the exchange rate but could fall below the threshold because of invasion of Ukraine.[159] In December 2022 in a study an economist at the Bank of Russia's Research and Forecasting Department, finds that the import dependence of the Russian economy is relatively low, does not exceed the median for other countries and the share of imports in most industries is lower than in other countries. The key explanation for this could be the low involvement of the Russian economy in global value supply chains and its focus on production of raw materials. However, 60% of Russia's imports come from the countries that have announced sanctions against Russia.[160]
TASS reported poor results for the Russian economy for quarter 1 2023 with revenues of 5.7 trillion roubles – down 21% (mainly due to falling oil revenues), expenditure 8.1 trillion roubles – up 34% (mainly due to increased military costs), creating a deficit 2.4 trillion roubles – ($29.4 billion)[161]
Following Central Bank of Russia interventions, the exchange rate of rouble against the dollar remained relatively stable in 2022, although in 2023 it started to decrease significantly, reaching 97 RUB per 1 USD on 15 August 2023. Both the interventions and the exchange rate decrease resulted in significant criticism of the Central Bank by Russian state propaganda.[162] Quarter 2 of 2023 saw a 13% fall in the value of the rouble against the dollar and a current account surplus estimated in to be falling by 80% from the annual 2022 surplus of $233 billion.[163]
After 11 years of negotiations, on 8 June 2023, in Sochi, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan signed the Commonwealth of Independent States Agreement on Free Trade in Services, Establishment, Operations and Investment to partly integrate Uzbekistan and Tajikistan on the common standards of the WTO (General Agreement on Trade in Services) and the EAEU (some provisions were borrowed from EAEU law) even without their membership in the WTO (Uzbekistan) or the EAEU (Uzbekistan and Tajikistan).[164] The Treaty on the Eurasian Economic Union has preserved international agreements on trade in services in the sphere of national competence of the member states therefore, the EAEU is not a party to the agreement.
In August and September 2023, the Central Bank of Russia started raising the key lending rate, ending up at 13% in September, while USD to RUB exchange rate remained at 95 RUB.[165] As of June 2023 share of Russia's exports to EU dropped to 1.7% while Russia's imports from EU dropped to 1.5%.[166] In October 2023 the "psychological barrier" of 100 RUB per 1 USD was crossed.[167]
The 2024 budget expects revenues of 35 trillion rubles ($349 billion) with expenditure of 36.6 trillion, based on a Urals oil forecast of $71.30 per barrel, a 90.1 rubles to 1 USD exchange rate and inflation of 4.5%. Defence spending will double to 10.78 trillion, 29.4% of expenditure. Russia currently has a record low unemployment rate of just 3 percent.[168]
Unemployment rate of Russia since the fall of the Soviet Union
Russian inflation rate 2012–2022
Data
The following table shows the main economic indicators in 1980–2023. Inflation below 5% is in green.[169]
Year
GDP
(in billion. US$PPP)
GDP per capita
(in US$ PPP)
GDP
(in billion US$nominal)
GDP per capita
(in US$ nominal)
GDP growth
(real)
Inflation rate
(in Per cent)
Unemployment
(in Per cent)
Government debt
(in % of GDP)
1992
1,602.6
10,805.2
71.6
482.8
n/a
n/a
5.2%
n/a
1993
1,497.9
10,091.3
196.2
1,322.0
-8.7%
874.3%
5.9%
n/a
1994
1,335.6
8,999.0
293.8
1,979.4
-12.7%
307.5%
8.1%
n/a
1995
1,307.7
8,818.3
335.8
2,264.3
-4.1%
197.3%
8.3%
n/a
1996
1,283.6
8,668.4
412.7
2,787.0
-3.6%
47.8%
9.3%
n/a
1997
1,323.7
8,958.2
433.7
2,935.0
1.4%
14.8%
10.8%
51.5%
1998
1,267.1
8,588.1
287.7
1,949.8
-5.3%
27.7%
11.9%
135.2%
1999
1,366.5
9,303.2
209.7
1,427.3
6.4%
85.7%
13.0%
92.4%
2000
1,537.9
10,511.7
278.3
1,902.0
10.0%
20.8%
10.6%
55.9%
2001
1,652.6
11,346.4
328.5
2,255.3
5.1%
21.5%
8.9%
44.4%
2002
1,758.0
12,127.0
370.1
2,552.8
4.7%
15.8%
8.0%
37.6%
2003
1,924.4
13,333.1
461.5
3,197.6
7.3%
13.7%
8.2%
28.3%
2004
2,117.9
14,727.8
633.3
4,404.0
7.2%
10.9%
7.7%
20.8%
2005
2,323.6
16,221.8
817.7
5,708.8
6.4%
12.7%
7.2%
14.9%
2006
2,590.6
18,133.2
1,060.9
7,426.0
8.2%
9.7%
7.1%
9.8%
2007
2,887.6
20,229.0
1,393.4
9,761.4
8.5%
9.0%
6.0%
8.0%
2008
3,097.5
21,700.5
1,779.1
12,464.2
5.2%
14.1%
6.2%
7.4%
2009
2,873.5
20,117.9
1,307.9
9,157.0
-7.8%
11.6%
8.2%
9.9%
2010
3,039.0
21,271.9
1,633.1
11,431.1
4.5%
6.8%
7.4%
10.1%
2011
3,259.3
22,783.5
2,046.6
14,306.4
5.1%
8.4%
6.5%
10.3%
2012
3,480.3
24,278.8
2,191.5
15,288.0
4.0%
5.1%
5.5%
11.2%
2013
3,741.8
26,044.8
2,288.4
15,928.7
1.8%
6.8%
5.5%
12.3%
2014
3,763.5
25,730.6
2,048.8
14,007.5
0.7%
7.8%
5.2%
15.1%
2015
3,526.2
24,062.5
1,356.7
9,257.9
-2.0%
15.5%
5.6%
15.3%
2016
3,538.6
24,104.1
1,280.6
8,723.5
0.2%
7.0%
5.5%
14.8%
2017
3,818.8
25,999.3
1,575.1
10,724.0
1.8%
3.7%
5.2%
14.3%
2018
4,019.8
27,386.2
1,653.0
11,261.7
2.8%
2.9%
4.8%
13.6%
2019
4,182.4
28,500.4
1,695.7
11,555.3
2.2%
4.5%
4.6%
13.7%
2020
4,124.5
28,217.3
1,484.4
10,155.3
-2.7%
3.4%
5.8%
19.2%
2021
4,551.8
31,271.3
1,836.6
12,218.7
5.6%
6.7%
4.8%
16.5%
2022
4,769.8
33,252.7
2,244.2
15,645.7
-2.1%
13.8%
3.9%
18.9%
2023
5,056.8
35,309.6
1,862.5
13,005.7
2.2%
5.3%
3.3%
21.2%
Income inequality
In Russia, areas where income is higher have increased air pollution. However while income may have been higher in these regions a greater disparity in income inequality was found. It was discovered that "greater income inequality within a region is associated with more pollution, implying that it is not only the level of income that matters but also its distribution".[170] In Russia areas lacking in hospital beds suffer from greater air pollution than areas with higher numbers of beds per capita which implies that the poor or inadequate distribution of public services also may add to the environmental inequality of that region.[170]
Currency and monetary policy
The currency of the Russian Federation is the Russian ruble.
The currency exchange rate is floating. The Central Bank of the Russian Federation follows inflation targeting policy. Higher inflation than in developed countries has remained throughout the last 25-30 post-Soviet years and the devaluation of the currency (in relation to foreign currencies and in relation to domestic goods) is significantly compensated by higher interest rates and an increase in nominal incomes and assets. This situation is typical for developing markets. Typically devaluations of the ruble relative to foreign currency strongly stimulate the export-oriented economy of Russia.
Ruble's Real Effective Exchange Rate remains in 2022-23 higher than in 1996 and 1998[171] when the sharp devaluations happened relative to the foreign currency.
Russia was expected to have a Government Budget deficit of $21 billion in 2016.[172] The budget deficit narrowed to 0.6% of GDP in 2017 from 2.8% in 2016.[173]
In 2022, domestic government debt increased by 13.9 percent to 18.78 billion rubles.[178][179] Russia Domestic government Debt data was reported at 19,801.921 RUB bn in May 2023.[180]
In 2022, the share of external debt to GDP was 17%, decreasing from 26.3% in 2021.[176][181] Russia's external debt was estimated at 381.8 billion U.S. dollars as of 1 January 2023, down 20.8 percent from the previous year.[182] Russia External Debt reached 357.9 USD billion in March 2023, compared with 380.5 USD billion in the previous quarter.[183]
On 1 January 2004, the Government of Russia established the Stabilization fund of the Russian Federation as part of the federal budget to balance it if price of oil falls. On 1 February 2008, the Stabilization fund was divided into two parts. The first is a reserve fund equal to 10% of GDP and was to be invested in a similar way as the Stabilization Fund. The second is the National Welfare Fund of the Russian Federation to be invested in more risky instruments, including some shares in domestic and foreign companies. The Reserve fund which started with $125 billion was exhausted by 2017 and discontinued. The National Wealth Fund had started with $32 billion in 2008 and by August 2022, peaked at $201 billion.[184] December 2023 saw it fall to $133 billion with liquid assets also down at $56 billion.[185]
Russia was the lowest rated European country in Transparency International's Corruption Perceptions Index for 2020; ranking 129th out of 180 countries.[186] Corruption is perceived as a significant problem in Russia,[187] impacting various aspects of life, including the economy,[188] business,[189]public administration,[190][191]law enforcement,[192]healthcare,[193] and education.[194] The phenomenon of corruption is strongly established in the historical model of public governance in Russia and attributed to general weakness of rule of law in Russia.[195] As of 2020, the percentage of business owners who distrust law enforcement agencies rose to 70% (from 45% in 2017); 75% don't believe in impartiality of courts and 79% do not believe that legal institutions protect them from abuse of law such as racketeering or arrest on dubious grounds.[196]
Until 2022 Russia was a key oil and gas supplier to much of Europe.Rosneft headquarters on the bank of the Moskva River, Moscow
The mineral-packed Ural Mountains and the vast fossil fuel (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.
In the mid-2000s, the share of the oil and gas sector in GDP was around 20%, and in 2013 it was 20–21% of GDP.[203] The share of oil and gas in Russia's exports (about 50%) and federal budget revenues (about 50%) is large, and the dynamics of Russia's GDP are highly dependent on oil and gas prices,[204] but the share in GDP is much less than 50%. According to the first such comprehensive assessment published by the Russian statistics agency Rosstat in 2021, the maximum total share of the oil and gas sector in Russia's GDP, including extraction, refining, transport, sale of oil and gas, all goods and services used, and all supporting activities, amounts to 16.9% in 2017, 21.1% in 2018, 19.2% in 2019 and 15.2% in 2020. To compare the data obtained using the same methodology, the source provides data for other countries. This is more than the share of GDP in the United States (8%) and Canada (less 10%). This is comparable to the share of GDP in Norway (14%) and Kazakhstan (13.3%). It is much lower than the share of GDP in the United Arab Emirates (30%) and Saudi Arabia (50%). This assessment did not include, for example, the production of used pumps or specialized education, which should have been included, according to experts.[205][206][207][208][209] Russia consumes domestically two-thirds of its gas production and a quarter of its oil production while it sells three-quarters of its oil on the world market and Russia's share of the traded world oil market is 17.5% - more than Saudi Arabia's.[210][211] At the same time, experts note that there are formal and informal part of the rent and the total oil and gas rent in 2023 can be estimated at 24% of Russia's GDP. Michael Alexeyev (son of Lyudmila Alexeyeva), a professor of economics at Indiana University, notes that the oil and gas taxes reported by the government do not include corporate dividends and the so-called indirect or additional revenues derived from the expenditure of oil and gas rents in the economy.[212] There is also such an indicator as the oil rent (% of GDP), which is published by the World Bank. It is 9.7% for Russia, 14.8% for Kazakhstan, 6.1% for Norway, 23.7% for Saudi Arabia, 15.7% for the United Arab Emirates, 2.8% for Canada and 0.6% for the United States.[213]
2023 saw a fall in Russia's oil and gas tax revenues of 24% to 8.8 trillion roubles ($99.4 billion) compared to 2022.[214]
Russia is also a leading producer and exporter of minerals and gold. 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.[215]
In 2019, the country was the 3rd world producer of gold;[216] 2nd worldwide producer of platinum;[217] 4th worldwide producer of silver;[218] 9th largest world producer of copper;[219] 3rd largest world producer of nickel;[220] 6th largest world producer of lead;[221] 9th largest world producer of bauxite;[222] 10th largest world producer of zinc;[223] 2nd worldwide producer of vanadium;[224] 2nd largest world producer of cobalt;[225] 5th largest world producer of iron ore;[226] 7th largest world producer of boron;[227] 9th largest world producer of molybdenum;[228] 13th largest world producer of tin;[229] 3rd largest world producer of sulfur;[230] 4th largest world producer of phosphate;[231] 8th largest world producer of gypsum;[232] in addition to being the world's 10th largest producer of salt.[233] It was the world's 6th largest producer of uranium in 2018.[234]
Russia's agriculture sector contributes about 5% of the country's total GDP, although the sector employs about one-eighth of the total labour force.[235] It has the world's third-largest cultivated area, at 1,265,267 square kilometres (488,522 sq mi). However, due to the harshness of its environment, about 13.1% of its land is agricultural,[1] and only 7.4% of its land is arable.[236] The main product of Russian farming has always been grain, which occupies considerably more than half of the cropland.[235] Russia is the world's largest exporter of wheat,[237] and is the largest producer of barley,[238]buckwheat, oats,[239] and rye,[240] and the second-largest producer of sunflower seed.[241] Various analysts of climate change adaptation foresee large opportunities for Russian agriculture during the rest of the 21st century as arability increases in Siberia, which would lead to both internal and external migration to the region.[242]
More than one-third of the sown area is devoted to fodder crops, and the remaining farmland is devoted to industrial crops, vegetables, and fruits.[235] Owing to its large coastline along three oceans, Russia maintains one of the world's largest fishing fleets, ranking sixth in the world in tonnage of fish caught; capturing 4,773,413 tons of fish in 2018.[243] It is also home to the world's finest caviar (the beluga), and produces about one-third of all canned fish, and some one-fourth of the world's total fresh and frozen fish.[235]
The Sukhoi Superjet 100 is one of Russia's most recent civilian aviation products. The regional passenger plane was ordered around 280 times for various airlines and leasing companies as of 2018.
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 defence industry sectors, and aircraft products make up more than half of the country's arms exports.[244]
Automotive production is a significant industry in Russia, directly employing around 600,000 people or 1% of the country's total workforce. Russia produced 1,767,674 vehicles in 2018, ranking 13th among car-producing nations in 2018, and accounting for 1.8% of the worldwide production.[246] Following the 2022 sanctions and the withdrawal of Western manufacturers the production dropped to 450,000 passenger cars in 2022, the lowest level since the dissolution of the Soviet Union in 1991.[247] The main local brands are light vehicle producers AvtoVAZ and GAZ, while KamAZ is the leading heavy vehicle producer. In December 2022 the only foreign car manufacturers are eleven Chinese carmakers that have production operations or are constructing their plants in Russia.[248]
Electronics
Russia was experiencing a regrowth of microelectronics, with the revival of JCS Mikron until sanctions took effect in 2022.[249][250][251]
Services
Retail
As of 2013, Russians spent 60% of their pre-tax income on 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. Russia had over 1,000 shopping malls in 2020, although in 2022, many international companies left Russia resulting in empty stores in malls.[252] A supermarket selling groceries is a typical anchor store in a Russian mall.[253]
Russia's telecommunications industry is growing in size and maturity. As of December 2007, there were an estimated 4,900,000 broadband lines in Russia.[255]
As of 2020[update], 122,488,468 Russians (85% of the country's total population) were Internet users.[256]
There are four national mobile phone networks, MegaFon, Tele2, Beeline and MTS with total subscriptions between 2011 and 2021 ranging between 200 and 240 million.[257]
In 2022, construction was worth 13 trillion rubles, 5% more than in 2021. Residential construction in 2022 reached 126.7 million square metres.[267]
The 2020-2030 target for construction is 1 billion square meters of housing, 20% of all housing stock to be renovated and to increase space from 27.8 square meters up to 33.3 square meters per person.[267]
Insurance
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) [ru], as the top 10 companies in 2013 charged 58.1% premiums in total without compulsory health insurance (CHI).[268] 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%, an insufficient increase compared to 2012. The number of policies 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 by 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.[269]
Russia has more academic graduates than any other country in Europe (and world leader in percentage of population with associate degree or higher: 54%, compared to 31% in UK[270]).
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.[271] 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.[272] Meanwhile, the fastest growing segment of the IT market is offshore programming.
Interior of the Beriev Scientific and Technical Complex in Taganrog
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 locations: Moscow, Novosibirsk, Nizhny Novgorod, Kaluga, Tumen, Republic of Tatarstan and St. Peterburg Region.[271]
Under a government decree signed in 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.[273]
Russia is one of the few countries in the world with a homegrown internet search engine with a significant marketshare as the Russian-based search engine Yandex is used by 53.8% of internet users in the country.[274][275][276]
According to a UNWTO report, Russia is the sixteenth-most visited country in the world, and the tenth-most visited country in Europe, as of 2018, with 24.6 million visits.[277] Russia is ranked 39th in the Travel and Tourism Competitiveness Report 2019.[278] According to Federal Agency for Tourism, the number of inbound trips of foreign citizens to Russia amounted to 24.4 million in 2019.[279] Russia's international tourism receipts in 2018 amounted to $11.6 billion.[277] In 2020, tourism accounted for about 4% of country's GDP.[280] Major tourist routes in Russia include a journey around the Golden Ringtheme route of ancient cities, cruises on the big rivers like the Volga, and journeys on the famous Trans-Siberian Railway.[281] Russia's most visited and popular landmarks include Red Square, the Peterhof Palace, the Kazan Kremlin, the Trinity Lavra of St. Sergius and Lake Baikal.[282]
Economic integration
Russia joined the World Trade Organization (WTO) on 22 August 2012.[112]
On 20 September 2012, the Free Trade Agreement of the Commonwealth of Independent States signed on 18 October 2011 came into force (CIS FTA) for Russia and superseded previous agreements.[115] Russia is a founding member of the Eurasian Economic Union (EAEU) and is party to EAEU trade agreements with Vietnam, Iran, Singapore, and Serbia. In 2018, the EAEU signed a trade cooperation agreement with China, and it is in trade negotiations with India, Israel, and Egypt. Russia is also a party to several agreements that predate the EAEU.[283] The EAEU Treaty in 2015 superseded previous integration agreements and envisaged an economic union (the deepest stage of economic integration[116]). The EAEU provides for free movement of goods, services, capital and labour without a work permit ("four economic freedoms" as in the European Union), pursues coordinated, harmonized and single policy in the sectors determined by the Treaty and international agreements within the Union. The EAEU has a Eurasian Customs Union and an integrated single market of 183 million people.[117]
External trade and investment
Over the past 30 years, the share of imports of goods and services as a share of Russia's GDP has been below 25% for almost all years. The growth of oil rents, rapid economic growth, economic integration, WTO accession, improved transport accessibility and the government's import substitution program hardly changed the percentage, and only sanctions and boycotts in 2022 led to a drop to 15.6%.[284]
Trade
Russia recorded a trade surplus of US$15.8 billion in 2013.[285] Balance of trade in Russia is reported by the Central Bank of Russia. Historically, from 1997 until 2013, Russia balance of trade averaged US$8.338billion reaching an all-time high of US$20.647 billion in December 2011 and a record low of −185 US$ million in February 1998. Russia runs regular trade surpluses primarily due to exports of commodities.
In 2015, Russia main exports are oil and natural gas (62.8% of total exports), ores and metals (5.9%), chemical products (5.8%), machinery and transport equipment (5.4%) and food (4.7%). Others include: agricultural raw materials (2.2%) and textiles (0.2%).[286]
Russia top exports in 2021 were: Crude oil $110.9b, Processed oil $69.9b, gold $17.3b, coal $15.4b and natural gas $7.3b.[287]
Russia top imports in 2021 were: Transmission equipment $10.7b, medication $7.3b, tankers $3.7b, parts and accessories for data processing 3.7b and storage units $3.3b.[287]
Foreign trade of Russia – Russian export and import[287]
In 2017, Russian Federation's commercial services' shares of total exports and imports were 13.9% and 26.8%, respectively. Russian Federation had a trade-to-GDP ratio of 46.6% in 2017.[288] In 2013–2017, Russia had a trade surplus for goods, and a trade deficit for services. Since trade in goods is larger than trade in services, Russia had a significant trade surplus.[289] Trade is relatively important to the Russian economy: the ratio of Russia's goods trade (exports plus imports) to GDP has averaged about 40% in recent years, compared to 20% for the United States. In 2021, Russia ranked 13th among world goods exporters and 22nd among importers. According to Russian official sources, its goods exports
totaled $492 billion in 2021, up 46% from 2020 (not adjusting for inflation). Minerals, including oil and gas, accounted for almost 45% of these exports. Goods imports increased 27% to $294 billion in 2021. Machinery and mechanical appliances was the top import category,
accounting for almost a third of Russia's goods imports. In services trade, Russia ranked 26th among world exporters
and 19th among importers in 2020, the most recent year for which there is data. It was a net services importer, exporting
$49 billion worth of services and importing $76 billion.[283]
According to the World Bank, imports of goods and services occupied 21.3% of the Russian gross domestic product (GDP) in 2021
[290] and exports of goods and services occupied 30.9% of Russia's GDP.[291] Russia has trade-to-GDP ratio (trade openness) 49.26%
[292]
which is lower than an average of the countries. In December 2022 in a study an economist at the Bank of Russia's Research and Forecasting Department, finds that the import dependence of the Russian economy is relatively low, does not exceed the median for other countries and the share of imports in most industries is lower than in other countries. The key explanation for this could be the low involvement of the Russian economy in global value supply chains and its focus on production of raw materials. However, 60% of Russia's imports come from the countries that have announced sanctions against Russia.[160]
Mergers and acquisitions
Between 1985 and 2018, almost 28,500 mergers or acquisitions have been announced in Russia. This cumulates to an overall value of around 984 bil. USD which translates to 5.456 bil. RUB. In terms of value, 2007 has been the most active year with 158 bil. USD, whereas the number of deals peaked in 2010 with 3,684 (964 compared to the value record year 2007). Since 2010 value and numbers have decreased constantly and another wave of M&A is expected.[293]
The majority of deals in, into or out of Russia have taken place in the financial sector (29%), followed by banks (8.6%), oil and gas (7.8%), and Metals and Mining (7.2%).
Here is a list of the top deals with Russian companies participating ranked by deal value in mil. USD:
^
—Rosefielde, Steven, and Natalia Vennikova. “Fiscal Federalism in Russia: A Critique of the OECD Proposals". Cambridge Journal of Economics, vol. 28, no. 2, Oxford University Press, 2004, pp. 307–18, JSTOR23602130.
—Robinson, Neil. “August 1998 and the Development of Russia's Post-Communist Political Economy". Review of International Political Economy, vol. 16, no. 3, Taylor & Francis, Ltd., 2009, pp. 433–55, JSTOR27756169.
—Charap, Samuel. “No Obituaries Yet for Capitalism in Russia". Current History, vol. 108, no. 720, University of California Press, 2009, pp. 333–38, JSTOR45319724.
—Rutland, Peter. “Neoliberalism and the Russian Transition". Review of International Political Economy, vol. 20, no. 2, Taylor & Francis, Ltd., 2013, pp. 332–62, JSTOR42003296.
—Kovalev, Alexandre, and Alexandre Sokalev. “Russia: Towards a Market Economy". New Zealand International Review, vol. 18, no. 1, New Zealand Institute of International Affairs, 1993, pp. 18–21, JSTOR45234200.
—Czinkota, Michael R. “Russia's Transition to a Market Economy: Learning about Business". Journal of International Marketing, vol. 5, no. 4, American Marketing Association, 1997, pp. 73–93, JSTOR25048706.
^Excerpted from Curtis, Glenn E., ed. (1998). "Russia – Natural Resources". Country Studies US. Federal Research Division of the Library of Congress. Archived from the original on 13 March 2022. Retrieved 25 June 2021. Russia is one of the world's richest countries in raw materials, many of which are significant inputs for an industrial economy. Russia accounts for around 20 per cent of the world's production of oil and natural gas and possesses large reserves of both fuels. This abundance has made Russia virtually self-sufficient in energy and a large-scale exporter of fuels.
^ abN. Sönnichsen (15 June 2021). "Natural gas – countries with the largest reserves 2009–2019". Statista. Archived from the original on 12 August 2021. Retrieved 2 July 2021. Russia has the largest proved natural gas reserves in the world. As of 2019, it had 38 trillion cubic meters worth of the fossil fuel, four trillion cubic meters more than ten years prior.
^Davydova, Angelina (24 November 2021). "Will Russia ever leave fossil fuels behind?". BBC. Archived from the original on 13 April 2022. Retrieved 3 March 2022. Overall in Russia, oil and gas provided 39% of the federal budget revenue and made up 60% of Russian exports in 2019.
^According to the Unified Register of Legal Acts and Other Documents of the Commonwealth of Independent States, on 24 December 1993, Turkmenistan sent a notification of accession to the Treaty on the Establishment of the Economic Union. It entered into force for Turkmenistan on 22 January 1994. As of 2024, the agreement is in force according to the register (CIS Executive Committee). See https://cis.minsk.by/reestrv2/doc/257#documentCardArchived 4 January 2024 at the Wayback Machine
^Guriev, Sergei; Tsyvinski, Aleh (2010). "Challenges Facing the Russian Economy after the Crisis". In Anders Åslund; Sergei Guriev; Andrew C. Kuchins (eds.). Russia After the Global Economic Crisis. Peterson Institute for International Economics; Centre for Strategic and International Studies; New Economic School. pp. 12–13. ISBN9780881324976.
^Putin: Russia's Choice, (Routledge 2007), by Richard Sakwa, Chapter 9
^Matlack, Carol (28 January 2016). "Russia's Great Downward Shift". Bloomberg.com. Bloomberg L.P. Archived from the original on 29 January 2016. Retrieved 28 January 2016.
^ abVornovytskyy, Marina S.; Boyce, James K. (1 January 2010). Economic Inequality and Environmental Quality: Evidence of Pollution Shifting in Russia. ScholarWorks@UMass Amherst. OCLC698200672.
^Long, Tony (27 June 2012). "June 27, 1954: World's First Nuclear Power Plant Opens". Wired. Archived from the original on 17 October 2022. Retrieved 8 June 2021. 1954: The first nuclear power plant to be connected to an external grid goes operational in Obninsk, outside of Moscow... The nuclear reactor, used to generate electricity, heralded Obninsk's new role as a major Soviet scientific city, a status it retains in the Russian Federation where it carries the sobriquet of First Russian Science City.
^Shahbandeh, M. (8 July 2021). "Global barley producers by country 2020/21". Statista. Archived from the original on 18 July 2021. Retrieved 18 July 2021. This statistic provides a forecast of barley production volume worldwide in 2020/2021, by country. In that year, Russia produced about 20.63 million metric tons of barley.
^Shahbandeh, M. (25 February 2021). "Sunflower seed production in major countries 2019/20". Statista. Archived from the original on 18 July 2021. Retrieved 18 July 2021. Russia is also a major producer of sunflower seeds worldwide, with a production volume of 15.3 million metric tons in 2019/2020.
^D. Elagina (22 January 2021). "Cargo throughput volume in Russia in 2020, by port". Statista. Archived from the original on 10 June 2021. Retrieved 10 June 2021. The Russian sea port Novorossiysk, located in the Azov-Black Sea basin, handled almost 142 million metric tons of cargo in 2020 and became the leading port in the country by the cargo throughput.
^"Nuclear icebreakers – what's so special about them?". Poseidon Expeditions. Archived from the original on 24 May 2021. Retrieved 24 May 2021. Russia is the only country constructing nuclear-powered icebreakers in the world. They were purposely built for the strategic importance of the Northern Sea Route and a more evident need to guarantee the safety of the Russian trade vessels in winter and Arctic settlements' dependency on supplies.
^"Tourism Highlights 2014"(PDF). UNWTO (World Tourism Organization). 2014. Archived from the original(PDF) on 12 January 2015. Retrieved 20 January 2015.
Zinchenko, L. A., et al. "Main features of the Russian economy and its development." International Journal of Applied Business and Economic Research 15.23 (2017): 265–272.
147,190,000 (late 2021 census)[4]
6.6% (October 2023)[9]
37.5 medium (2018, World Bank)[12]
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