Economy of Russia Russia has

Economy of Russia

• Russia has been growing steadily since the financial crisis of 1998. • high oil prices, a cheap ruble, consumer demand investment have played an important role in fighting the aftermath of the crisis. • poverty has decreased steadily and the middle class has continued to expand. • Russia has also improved its international financial position since the 1998 financial crisis. • Oil export made Russia the third largest oil reserve in the world. • Russia has signed an agreement with the US as a prelude to possible WTO entry. • Fraud at the elections, corruption, and lack of trust undermine domestic and foreign investment. • The currency of Russia is the Ruble.

Exports • fuels, energy, metals, machinery & equipment, chemicals, and oil, Vodca, and clothes. • Export markets : Ukraine, Germany, Belarus, Netherlands and China. • Russia is a major exporter of iron ore, with most production occurring in the Kursk Magnetic Anomaly of south central Russia. • Russia is also a notable exporter of copper and nickel. Copper and nickel ores are mined primarily in the Urals, the Kola Peninsula near Murmansk. • The country is one of the world's leading producers of gold, which is mined in the Urals, western Siberia, and eastern Siberia in the valley of the Lena River. • Russia is also a major diamond producer.

Imports • machinery & equipment, food and agricultural raw materials, chemicals and metals. • Major Import Markets : Germany, Ukraine, Belarus and the US.

Agriculture • Russia is a major producer of wheat (пшеница), barley (ячмень), oats (овес), and rye (рожь), corn (кукуруза), millet (просо), buckwheat (гречка), rice, and soybeans, apples, pears (груши), and cherries (вишня).

Fishing • Russia's fishing industry is one of the largest in the world. In the early 1990 s the annual catch (улов) was about 9. 2 million metric tons.

Mining (горная промышленность) • Mining is a major sector of the Russian economy and provides : energy-bearing minerals, including petroleum, coal, and natural gas. Functions: • to meet domestic demands • provide for nations in its economic sphere, • export to industrial nations of the West in return for needed hard currency.

Collapse (развал) of the USSR (СССР) • independence of the USSR's republics on 26 December 1991 • In 1991 the USSR stopped existence. The Yeltsin government dissolved (распустить) the USSR. Yeltsin became the first president of the Russian Federation. Yeltsin made many economic reforms: • privatization • macroeconomic stabilization

Reforms • Domestic markets were opened to foreign trade and investment • Market economy instead of central planning • “shock therapy”

Optimism The USSR had a huge foreign debt (=sovereign debt) The investors didn’t believe Russia could pay this debt and refuse to invest money. In 1996 and 1997 everything seemed fine: • There was balance between export and import • The World Bank invested $3 billion per year • Inflation decreased from 131% in 1995 to 22% in 1996 and 11% in 1997 • The exchange rate: 5 -6 rubles = 1 dollar • Oil export: $23 per barrel (which made 45% fo the GDP in 1997) • Economic growth = 0. 8%

Problems • Real wages were VERY low (1/2 from what people earned in 1991) • Only 40% of people were paid in full and on time • Unrest in the Duma • Low taxes => public sector deficit • the first war in Chechnya cost Russia $5. 5 billion • Corruption

1997 -1998 • The foreign investors began to sell the ruble and buy the dollars • The oil prices (цены) dropped (упали) • on March 23, President Yeltsin fired (уволил) his entire (все) government, including Prime Minister Viktor Chernomyrdin. • The Duma and the CBR (Central Bank of Russia) (ЦБ) were in conflict

• The CBR lent (давать в долг) money at 150% • The oil prices dropped (упали) to $11 per barrel • The government formed an anticrisis plan

Default (дефолт, неплатеж) "Ruble crisis" • August 17, 1998 • the Russian stock (акции), bond (облигации), and currency (валюта) markets collapsed (рухнуть) because the investors were afraid to invest money in Russia • in August 1998 Russia devalued (обесценить) the ruble and declared (объявить) a stop of payments to foreign creditors (default on domestic debt (внутренний долг)

Result • • The export increased The import was low Inflation reached 84% Many banks were closed The debt on salaries was $5 billion Prices on domestic food increased 100% Prices on imported food increased 4 times (x 4) People stocked up for bad times (запасались на «черный день» ) • Millions of people LOST their life savings when the banks closed • Mass protests and manifestations

• Rationing of food (food cards (продуктовые карточки) were introduced) • The new Foreign Minister Yevgeny Primakov restored (восстановил) political stability • But on October, 9 Russia asked for humanitarian aid

Recovery ( «выздоровление» ) • • Oil prices rose Barter exchange helped to restore economy Demand of Russian goods and services rose Unemployment decreased