Economic and political overview RUSSIA: Economic and political overview

GOALS: To enquire basic knowledge about Russia and Russian economics To analyze and to understand main features of economic positions of Russia in the contemporary world To formulate personal opinion on the idea of perspectives of Russian development

RESULTS: To prepare oneself for other study courses in MGIMO, Russia To make a short presentation on the main topics of Russian economic strategy

WHAT IS RUSSIA? BIG EUROASIAN COUNTRY? IMPORTANT WORLD PARTNER? COUNTRY OF COLD AND WINTER? COUNTRY OF VODKA AND CAVIAR? COUNTRY OF ILLEGAL BILLIONAIRS?

Latest historical background Gorbachev and his team of economic advisers introduced most fundamental reforms, which became known as perestroika (restructuring). Elimination of the monopoly on most trade operations. The most significant reforms in the external sector - foreigners were allowed to invest in Russia in different forms of enterprises, and cooperatives. The reforms made some inroads in decentralization.

Unforeseen Results of Reform Gorbachev's new system had the characteristics of neither central planning nor a market economy. The Soviet Union left a legacy of economic inefficiency and deterioration to the fifteen constituent republics after its breakup in December 1991. In 1991 the Soviet GDP had declined 17 percent and was declining at an accelerating rate. Under these conditions, the general quality of life for Soviet consumers deteriorated. Consumers traditionally faced shortages of durable goods, but under Gorbachev, food, wearing apparel, and other basic necessities were in short supply. Fueled by the liberalized atmosphere of Gorbachev's glasnost (literally, public voicing--see Glossary) and by the general improvement in information access in the late 1980s, public dissatisfaction with economic conditions was much more overt than ever before in the Soviet period. The foreign-trade sector of the Soviet economy also showed signs of deterioration.

Economic Reform in the 1990s Two fundamental and interdependent goals--macroeconomic stabilization and economic restructuring--mark the transition from central planning to a market-based economy. An ambitious program of radical economic reforms. The record to date indicates that the goals for macroeconomic stabilization and economic restructuring programs may have been unrealistically high. Since 1991 both political and economic authority have devolved significantly from the national to the regional level .

Territory 17,075,400 square kilometres (Eleven time zones) Land boundaries – more than 21 139 km Population Population: 145.0 million About 57 percent of population working age. Urban population: over 107 million Rural population: over 39 million State language: Russian

Moscow: population - 8.7 million Other cities with population over 1 million: Saint Petersburg (5.0) Rostov-on-Don Chelyabinsk Samara Nizhny Novgorod Volgograd Ufa Omsk Novosibirsk Ekaterinburg Perm Voronezh Kazan 

Administrative Division 21 Republics, 6 territories, 49 regions, 1 autonomous region, 10 autonomous areas and 2 cities of Federal Importance (TOTAL: 89) May 2000 – 7 Federal districts were formed/

The State Power System in the Russian Federation One of the basic principles of constitutional government is the division of powers. The President is at the summit of the system of state power Each institution of state power is only partially responsible for enforcing the Constitution The President’s place in the state power system is tied to his constitutional prerogatives regarding, above all, the executive branch of power. relations between the President and the government reflect most fully the President’s imperative in setting domestic and foreign policy.

PRINCIPLES OF THE CONSTITUTIONAL GOVERNMENT THE DIVISION OF POWERS Powers must not be concentrated in the hands of one person or the institution POWER MUST BE DIIVIDED AMONG THE LEGISLATIVE, EXECUTIVE AND JUDICIAL BRANCHES CLEAR DELINEATION OF RESPONSIBILITIES AND A SYSTEM OF CHECKS AND BALANCES

PRESIDENT: To approve the structure of the federal executive bodies of power; To appoint deputy prime ministers and ministers: The right to preside government meetings; To excise control over the lawfullness of the government action; Direct subordination of the security ministers to the President; The right to dismiss the government or to accept the Prime Minister’s resignation (the resignation of the government); Works chares two consultative bodies – the Security Council and the State Council

GOVERNMENT The Government is headed by the Prime Minister. It also includes the deputy prime minister and federal ministers. Besides federal ministries, the structure of the Government includes federal structures and federal agencies.

Branches of Power

International organization participation APEC, ARF, ASEAN (dialogue partner), BIS, BSEC, CBSS, CE, CERN (observer), CIS, EAPC, EBRD, G- 8, IAEA, IBRD, ICAO, ICC, ICCT (signatory), ICFTU, ICRM, IDA, IFC, IFRCS, IHO, ILO, IMF, IMO, Interpol, IOC, IOM (observer), ISO, ITU, LAIA (observer), MIGA, MINURSO, MONUC, NAM (guest), NSG, OAS (observer), ONUB, OPCW, OSCE, Paris Club, PCA, PFP, SCO, UN, UN Security Council, UNAMSIL, UNCTAD, UNHCR, UNIDO, UNITAR, UNMEE, UNMIK, UNMIL, UNMISET, UNMOVIC, UNOCI, UNOMIG, UNTSO, UPU, WCO, WFTU, WHO, WIPO, WMO, WToO, WTO (observer), ZC

Labor force: 71.83 million Labor force - by occupation: agriculture 12.3%, industry 22.7%, services 65% Unemployment rate: 8.3% plus considerable underemployment

Industrial production growth, % 4,6 3,7 7 8,3 4 7,7   2001 2002 2003 2004 2005 2006 GDP Growth,% 5,1 4,7 7,3 7,2 6,4 7,9 Industrial production growth, % 4,6 3,7 7 8,3 4 7,7 Fixed capital Investment growth, % 8,7 2,6 12,5 10,9 10,5 1,6 Federal Government Balance, %GDP 3 2,3 1,7 4,2 7,5 Jan-Feb 11,4 Inflation (CPI), % change 18,6 15,1 12 11,7 10,0 Current Account, bln $ 35,1 32,8 35,9 60 86,6 28 Reserves(including gold) bln $ 36,6 47,8 76,9 124,5 182,2 195,9

GDP and Industrial Production Structural composition has changed (Table 2) Construction – rapid growth At least part of the decline in 2006 – exceptionally cold winter Different competitiveness level compared to foreign goods Significant growth in consumer electronics (lower import tariffs on parts) If the growth in 2003 and the first part of 2004 was lead by oil and gaz, subsequent growth has shifted to the production of largerly non-tradable services and goods for domestic market. The food industry continued to grow, the light industry was still under the level of competitiveness.

INDUSTRY GROWTH RATE (%)   2003 2004 2005 GDP 7,3 7,2 6,4 Agriculture, hunting, forestry 5,5 3 1,1 Extraction of mineral resources 10,8 7,9 1,7 Manufacturing 9,5 7,8 4,4 Electricity, gaz, water production and distribution 1,6 2,1 1 Construction 13 10,2 9,7 Retail and wholesale trade, repair and maintenance of vehicles 13,2 9,8 12,4 Transport and communication 10,5 6,2 Finance 9,6 4,5 Immovable property operations, leasing and services provisions 9 Oil industry suffered in 2005 because of disruptive effect of Yukos affair.

Growth in employment in selected sectors, 2005 Agriculture, hunting, forestry -11,9 Extraction of mineral resources -2,3 Manufacturing -4 Construction -1,4 Trade and other services 9,7 Hotels and Restaurants 2,6 Transport and communication -2,1 Finance 7,4 Real Estate and Leasing -0,5 Government Administration and social security 7,2

Total fixed capital investment Double-digit fixed capital investment growth However, absolute investment levels remain low in comparison with emerging market economies. Investment concentrated in oil and gas industry Manufacturing – low investment

External Debt Two trends: A substantial reduction in sovereign debt Rapid increase of debt accumulated in corporate and private sector IMF Debt = 0 Influence: Relatively low interest rates High oil prices

Russia's International Reserves (US $ bln Russia's International Reserves (US $ bln.) (Bank of Russia's current cross-rates as of reporting date) Year Volume 31.12.04 124.5 01.07.05 151.8 23.09.05 156.2

National Projects (2005) 2006 2007 Total (06-07) Health 88,4 120,5   2006 2007 Total (06-07) Health 88,4 120,5 208,9 Education 25,3 31,2 56,5 Housing 35,4 46,2 81,6 Agriculture 16,2 18,7 34,9 Total 165,3 216,6 382