Economy of Russia

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally-planned economy to market-based economy. The policy of privatization in the 1990s. The impact of the global financial crisis on the Russian economy.

Рубрика Экономика и экономическая теория
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Язык английский
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THE FEDERAL AGENCY OF EDUCATION OF THE RUSSIAN

FEDERATION

Chair of humanities, natural, social and economic disciplines

ESSAY

ECONOMY OF RUSSIA

Performed by:

Checked by:

2011

Contents

  • Introduction
  • 1. Raw material base
  • 2. Economic development of the industry and agriculture
  • 3. Trade
  • 4. Transport system
  • Conclusion
  • Vocabulary
  • Bibliography
  • Introduction
  • The Russian economy underwent tremendous stress as it moved from a centrally planned economy to a free market system despite the country's well-known wealth of natural resources, its well-educated population, and its diverse - although increasingly dilapidated - industrial base. By the end of 1997, Russia had achieved some well-observable progress. Inflation had been brought under control, the ruble was stabilized, and an ambitious privatization program had transferred thousands of enterprises to private ownership. Some important market-oriented laws had also been passed, including a commercial code governing business relations and the establishment of an arbitration court for resolving economic disputes.
  • The raw-material base of Russia, economic development of the industry and agriculture in the country, external and domestic trade, and transport system are considered in the given work.
  • 1. Raw material base

The mineral-packed Ural Mountains and the vast oil, gas, snow, coal, and timber reserves of Siberia and the Russian Far East make Russia rich in natural resources. However, most such resources are located in remote and climatically unfavorable areas that are difficult to develop and far from Russian ports. Oil and gas exports continue to be the main source of hard currency. Russia is a leading producer and exporter of minerals, gold, and all major fuels. The Russian fishing industry is the world's fourth-largest, behind Japan, the United States, and China. Natural resources, especially energy, dominate Russian exports. Ninety percent of Russian exports to the United States are minerals or other raw materials.

Expecting the area to become more accessible as climate change melts Arctic ice, and believing the area contains large reserves of untapped oil and natural gas, on August 2, 2007, Russian explorers, in submersibles, planted the Russian flag on the Arctic seabed, staking a claim to energy sources right up to the North Pole. Reaction to the event was mixed: President Vladimir Putin congratulated the explorers for "the outstanding scientific project", while Canadian officials stated the expedition was just a public show. Variations in CO2, temperature and dust from the Vostok ice core over the last 450,000 years For current global climate change, see Global warming.

2. Economic development of the industry and agriculture

Russia is one of the most industrialized of the former Soviet republics. However, years of very low investment have left much of Russian industry antiquated and highly inefficient. Besides its resource-based industries, it has developed large manufacturing capacities, notably in machinery. Russia inherited most of the defense industrial base of the Soviet Union, so armaments are the single-largest manufactured goods export category for Russia. Efforts have been made with varying success over the past few years to convert defense industries to civilian use.

Russia comprises roughly three-quarters of the territory of the former Soviet Union but has relatively little area suited for agriculture because of its arid climate and inconsistent rainfall. Northern areas concentrate mainly on livestock, and the southern parts and western Siberia produce grain. Restructuring of former state farms has been an extremely slow process. The new land code passed by the Duma in 2002 should speed restructuring and attract new domestic investment to Russian agriculture. Private farms and garden plots of individuals account for over one-half of all agricultural production.

The Agriculture in Russia is struggling to rebuild as it transforms itself from a command economy to a more market-oriented system. Following the breakup of the Soviet Union in 1991, large State farms had to contend with the sudden loss of heavy government subsidies. Livestock inventories declined, pulling down demand for feed grains, and the area planted to grains dropped by 25 percent in less than ten years. The use of mineral fertilizer and other costly inputs plummeted, driving yields downward. Most farms could no longer afford to purchase new machinery and other Capital Investments. After about ten years of decline, Russian agriculture began to show signs of modest improvement. As in Ukraine, the transition to a more market-oriented system has introduced the element of fiscal responsibility, which has resulted in increased efficiency as farmers try to maintain productivity while struggling with resource constraints. Official data indicate a rebound in Russian grain yield in recent years, and although the bumper harvests of 2001, 2003, and 2004 are due in large part to favorable weather, most analysts agree that the gradual improvement will continue.

In 2003, private farms accounted for 14.4 percent of Russia's total grain production (up from 6.8 percent in 1995), 21.8 (10.9) percent of sunflowerseed, and 10.1 (4.0) percent of sugar beets. Private household plots, with a maximum size of 2 hectares (5 acres), produce an astonishing 93 percent of the country's potatoes and 80 percent of the vegetables, either for personal consumption or for sale at local markets. Only about 1 percent of grains, oilseeds, and sugar beets. Another problem is that rural infrastructure which would provide processing and business services is not in place while tax rates are high. Families which strike out on their own also lose the services provided by the TOO.

3. Trade

In 1999, exports were up slightly, while imports slumped by 30.5%. As a consequence, the trade surplus ballooned to $33.2 billion, more than double the previous year's level. In 2001, the trend shifted, as exports declined while imports increased. World prices continue to have a major effect on export performance, since commodities, particularly oil, natural gas, metals, and timber comprise 80% of Russian exports. Ferrous metals exports suffered the most in 2001, declining 7.5%. On the import side, steel and grains dropped by 11% and 61%, respectively.

Most analysts predicted that these trade trends would continue to some extent in 2002. In the first quarter of 2002, import expenditures were up 12%, increased by goods and a rapid rise of travel expenditure. The combination of import duties, a 20% value-added tax and excise taxes on imported goods (especially automobiles, alcoholic beverages, and aircraft) and an import licensing regime for alcohol still restrain demand for imports. Frequent and unpredictable changes in customs regulations also have created problems for foreign and domestic traders and investors. In March 2002, Russia placed a ban on poultry from the United States. In the first quarter of 2002, exports were down 10% as falling income from goods exports was partly compensated for by rising services exports, a trend since 2000. The trade surplus decreased to $7 billion from well over $11 billion the same period last year.

Foreign trade rose 34% to $151.5 billion in the first half of 2005, mainly due to the increase in oil and gas prices which now form 64% of all exports by value. Trade with CIS countries is up 13.2% to $23.3 billion. Trade with the EU forms 52.9%, with the CIS 15.4%, Eurasian Economic Community 7.8% and Asia-Pacific Economic Community 15.9%.

Trade volume between China and Russia reached $29.1 billion in 2005, an increase of 37.1% compared with 2004. China's export of machinery and electronic goods to Russia grew 70%, which is 24% of China's total export to Russia in the first 11 months of 2005. During the same time, China's export of high-tech products to Russia increased by 58%, and that is 7% of China's total exports to Russia. Also in this time period border trade between the two countries reached $5.13 billion, growing 35% and accounting for nearly 20% of the total trade. Most of China's exports to Russia remain apparel and footwear.

Russia is China's eighth largest trade partner and China is now Russia's fourth largest trade partner.

China now has over 750 investment projects in Russia, involving $1.05 billion. China's contracted investment in Russia totaled $368 million during January-September 2005, twice that in 2004.

Chinese imports from Russia are mainly those of energy sources, such as crude oil, which is mostly transported by rail, and electricity exports from neighboring Siberian and Far Eastern regions. In the near future, exports of both of these commodities are set to increase, as Russia is building the Eastern Siberia-Pacific Ocean oil pipeline with a branch to Chinese border, and Russian power grid monopoly UES is building some of its hydropower stations with a view of future exports to China.

4. Transport system

Railway transport in Russia is mostly under the control of the state-run Russian Railways monopoly. The company accounts for over 3.6% of Russia's GDP and handles 39% of the total freight traffic (including pipelines) and more than 42% of passenger traffic. The total length of common-used railway tracks exceeds 85,500 km, second only to the U.S. Over 44,000 km of tracks are electrified, which is the largest number in the world, and additionally there are more than 30,000 km of industrial non-common carrier lines. Railways in Russia, unlike in the most of the world, use broad gauge of 1,520 mm (4 ft 11 5?6 in), with the exception of 957 km on Sakhalin Island using narrow gauge of 1,067 mm (3 ft 6 in). The most renown railway in Russia is Trans-Siberian (Transsib), spanning a record 7 time zones and serving the longest single continuous services in the world, Moscow-Vladivostok (9,259 km, 5,753 mi), Moscow-Pyongyang (10,267 km, 6,380 mi) and Kiev-Vladivostok (11,085 km, 6,888 mi).

As of 2006 Russia had 933,000 km of roads, of which 755,000 were paved. Some of these make up the Russian federal motorway system. With a large land area the road density is the lowest of all the G8 and BRIC countries.

102,000 km of inland waterways in Russia mostly go by natural rivers or lakes. In the European part of the country the network of channels connects the basins of major rivers. Russia's capital, Moscow, is sometimes called "the port of the five seas", due to its waterway connections to the Baltic, White, Caspian, Azov and Black Seas.

Major sea ports of Russia include Rostov-on-Don on the Azov Sea, Novorossiysk on the Black Sea, Astrakhan and Makhachkala on the Caspian, Kaliningrad and St Petersburg on the Baltic, Arkhangelsk on the White Sea, Murmansk on the Barents Sea, Petropavlovsk-Kamchatsky and Vladivostok on the Pacific Ocean. In 2008 the country owned 1448 merchant marine ships. The world's only fleet of nuclear icebreakers advances the economic exploitation of the Arctic continental shelf of Russia and the development of sea trade through the Northern Sea Route between Europe and East Asia.

By total length of pipelines Russia is second only to the U.S. Currently many new pipeline projects are being realized, including Nord Stream and South Stream natural gas pipelines to Europe, and ESPO oil pipeline to the Russian Far East and China.

Russia has 1216 airports, the busiest being Sheremetyevo, Domodedovo, and Vnukovo in Moscow, and Pulkovo in St Petersburg. The total length of airlines in Russia exceeds 600,000 km.

Typically, major Russian cities have well-developed and diverse systems of public transport, with the most common varieties of exploited vehicles being bus, trolleybus and tram. Seven Russian cities, namely Moscow, Saint Petersburg, Nizhny Novgorod, Novosibirsk, Samara, Yekaterinburg and Kazan, have underground metros, while Volgograd features a metro tram. Total length of metros in Russia is 465.4 km. Moscow Metro and Saint Petersburg Metro are the oldest in Russia, opened in 1935 and 1955 respectively. These two are among the fastest and busiest metro systems in the world, and are famous for rich decorations and unique designs of their stations, which is a common tradition on Russian metros and railways.

Conclusion

economy russia privatization

The economy of Russia is the tenth largest economy in the world by nominal value and the sixth largest by purchasing power parity (PPP). Russia has an abundance of natural gas oil, coal, and precious metals. It is also rich in agriculture. Russia has undergone significant changes since the collapse of the Soviet Union, moving from a centrally-planned economy to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. Nonetheless, the rapid privatization process, including a much criticized "loans-for-shares" scheme that turned over major state-owned firms to politically-connected "oligarchs", has left equity ownership highly concentrated. The protection of property rights is still weak and the private sector remains subject to heavy state interference. During the global financial crisis, Russia experienced a severe recession, until the growth was later on stabilized. Russia was one of the hardest hit during the global financial crisis, since it already has an economy dependent on high oil prices.

Vocabulary

1. Accounts - [?'kaunts] - (бухгалтерские) счета, (бухгалтерская) отчётность.

2. Additionally - [?'d??(?)n(?)l?] - дополнительно; кроме того, сверх того.

3. Agriculture - ['жgr?k?l??] - сельское хозяйство.

4. Alcohol - ['жlk?h?l] - алкоголь, спирт, спиртные напитки.

5. Average - ['жv(?)r??] - средний.

6. Billion - ['b?l??n] - миллиард(тысяча миллионов).

7. Branch - [br?:n?] - отрасль, подразделение.

8. Bubble - ['b?bl] - пузырёк(воздуха или газа), дутое предприятие, мыльный пузырь (обычно о нереальных или заведомо мошеннических коммерческих схемах); дурачить, обманывать, надувать

9. Coal - [k?ul] - уголь.

10. Compensate - ['k?mpense?t] - расплачиваться; вознаграждать (compensate for), возмещать (убытки); компенсировать.

11. Comprise - [k?m'pra?z] - включать; заключать в себе, содержать.

12. Crisis - ['kra?s?s] - кризис, поворотный пункт, перелом.

13. Demand - [d?'m?:nd] - требовать, потребовать (с кого-л. / от кого-л.); предъявлять требование.

14. Dependent - [d?'pend?nt] - обусловленный, зависящий (от обстоятельств).

15. Distribution - [d?str?'bju:?(?)n] - распределение; раздача, распространение.

16. Development - [d?'vel?pm?nt] - развитие, расширение, развёртывание, рост; эволюция.

17. Diverse - [da?'v?:s] - иной, отличный от чего-л., различный; несходный, многообразный, разнообразный, разный.

18. Domestic - [d?'mest?k] - домашний; семейный внутренний; отечественный, находящийся в пределах страны (domestics); товары отечественного производства.

19. Dominate - ['d?m?ne?t] - управлять, контролировать доминировать, господствовать, занимать господствующее положение.

20. Economy - [?'k?n?m?] - хозяйство, экономика , народное хозяйство.

21. Effort - ['ef?t] - усилие, попытка; напряжение; достижение, успех.

22. Electricity - [elek'tr?s?t?] - электричество.

23. Expenditure - [?k'spend???] - расходование, трата денег потребление, расходование, трата, затраты (энергии, труда, времени); издержки, расход(ы).

24. Exploitation - [ekspl??'te??(?)n] - использование, употребление, эксплуатация; разработка (природных богатств, земных недр, месторождения).

25. Interference - [?nt?'f??r(?)n(t)s] - вмешательство, помеха, препятствие.

26. International - [?nt?'nж?(?)n(?)l] - интернациональный, международный.

27. Investment - [?n'vestm?nt] - инвестирование, вложение денег, капитала.

28. Marine - [m?'ri:n] - морской, военно-морской, флотский (о солдатах, военных частях) судовой, корабельный (о снастях, принадлежностях, приборах); флот.

29. Merchant - ['m?:?(?)nt] - купец, торговец; лицо, занимающееся оптовыми продажами.

30. Nominal - ['n?m?n(?)l] - номинальный.

31. Partner - ['p?:tn?] - компаньон; партнёр; пайщик.

32. Pipeline - ['pa?pla?n] - трубопровод; нефтепровод; канал(связи, снабжения, коммуникации); перекачивать по трубопроводу; прокладывать трубопровод.

33. Precious - ['pre??s] - драгоценный; большой ценности.

34. Public - ['p?bl?k] - общественный; государственный; народный, национальный, общенародный.

35. Quarter - ['kw?:t?] - четверть, четвёртая часть.

36. Raw material - [r?:] [m?'t??r??l] - сырье.

37. Railway - ['re?lwe?] - железная дорога; железнодорожный путь.

38. Reform - [r?'f?:m] - реформа, преобразование, перестройка, реорганизация; улучшать; изменять, исправлять, преобразовывать; проводить реформы.

39. Relation - [r?'le??(?)n] - отношение; зависимость, касательство, связь.

40. Renown - [r?'naun] - известность, популярность, слава.

41. Restrain - [r?'stre?n] - сдерживать; обуздывать; удерживать ограничивать, суживать.

42. Rise - [ra?z] - в(о)сходить, вставать, подниматься, взбираться.

43. Significant - [s?g'n?f?k?nt] - значительный, важный, существенный; знаменательный; многозначительный; выразительный значащий.

44. Surplus - ['s?:pl?s] - избыток, излишек, остаток.

45. Trade - [tre?d] - занятие, ремесло, профессия торговля; коммерческая деятельность.

46. Treaty - ['tri:t?] - договор, соглашение, конвенция; переговоры.

47. Trend - [trend] - курс, направление; общее направление, тенденция.

48. Unique - [ju:'ni:k] - уникальный, единственный в своём роде, исключительный; (unique to) индивидуальный, специфичный, присущий только данному региону или человеку.

49. Value - ['vжlju:] - ценность; важность, стоимость, цена; рыночная цена.

50. Vehicle - ['v??kl] - транспортное средство; средство передачи, распространения чего-л.

Bibliography

1. Economy of Russia. From Wikipedia, the free encyclopedia. http://en.wikipedia.org/wiki/Russian_economy.

2. Economy of Russia. http://www.globaltenders.com/economy-russia.htm.

3. Economy Of Russia. http://www.globaltenders.com/economy-russia.htm.

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