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Russia: Overview

Russia is a vast and diverse nation that continues to evolve politically, economically, and socially.

Russia came out from a decade of post-Soviet economic and political turmoil to declare itself as a world power. Revenue from vast natural resources, above all oil and gas, have helped Russia overcome the economic catastrophe of 1998. The state-run gas company Gazprom is the world's largest producer and exporter, and delivers a growing share of Europe's needs.

Russia is ranked number six on the Bisignis Institute's Emerging Market Energy Security Growth Prosperity Index®.

U.S. Relations

Russia's modernity, prosperity, integration into the global economy, and political liberalization are all in the interest of the United States.

Ukraine

A few days after Ukraine halted its integration process with the European Union (EU), the focus shifted to two countries: Moldova and Georgia. In December 2013, U.S. Secretary of State John Kerry went to Moldova to promote American support for Moldova's efforts to improve ties with Europe.

Nuclear

Russia and the U.S. have over 90 percent of the world's nuclear weapons. On January 11, 2011, the U.S. and Russia finalized an agreement on civilian nuclear cooperation, building a legal basis for cooperation and expanding opportunities for U.S. companies in Russia.

Afghanistan

In terms of stabilizing Afghanistan, Russia has been an essential partner for the United States. Thanks to Russia's agreement to allow the transit of U.S. personnel and equipment across Russian territory in support of the ISAF mission, as of June 2012, more than 2,374 flights and over 404,000 military personnel have transited this corridor, while Russia's ground transit arrangement with NATO has resulted in the shipment of over 50,000 containers of supplies to Afghanistan.

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Economic History

Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, 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. The protection of property rights is still weak and the private sector remains subject to heavy state interference.

Economy

The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up.

According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7 % of GDP. The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009. High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09. Russia has reduced unemployment to a record low and has lowered inflation below double digit rates.

At a time of increased concern over energy security, Moscow has more than once reminded the rest of the world of the power it wields as a major energy supplier. In 2006, it halted gas to Ukraine after a row between the countries, a move that also affected the supply of gas to Western Europe.

WTO

Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services. At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union.

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Energy

Russia's economic power lies in its key natural resources - oil and natural gas. The energy giant Gazprom is close to the Russian state and critics have noted it is little more than an economic and political instrument of the Kremlin.

In 2011, Russia was the world's top oil producer, exceeding Saudi Arabia; Russia is the second-largest producer of natural gas; Russia has the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services. Russia has had difficulty attracting foreign direct investment and has experienced large capital outflows in the past several years, leading to state-sponsored programs to improve Russia's international rankings for its investment climate.

Russia's adoption of a new oil-price-based fiscal rule in 2012 and a more flexible exchange rate policy have improved its ability to deal with external shocks, including unpredictable oil prices. Russia's long-term challenges also include a diminishing workforce, rampant corruption, and underinvestment in infrastructure.

 

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