Russia: In-Depth PESTLE Insights

COUNTRY ANALYSIS REPORT
Russia
In-depth PESTLE Insights
Publication Date: May 2009
OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental structure in Russia. Each of the
PESTLE factors is explored on four parameters: current strengths, current challenges, future prospects and future risks.
Summary
Key findings
Russia has an established political structure, but corruption and crime still pose a problem
Russian politics gained considerable stability after Vladimir Putin became president in 1999. Both political and economic
reforms introduced under his leadership were well received, prior to the recent global crisis. In the presidential elections of
May 2008, Dmitry Medvedev, previously the chief of staff and vice president under Putin, was elected as the new president.
There was considerable support for Medvedev, as it was believed that he would undertake policies very similar to that of
Putin. This was later proved when Putin was appointed prime minister in June 2008. With both Medvedev and Putin at the
helm, Russia was expected to have the twin advantages of political stability and high economic growth. However, with the
economic crisis, it is feared that the relationship between Prime Minister Putin and President Medvedev may not remain as
harmonious as before, especially due to differences in opinion on ways to tackle the economic crisis.
However, despite its established and seemingly stable political structure, Russia is considered to be one of the most
corrupt nations in the world. According to Transparency International (TI), Russia scored 2.2 out of 10 in 2009 Corruption
Perception Index (CPI), down from 2.3 in 2007, which is the lowest standing in the last eight years. The government has
not been very effective in controlling increasing criminal activities and corruption, which could prove to be a major
impediment for foreign investments.
Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010
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Overview
Strong current account surplus; however rising unemployment is a cause for concern
Despite global slowdown, the Russian external trade showed tremendous growth with increasing current account surplus in
2009. In 2008, the current account surplus stood at around 7% of GDP. The country’s current account surplus came down
from around $102 billion in 2008 to around $47 billion in 2009. According to Central Bank of Russia, the current account
surplus increased by 250% to reach $33.9 billion in the first quarter of 2010, up from $9.7 billion in the same quarter in
2009. The rising unemployment level in Russia is currently posing a challenge to the government. The number of
unemployed people rose from a level of 4.6 million in 2007 to more than 6.4 million in 2009, recording an unemployment
rate of 8.4% in 2009.
Despite improvements seen in real wages, high mortality rate still dogs the social system
During 2007–08, increased economic growth in Russia stimulated an increase in real incomes and wages of the working
population. The same trend continued in 2008, with the average real wages and real disposable incomes in the first four
months increasing by 13.1% and 11.8% respectively compared to the same period in 2007. The growth in real wages,
during the 2007–08 surpassed the real GDP and productivity growth. Furthermore, almost all sectors of the economy
reported an increase in real wages of more than 10%. The largest increase was recorded in the public sector, retail trade
and construction sectors, with growth in real wages up by around 17% compared to previous periods. The average monthly
dollar wage increased to around $650 in the first four months of 2008, with a growth rate of 41% over 2007. Although, the
real wages declined by 1.8% in first quarter of 2009, the disposable income grew by 4.5% during the same period.
Furthermore, the average real wages again grew by 3.4% at the end of first quarter of 2010 and real disposable income
grew by over 4%. The average monthly dollar wage increased to around $694 in the first four months of 2010.
High mortality and morbidity among the Russian working population have become a huge challenge to economic and social
development. The death rate in 2009 was an estimated 16 deaths per 1,000. As a result, supply constraints of labor are
expected to become a major impediment to economic growth. Currently, Russia’s demographic crisis is considered more
serious than that of Western Europe. Furthermore, the population has declined by six million since 1992 to an estimated
140 million in 2009. It is also expected that the population will fall by 30% by 2050. The high mortality rate is expected to
exacerbate the problem of a decreasing labor force.
Although Russia is renowned for its advanced space technologies, it is lagging behind in fundamental research
Historically, Russia has been known for creating some of the most advanced space technologies in the world. The Russian
space station, Mir, for example, has played a vital role in promoting international space stations in many space programs.
The space agency is also a revenue generating body for the government, which has become more prominent with Russia
taking up launching activities on a commercial basis. Furthermore, the country has started space tourism. However, the
science and technology system in Russia has more recently been falling short of international standards mainly due to the
structures of the old Soviet system exerting control over scientific streams. The chief problems of the system include
language barriers, a weak network and co-ordination of activities, lack of active presence in international meetings,
discrepancies in intellectual property rights and policies, political obstacles and differences among scientific bodies.

Overview
Russia is increasing its access to international labor; however, the country is dogged with a weak judiciary
After the end of the Soviet rule, a fall in population led to a decline in Russia’s labor efficiency for many years. This led to
the need for foreign workers in various industrial sectors of Russia, which in turn caused the government to ease its
immigration policy. The liberal immigration laws brought in many foreign workers, especially from the EU region; indeed, it
was reported that the total foreigners who entered Russia rose to 14.5 million at the end of 2008. Immigration laws play a
vital role for foreign direct investment (FDI) and, in Russia's case, they are presently adding to its strength. Aside from the
immigration laws, Russia’s judicial system is relatively weak and unpredictable. Corruption is rampant among law
enforcement bodies and judges, and court decisions are often difficult to implement. Many foreign investors have
experienced problems executing judicial rulings and obtaining approval on contractual agreements. This is presently
proving to be a major obstacle for FDI in Russia.
Russia is well equipped with a good environmental management system, although lack of resources is a challenge
Russia’s environmental management systems are well equipped with various levels of controls and streamlined monitoring
systems. A three-tier executive federal governance body—which comprises federal ministries, federal services, and federal
agencies—manages the environmental management system. Presently, the system plays a vital role in co-ordinating
various conservation activities in Russia. However, the biggest challenge of the Russian government is its inability to tackle
huge environmental problems that may arise due to military and other toxic wastes. The federal funds available for the
disposal of solid fuel missiles are not sufficient to conduct any cleaning programs. Furthermore, in Russia there is also a
scarcity of trained local staff to implement environmental regulations.
PESTLE highlights
Political landscape
• In July 2009, President Medvedev and Barack Obama reached an agreement to cut back their countries'
stockpiles of nuclear weapons. Russia also supported the US decision to shelve controversial missile defense
bases in Poland and the Czech Republic.
• In April 2010, Ukraine and Russia signed an inter-governmental protocol on the supply of goods on industrial
cooperation in 2010. The sides also signed protocols on cooperation in the aviation industry and on industrial
policy.
Economic landscape
• Although, the country managed to maintain 6% growth in 2008, the Russian economy contracted by 8% in 2009.
With the prevailing economic deterioration, the government has drawn policies to reduce budget deficit which
was about 6% of GDP in 2009 to around 3% by 2012.
• The insurance market in Russia has grown continuously for the last five years, despite sharp declines in the life
insurance segment’s value since 2003. The Russian insurance market generated a gross premium income of
$36.9 billion in 2008, representing a compound annual growth rate (CAGR) of 18.4% for the period spanning
2004-20–08.

Overview
Social landscape
• Income inequality in Russia has widened in the post-liberalization period. The difference between the 10% richest
and 10% poorest among the population in Moscow was over 42 times in 2008 compared to 38.6 times in 2005.
• Even though the country went through a severe economic crisis during 2009, the government was able to carry
out large-scale anti-crisis measures without any cuts in social spending. The actual social spending increased by
over 27% in 2009 compared to that of 2008.
Technological landscape
• Russia has been historically known for its excellence in space technologies and is one of the most successful
countries with regards to its implementation of many space programs. The government has allocated more than
$11 billion for the Russian Space Agency for the period 2006–15.
• The country's IT market is presently the fastest-growing in the Central and East European (CEE) region. There is
huge potential for IT spending by Russia's traditional industries to make their conventional systems of operations
IT compliant.
Legal landscape
• The new government has set a long list of legal reforms which are expected to bring improvement to the
country’s judicial system.
• Russia has also agreed to various legal assistance programs from many countries to solve its domestic and
international legal issues.
Environmental landscape
• The Russian government is planning to set up an effective security system to prevent pollution and man-made
environmental disasters. The main tasks outlined by the government include implementation of environmental
decisions consistently and completely, and the creation of an effective system for ecological security in the
country.

Overview
Key fundamentals
Table 1: Russia – key fundamentals
2008 2009 2010 2011 2012 2013 2014
GDP, constant prices ($bn) 431.0 396.6 408.5 417.0 426.5 442.4 465.4
GDP growth rate (%) 6.0 -8.0 3.0 2.1 2.3 3.7 5.2
GDP, constant 2000 prices, per capita ($) 3064 2832 2930 3006 3089 3219 3404
Inflation (%) 13.1 10.7 8.9 8.9 7.7 7.4 6.8
Exports, total as % of GDP 28.7 31.4 31.0 29.3 28.2 27.5 26.9
Imports, total as % of GDP 17.8 19.8 20.7 19.4 18.5 18.0 17.8
Mid-year population, (m) 140.7 140.0 139.4 138.7 138.1 137.4 136.7
Unemployment rate (%) 6.3 8.4 8.6 9.0 9.4 9.7 10.0
Doctors per 1,000 people 4.3 4.4 4.4 4.4 4.5 4.5 4.5
Mobile penetration (per 100 people) 133 144 152 157 160 162 163
Source: Datamonitor DAT AMONITOR

Table of Contents
TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Key facts and geographic location 10
Key facts 10
Geographical location 11
PESTLE analysis 12
Summary 12
Political analysis 13
Economic analysis 16
Social analysis 20
Technological analysis 23
Legal analysis 26
Environmental analysis 29
Political landscape 32
Summary 32
Evolution 32
Structure and policies 35
Performance 40
Outlook 42
Economic landscape 43
Summary 43
Evolution 43
Performance 47
Outlook 61
Social landscape 62
Summary 62
Evolution 62
Performance 65

Table of Contents
Outlook 68
Technological landscape 70
Summary 70
Evolution 70
Performance 71
Outlook 75
Legal landscape 77
Summary 77
Evolution 77
Performance 81
Outlook 82
Environmental landscape 83
Summary 83
Evolution 83
Performance 86
Outlook 87
APPENDIX 88
Ask the analyst 88
Datamonitor consulting 88
Disclaimer 88

Table of Contents
TABLE OF FIGURES
Figure 1: Map of Russia 11
Figure 2: Unemployment in Russia, 2002–13 17
Figure 3: Russia’s political events timeline 33
Figure 4: Russia – Key political figures 35
Figure 5: Distribution of seats by political parties in the Duma, 2007 38
Figure 6: Evolution of GDP growth in Russia, 1990–2009 45
Figure 7: GDP and GDP growth rate of Russia, 2002–13 48
Figure 8: Sector specific GDP in Russia, 2009 49
Figure 9: Agricultural output in Russia, 2002–09 50
Figure 10: Industrial output in Russia, 2002–09 51
Figure 11: Services output in Russia, 2002–09 52
Figure 12: Current account balance in Russia, 2001–08 54
Figure 13: Russia’s external trade position, 2002–09 55
Figure 14: FDI inflow in Russia, 2002–08 57
Figure 15: Consumer price index (CPI) and CPI-based inflation in Russia, 2002–13 59
Figure 16: Employment in Russia, 2002–13 61
Figure 17: Major religions in Russia 64
Figure 18: Healthcare expenditure in Russia, 2002–13 66
Figure 19: Education expenditure in Russia, 2002–13 68
Figure 20: Growth of fixed and mobile phones in Russia, 2002–13 72
Figure 21: Internet users in Russia, 2002–13 73
Figure 22: R&D expenditure in Russia, 2000–10 75
Figure 23: Carbon dioxide emissions in Russia, 2002–13 87

Table of Contents
TABLES
Table 1: Russia – key fundamentals 5
Table 2: Russia – key facts 10
Table 3: Analysis of Russia’s political landscape 13
Table 4: Analysis of Russia’s economic landscape 16
Table 5: Analysis of Russia’s social landscape 20
Table 6: Analysis of Russia’s technology landscape 23
Table 7: Analysis of Russia’s legal landscape 26
Table 8: Analysis of Russia’s environmental landscape 29
Table 9: Mid-year population by age (m) in 2009 63
Table 10: Patents received by Russia – 2000–08 71
Table 11: International environmental treaties signed and ratified by Russia 86

Key facts and geographic location
KEY FACTS AND GEOGRAPHIC LOCATION
Key facts
Table 2: Russia – key facts
Country and capital

Full name Russia
Capital city Moscow
Government
Government type Federation
Head of state President Dmitry Anatolyevich Medvedev
Head of government Prime Minister Vladimir Putin
Population 140.04 million
Currency Ruble (RUB)
GDP per capita (PPP) $15,100
Internet domain .ru
Demographic details
Life expectancy 66.03 years (total population)
59.33 years (men)
73.14 years (women)
Ethnic composition (2002 data) Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%,
Chuvash 1.1% and other unspecified 12.1%
Major religions (1995 census) Russian orthodox – 20%

Muslims – 15%
Other Christians – 2%
None – 63%
Country area 17,075,200 sq km

Language Russian
Exports Major exports include petroleum and petroleum products, natural
gas, wood and wood products, metals, chemicals and military
equipment.
Imports Machinery and equipment, consumer goods, medicines, meat,
sugar, and semi-finished metal products.
Source: CIA DAT AMONITOR

Key facts and geographic location
Geographical location
Russia is located in Northern Asia, between Europe and the North Pacific Ocean. The country also borders the Arctic
Ocean.
Figure 1: Map of Russia
Source: CIA The World Factbook DAT AMONITOR

PESTLE analysis
PESTLE ANALYSIS
Summary
Russia, in its present form, came into existence after the disintegration of the Union of Soviet Socialist Republics (USSR;
also known as the Soviet Union). Russia gradually opened up its economy, and after a seven-year transitional period of
numerous market reforms, witnessed political stability under Prime Minister Vladimir Putin and President Dmitry Medvedev.
The Russian economy grew at a rate of 8% in 2007, but contracted by 8% in 2009. The economic conditions deteriorated in
2009. Government finances and the balance of payments came under pressure along with the fall in oil prices and as a
result the economy went into a recession. In addition, corruption and crime remain two significant impediments to the
smooth functioning of the state.
The Russian population is among the most highly educated in the world. Despite an increase in real wages, a rise in food
prices has drastically affected the poor in Russia. Also, the mortality rate in the country is still very high among the working
population. To mitigate the effects of these problems, the government has plans to implement certain reforms and
streamline funds for social development in the near future.
Russia has been one of the most successful countries in implementing ambitious space programs. However, the country
has not been very successful in registering patents over the years for its products. In addition to its advances in the space
sector, the country is also seen as one of the leading IT destinations of the future.
The Russian judicial system has been very ineffective and weak since the fall of the USSR. However, the country has
introduced many reforms which are expected to bring improvements in the system. Russia has also entered into various
legal assistance programs with many countries around the world, as unfair competition practices are hampering the entry of
foreign direct investment (FDI) into the country.
The environmental management system in Russia lacks resources to tackle the environmental problems of the country.
However, the government is set to introduce an environmental security system to enhance environmental protection and
conservation. The country has also signed various international environmental treaties to participate in environmental
conservation.

PESTLE analysis
Political analysis
Overview
The Russian political system was reinvigorated by the election of Dmitry Medvedev as the new president and Vladimir Putin
as the prime minister. The new government had promised to continue with economic reforms and thereby cohesively
integrate the Russian economy with the rest of the world. However, deteriorating economic conditions have brought fresh
challenges for the present government. Moreover, its relations with its neighbors, especially Georgia have deteriorated.
Moreover, corruption and crime, which haunts all the governmental agencies of Russia, continues to be a serious challenge
to the country.
Table 3: Analysis of Russia’s political landscape
Current strengths Current challenges

▪ Continuity in polices ▪ Corruption and crime
▪ International integration ▪ Terrorism
Future prospects Future risks
▪ Growing international relations ▪ Pressure from bureaucracy
Current strengths
Continuity in policies
Russian politics gained considerable stability after Vladimir Putin became the president in 1999. From that point, both
political and economic reforms undertaken under his leadership have taken the country on a growth path. Putin served as
the president for almost three full terms and implemented effective reforms to bring the country out of economic and
political turmoil. In the presidential elections of May 2008, Dmitry Medvedev was elected as the new president. Medvedev
was previously the chief of staff and also deputy prime minister under Putin’s rule. As such there was considerable support
for Medvedev and belief that the new president would undertake policies very similar to that of Putin’s. This was later
proved when Vladimir Putin was once again appointed as prime minister of the country in June 2008.
Under Mr. Putin's leadership, the Russian economy had boasted an annual growth rate of almost 7%. Overall, the reforms
undertaken by Mr. Putin elicited little opposition and his approval rating rarely fell below 70%. These policies have also
been welcomed by the new president. Since his election as the president, Medvedev has followed similar line of policies
that the previous administration had followed. The president, in April 2010, went in for a greater international integration in
all spheres starting from industry, R&D and environment. The president also initiated an agreement with Japan to step up
cooperation in energy development in the Middle East and Eastern Siberia. The continuity in policies has been main reason
for the country to come back to growth in 2010.

PESTLE analysis
International integration
Russia came out of a strict socialist regime to become a more economically open society during 1991–2009. Throughout
this period, Russia has endeavored to closely integrate itself with the international community, resulting in large
investments pouring into the country. The main goals of the Russian government during this period were to not only bring
about a qualitative economic change in the country but also to transform the social structure of the Russian society, by
giving more support to the rapidly growing middle class. Through this strategy, the government has been instrumental in
shaping Russia’s new long-term economic policy by relying on fully-fledged international integration and comprehensive
modernization of key industries and infrastructures in the country. The Russian government has initiated free market
exchange with many European countries and is on course to open its markets for many more countries around the world.
The country entered into several bilateral agreements with China, Japan, Iran, the US and many other European nations
during the course of 2009 and 2010 in many spheres such as energy, environmental issues, and R&D development. The
country is also in talks with Ukraine for an economic integration program in near future.
Current challenges
Corruption and crime
Russia is ranked as one of the most corrupt nations in the world, and its performance with respect to corruption has
worsened. According to Transparency International (TI), Russia has scored 2.2 out of 10 in 2009 Corruption Perception
Index (CPI), down from 2.3 in 2007, which is its lowest standing in the last eight years. Out of the 180 countries surveyed in
terms of Corruption Perception Index (CPI), Russia was in 146th place in 2009, falling from 143rd place in 2007. Corruption
remains a barrier to foreign investments and negatively affects the country's economic development. Furthermore,
according to a survey carried out by the World Bank, nearly 80% of businesses in Russia are paying some form of bribes to
many state-run agencies.
Increasing criminal activities is another factor restricting governmental effectiveness in the country. According to a survey
conducted by the Council of Europe (CoE), economic crimes committed in Russia include political fraud (13%),
embezzlement of funds (13%), customer fraud (20%) and counterfeiting of money or securities (7%). The council has also
reported that criminal organizations in Russia have largely targeted the fuel and energy sector, as well as consumer goods,
commercial services, transnational trade, financial services, metal industry, and public procurement. The government has
not effectively monitored and controlled these criminal and corrupt practices. These are proving to be significant
impediments for the effective implementation of government policies in Russia.
Terrorism
The terrorist activity has always been a concern in the country and has gained strength during 2009 and 2010. In
November 2009, more than 25 people were killed when a bomb blast caused the derailment of a Moscow-St Petersburg
express train. More than 40 terrorists were suspected to have taken part in the attack and as of March 2010, 10 were
arrested. In March 2010, 39 people were killed and more than 60 were injured in two suicide bomb attacks on the Moscow
Metro. The government blamed Muslim militants from the North Caucasus as the cause for the attack. The country has
been on high alert on terrorist activity since then. This is currently posing severe threats to national security in the country.

PESTLE analysis
Future prospects
Growing international relations
Russia has a strong presence in the international political arena, especially after its induction to the G7, an international
association of various countries which was rechristened as the G8 after Russia’s induction. Russia also hosted the BRIC
(Brazil, Russia, India and China) summit in Yekaterinburg in May 2008, convening a high-profile gathering of four nations
with vast resources but differing interests. The BRIC summit is expected to unite these major economic growth centers to
increase their role in international affairs. Furthermore, the country also held talks with Turkey in May 2008 to improve its
bilateral relations with the country. The main areas of focus included a number of regional and international problems,
including the situation around the Conventional Forces in Europe Treaty (CFE), relations between Russia and NATO and
security issues in the Black Sea region. Russia has also emerged as the representative voice of the BRIC nations, as
witnessed during the G20 meeting in April, 2009. All these initiatives are expected to enhance Russia’s position in the
international arena. In a historic event for the reduction of the nuclear stockpile, both the US and Russia signed a new
strategic arms agreement in April 2010. This is an outline agreement to cut back their countries' stockpiles of nuclear
weapons by more than 30%. This agreement is a welcome sign for both the countries.
Future risks
Pressure from bureaucracy
Since the end of Soviet rule, Russia’s bureaucratic structures and state administration has been under the control of the
ruling party. There is no clear division of functions and responsibilities among various governmental institutions, which
slows down co-ordination among government agencies. As corruption is widespread in state agencies, unofficial payments
for licenses and state procurement contracts are common. The number of corrupt employees in public administration is
also a continued problem and has decreased the efficiency of governance in the country.

PESTLE analysis
Economic analysis
Overview
Russia liberalized its economy in the 1990s and reaped huge benefits. The economy’s successful run since 1999 came to
an end in 2008 with the mounting economic crisis. During 1999–2007, the country had one of the highest growth rates,
touching around 8% in 2007 but fell back to 6% in 2008. The global economic slowdown gripped the Russian economy too,
and the economy went into recession with a negative rate of 8% in 2009. Large scale government expenditure and the
devaluation of the ruble have posed fresh challenges to government finances and the balance of payments. The growth
rate however is expected to recover to positive terms in 2010. The Russian economy continues to suffer setbacks in the
form of low oil prices, a lower inflow of capital and tighter credit conditions coupled with bad corporate debt.
Table 4: Analysis of Russia’s economic landscape

▪ Successful economic reforms ▪ Unemployment
▪ Strong current account surplus ▪ Dependence on foreign money

▪ Comfortable foreign exchange reserves ▪ Decreasing budget surplus
▪ Growing foreign investments ▪ Adverse balance of payments
Current strengths
Successful economic reforms
Russia's adoption of institutional developments and market reforms in 1998 has been beneficial for the country, allowing it
to recover from a crisis situation. The Russian economy has been growing by 6–7% per year during 2000–07 and the GDP
surpassed the pre-crisis level of 1991. However, due to global economic crisis, the country went into a recession in 2009.
However, the economy revived quickly during the first quarter of 2010 and posted a growth rate of over 3%. Diversifying the
structure of the economy and improving the market's institutional environment are the two main reforms that the country is
currently implementing. Mutual relations between government agencies and business organizations are becoming more
transparent, the efficiency of state regulation is being raised and human capital assets are being developed through
responsible social policies. The reforms implemented by the government have led to closer integration with the world
economy, with an ever-increasing economic growth for nearly nine years.
Strong current account surplus
Russia has maintained a current account surplus position since 2000. Improved competitiveness and higher oil prices
facilitated a dramatic turnaround in the current account, from a deficit of around 0.5% of GDP in 1998 to a surplus of 12% of

PESTLE analysis
GDP in 1999. In 2008, the current account surplus stood at around 7% of GDP. The country’s current account surplus
came down from around $102 billion in 2008 to around $47 billion in 2009. According to Central Bank of Russia, the current
account surplus increased by 250% to $33.9 billion in the first quarter of 2010, up from $9.7 billion in the same quarter in
2009. A strong and consistent current account surplus implies a very strong international trade in the country.
Current challenges
Unemployment
The rising unemployment level in Russia is currently posing a challenge to the government. The number of unemployed
people rose from 4.6 million in 2007 to more than 6.4 million in 2009, recording an unemployment rate of 8.4% in 2009.
During global economic crisis, unemployment reached a maximum of 7.1 million people in February 2009. A year later, in
March 2010, unemployment totaled 6.4 million. Although, the government has initiated measures to reduce unemployment,
the rate at which it is growing is a cause for concern. It is expected that the unemployment rate would go beyond 9.7% by
2013. The government’s intent to join hands with other Asian nations to conduct exploration in Middle East nations, instead
of Russia, may also cause a hit to domestic employment in the country.
Figure 2: Unemployment in Russia, 2002–13
8.0 12.0
7.0
10.0
Number of unemployed (millions)
6.0
Rate of unemployment (%)

8.0
5.0
4.0 6.0
3.0
4.0
2.0
2.0
1.0
0.0 0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Total unemployment Rate of unemployment (%)

PESTLE analysis
Dependence on foreign money
The Russian economy historically has been dependent on two external factors. One being the price of oil and the other is
the status of international financial markets. The Russian banking sector has been one of the most fragmented banking
sectors of the world with many localized banks in place. As a result there has been low trust, poor supervision and relatively
small share of foreign banks. During 1999–2009, a consistent share of banking sector growth has been due to high
borrowing from abroad. It was reported that around a third (37%) of the $140 billion foreign debt of the banking sector
matures after mid-2011, for which the sector has to ready funds. Furthermore, the interbank market, in particular, is highly
dependent on foreign money. All these factors apparently make the financial sector open to risk, because of which sector
ran into crisis during 2008–09 as the supply of foreign refinancing dried up and the interbank Russian Ruble interest rates
doubled in a matter of months. Furthermore, the collapse in the world market price of oil destroyed market confidence in the
Ruble. The government along with the central bank has to clearly formulate policies to restrict the dependency on foreign
funds of the economy.
Future prospects
Comfortable foreign exchange reserves
Russia’s foreign exchange reserves on December 31, 2009 stood at $439 billion. Although the country's foreign exchange
reserves fell from $575 billion in July 2008, Russia is better placed in terms of external reserves than many other countries
that are fighting the economic crisis. The Central Bank of Russia (CBR) has intervened in the market to stabilize the value
of the ruble. In November 2008, faced with a rapidly falling trade surplus, the CBR changed its ruble policy by introducing
“mini devaluations” against the basket, of around 1% per step. It gained speed in following weeks and by December 2008,
it managed three devaluations per week and four by mid-January 2009. The total depreciation to the basket since
November 2008 reached around 34% by February 2009. This has helped in arresting the flight of the ruble.
Growing foreign investments
Despite the dire economic situation, the foreign investments in to the country have not fallen. The FDIs into Russia grew
from $55 billion in 2007 to more than $70 billion in 2008. Furthermore, Japan’s investments in the Russian economy
doubled to $8.3 billion in 2009 in spite of the difficulties of the crisis period. This was mainly due to effective government
support to revive economy out of recession which has gained foreign trust. Furthermore, according to the Economic
Development Ministry, the net capital inflow amounted to $10 billion in the first quarter of 2010 against a net capital outflow
of $8.3 billion in Q4 2009 which gives good indication that the capital markets are picking up in the country.
Future risks
Decreasing budget surplus
The budgetary balance in Russia has been decreasing in the past few years due to increased social expenditure. The
budget balance decreased from around 7.5% of GDP in 2006 to around 5.5% of GDP in 2007, and despite the economic
slowdown, the government managed a surplus of 4.1% of GDP in 2008. However, the slowdown has exerted pressure on
government finances. With large scale government expenditure along with a fall in oil prices, the deficit reached 5.9% of
GDP in 2009, which will be the first deficit in a decade amounting to $79.6 billion. An increasing deficit is largely due to

PESTLE analysis
increased unemployment, pension and healthcare expenditures. It is expected that the decrease in tax revenue will further
put pressure on the budget balance.
Adverse balance of payments
Russia has failed to develop itself into a well diversified economy. It is dependent on imports for most of its consumer and
capital needs. At the same time, it suffered a setback because of its excessive dependence on oil for its export income.
Though Russia has continued to post a current account surplus, its magnitude has declined. In 2008, the current account
balance stood at around 7% of GDP. The country’s central bank had expected a deficit in 2008, but due to the gradual
devaluation of the ruble, which depreciated about 34% against the dollar-euro bi-currency basket, it posted positive figures.
Although the measure was successful in lowering imports, lower oil prices will also reduce export revenues. The country’s
current account surplus came down from around $102 billion in 2008 to around $47 billion in 2009. Although, it went up in
first quarter of 2010 to $33 billion from $9 billion last quarter 2009, the trend is not expected to be consistent. The scenario
will have an adverse impact on the balance of payments.

PESTLE analysis
Social analysis
Overview
The social welfare system in Russia went through turmoil after the fall of the USSR. A weak healthcare system is one of the
biggest challenges faced by Russia currently. Though the system is well decentralized in the country, it is inefficient, with
under-qualified doctors and corrupt officials undermining the quality of treatment. Russia faces a severe demographic
challenge resulting from low birth rates, poor medical care, and a rising AIDS problem. The human capital quality of Russia
also compares unfavorably with other nations at the same level of development.
Moreover, rising unemployment and poverty are still some of the challenges. Besides tackling the economic crisis, the
government also needs to implement urgent measures to meet the challenges emerging from low birth rates and a
shrinking working age population.
Table 5: Analysis of Russia’s social landscape

▪ Improvement in real income and wage levels ▪ High AIDS rate
▪ Educated population ▪ High mortality rate
▪ Revamp of social security benefits ▪ Widening income inequality and rising poverty
▪ National welfare fund ▪ Increasing spread of the AIDS epidemic
▪ Tax benefits to healthcare and education
Current strengths
Improvement in real income and wage levels
During 2000–08, increased economic growth in Russia stimulated an increase in real incomes and wages of the working
population. The same trend continued in 2008, with the average real wages and real disposable incomes in the first four
months increasing by 13.1% and 11.8% respectively compared to the same period in 2007. The growth in real wages,
during the 2007–08 surpassed the real GDP and productivity growth. Almost all sectors of the economy reported an
increase in real wages of more than 10%. The largest increase was recorded in the public sector, retail trade and
construction sectors, with growth in real wages up by around 17% compared to previous periods. The average monthly
dollar wage increased to around $650 in the first four months of 2008, with a growth rate of 41% over 2007. Although, the
real wages declined by 1.8% in first quarter of 2009, the disposable income grew by 4.5% during the same period.
Furthermore, the average real wages again grew by 3.4% at the end of first quarter of 2010 and real disposable income
grew by over 4%. The average monthly dollar wage increased to around $694 in the first four months of 2010.

PESTLE analysis
Educated population
Russia has one of the most highly educated populations in the world. The country has more than 70,000 primary and
secondary schools and more than 82,000 pre-schools. One of the strongest facets of the Russian education system is that
a majority of the schools are in rural areas compared to urban areas, making education accessible to all areas of the
country. Furthermore, the literacy rate in Russia is one of the highest in the world, at 99.4% for the total population. The
high literacy rate signifies that there is a large educated workforce in the economy.
Current challenges
High AIDS rate
Russian society reflects unfavorable trends of both the developed and developing worlds. The country is challenged with an
ageing population, coupled with a poor healthcare system and rapidly deteriorating AIDS situation. The AIDS rate is
growing in Russia, with country registering 49,000 HIV cases in 2007, and 55,000 in 2008. More than 500,000 Russians
have contracted the infection, according to the health department. It is estimated that there have been more than 60,000
registered AIDS cases in 2009. It is reported that the AIDS rate is 0.3% of adult population in Western Europe, and it was
more than 1% in Russia. It is estimated that this could increase in coming years as the government is not taking necessary
steps to control the disease.
High mortality rate
High mortality and morbidity among the Russian working population have become a huge challenge to economic and social
development. The death rate in 2009 was an estimated 16 deaths per 1,000. As a result, supply constraints of labor are
expected to become a major impediment to economic growth. Currently, Russia’s demographic crisis is considered more
serious than that of Western Europe. Furthermore, the population has declined by six million since 1992 to an estimated
140 million in 2009. It is also expected that the population will fall by 30% by 2050. The high mortality rate, then, not only
shows the low level of healthcare services in the country but also poses the problem of a decreasing labor force.
Future prospects
Revamp of social security benefits
In May 2008, the Russian government announced an increase in social security benefits. To this end, the government has
increased pension payments by 15% since August 2008. Furthermore, child tax exemptions for individuals will be increased
from $26 to $35 and the revenue accrued would be allocated to education, healthcare and housing programs. The
government will also boost financial support for the disabled and World War II veterans, and also provide them with housing
and other basic amenities. The government reported that it would continue with this strategy until 2011. These positive
signs and the government's continued focus will, in the long-term, further enhance social development in Russia.
Tax benefits to healthcare and education
In January 2010, the Russian government announced that it will consider tax breaks for private enterprises in the education
and healthcare sectors and expects to benefit from an eastward shift in investment. It is expected that the due to increased
debt and the tax burden in developed countries, the foreign investment flows would be increasingly towards eastern

PESTLE analysis
countries, which would be beneficial to Russia. With the view of attracting more investment into the social sector, the
government intends a plan of a full profit-tax exemption for private businesses linked to human capital, such as healthcare
and education. This would not only increase the social infrastructure in the form of new investments but also will provide
more access to healthcare and educational facilities.
National welfare fund
The Russian government reported a national welfare fund of around $33 billion in April 2008. The national welfare fund is
being judiciously invested into foreign currency bonds, sovereign bonds of chosen developed countries, foreign banks, and
credit originations. It is reported that revenue generated from these sources would be used to develop the social
infrastructure of the country. Between January and March 2008, the government reported earnings of $290m which has
been put to use for social development. As of January 1st, 2010, the National Welfare Fund reached RUB2.77 trillion, the
equivalent of $91.56 billion. The national welfare fund represents long-term motivated planning by the Russian government
to bring social change in the country.
Future risks
Widening income inequality and rising poverty
Income inequality in Russia has widened in the post-liberalization period. According to the Russian Statistics Service, the
Gini coefficient was 0.42 at the end of 2008, compared to 0.29 when the Soviet Union collapsed. In addition, income
inequality has been sharper in the cities of Russia. For instance, the difference between the 10% richest and 10% poorest
among the population in Moscow was 42 times in 2008 (compared to 41.7 times in 2006 and 38.6 times in 2005). Along
with rising income inequality, poverty is also on a rise in Russia. The living conditions of Russians are set to deteriorate with
the economic slump. According to the Federal State Statistics Agency (Rosstat), 19.7 million citizens were below the
poverty line as of third quarter of 2009, which is 14% of the population. However, unofficial sources claim that more than a
third of the Russian population is living in poverty. Russia also faces a severe housing shortage, with about 7% sharing
living space with other households and one in two people having less than 10 square meters (108 square feet) per capita.
The prolonged existence of such conditions is expected to give rise to a social crisis.
Increasing spread of the AIDS epidemic
The emergence of an AIDS epidemic is a real possibility in the near future. Some predictions suggest that up to 5% of the
population could be infected within the five year period of 2007–12. Despite an increase in investment to combat the
disease, the desired result has not yet been achieved. According to the estimates released by the Russian federal AIDS
center, Russia registered 49,000 HIV cases in 2007 and 55,000 in 2008. Moreover, the figure is expected to have reached
over 60,000 by the end of 2009. This amounts to an over 12% increase compared to 2007 and 2008, and has come despite
the government’s increased expenditure of around RUB400 million ($13.7 million in 2009) to fight the disease.
Given the current weaknesses of the health infrastructure and the recent sharp increases in the usage of intravenous
drugs, there could be a potentially disastrous escalation of infection rates. If the experience of Sub-Saharan Africa is any
kind of indicator, the economic impact of AIDS on Russia could be devastating.

PESTLE analysis
Technological analysis
Overview
Russia has historically been known for its excellence in space technologies and is one of the most successful countries in
terms of its implementation of many space programs. However, the country lacks expertise in fundamental research.
Although Russia is part of the G8, the country does not have enough patents registered in its name. Furthermore, the
science and technology system in Russia is weak, with a lack of proper resources and funding. Nevertheless, the country is
beginning to position itself as the next destination for IT sector investments.
Table 6: Analysis of Russia’s technology landscape

▪ Advanced space technologies ▪ Poor performance on patents
▪ Weak science and technology systems
▪ Increasing presence of IT sector ▪ Piracy and poor infrastructure
▪ Increasing number of skilled workers
▪ Military technologies helping the farming sector
Current strengths
Advanced space technologies
Russia has historically been known for creating some of the most advanced space technologies in the world. For example,
the Russian space station, Mir, is playing a vital role in helping international space programs. The government had
allocated more than $11 billion for the Russian space agency for the period 2006–15, and has always provided a regular
flow of funds for the development of advanced space technologies. It is also a revenue-generating body for the
government. This has become more prominent in recent years, with Russia taking up commercial launching activities and
starting a space tourism program.
Furthermore, in April 2010, the government announced that it is investing RUB1.5 billion rubles (around $50 million) to flag
off a unique satellite system to monitor climatic changes and survey energy resources in the Arctic region. The Arctica
satellite constellation will monitor the weather and environment of the North Pole, pinpoint hydrocarbon deposits on the
Arctic shelf, provide telecommunications over the hard-to-access areas and ensure safe air traffic and commercial shipping
in the region. Along with several international treaties with the US, Japan, India and China, Russia plays a key role in
developing space technologies.

PESTLE analysis
Current challenges
Poor performance on patents
For many years, Russia has been performing badly in terms of registering patents for the technologies it develops. The
figures were as low as 204 patents in 2008; this is particularly significant when compared to the US, which registered over
93,691 patents for the same period. Russia’s share in tradable international patents has also remained low. This is largely
due to efforts being concentrated completely on space and military technologies. The country's poor performance in terms
of patents has been a worrying factor for the government's science agencies.
Weak science and technology systems
The science and technology (S&T) system in Russia has been falling short of international standards mainly due to the
structures of the old Soviet system exerting control over scientific streams. The chief problems of the system include
language barriers, weak co-ordination of activities, a lack of active presence in international meetings, discrepancies in
intellectual property rights and policies, political obstacles and differences among scientific bodies. Adding to these
reasons, corruptive practices further deteriorate the system from harmonious functioning.
Future prospects
Increasing presence of IT sector
Although Russia has historically been a significant producer of oil, the country is now going through a diversification
process. The country's IT market is presently the fastest-growing in the Central and Eastern Europe region. There is huge
potential for IT spending by Russia's traditional industries to make their conventional systems of operations IT compliant.
Furthermore, Russia is witnessing a great increase in the sales of computers due to the government investments in several
IT-based programs in the country. The Russian software market generated total revenues of $3.8 billion in 2009,
representing a compound annual growth rate (CAGR) of 20.9% for the period spanning 2005–09. In comparison, the
French and German markets grew with CAGRs of 7.2% and 5.2% respectively. These factors provide strong incentives for
international vendors to invest in Russia. It is expected that the total size of the Russian IT market will increase to around
$18 billion by 2012.
Increasing number of skilled workers
Russia is slowly emerging as one of the countries with the highest number of skilled workers in S&T areas. According to
government sources, the US had around 35 million skilled workers out of 300 million people in 2007. Comparably, Russia
has around 30 million skilled workers out of 140 million population, signifying a better ratio. It is expected that this number
will rise to 45 million by 2020. This provides a strong base for future technological development and R&D in the country.
Military technologies helping the farming sector
The Russian military and air force have created a cloud-dispersal aircraft in 2008, which is considered to be one of the
most advanced technologies capable of artificially producing rain. Under this, a special aircraft will carry liquid nitrogen and
silver compounds (dry powder cement) and spray it over certain parts of the clouded sky. When this combination touches a
cloud, it will accumulate particles of the cloud, which then form into rain or snowflakes. This unique technology is soon

PESTLE analysis
going to be commercialized and is considered to be of great importance for both domestic and other international drought-
prone areas.
Future risks
Piracy and poor infrastructure
Russia is considered to have one of the highest rates of piracy. Russia reportedly had piracy rates of 68% in business
software in 2008. According to the International Intellectual Property Alliance (IIPA), it was reported that business software
losses due to piracy amounted to more than $2.3 billion in 2008. Furthermore, Russia continued to be on the priority watch
list of IIPA, which indicates that there is rampant piracy in the country. This is one of the worrying factors that prevent many
foreign investors from starting any exclusive R&D centers in Russia. Another factor impeding investment is that although
there has been economic growth, there have not been any significant efforts to build the scientific infrastructure of the
country. With the government streamlining funds more towards social and military development, there are no sign of any
efforts towards the future up-gradation of the scientific infrastructure and patent laws in Russia.

PESTLE analysis
Legal analysis
Overview
The Russian judicial system has suffered from corrupt officials and practices, which have made the system unreliable. In
addition, unfair competition practices are hampering the entry of FDI into Russia. However, the country has set a long list of
legal reforms during 2008, which are expected to improve the country’s judicial system. Russia has also agreed to various
legal assistance programs from many countries to solve its domestic and international legal issues.
Table 7: Analysis of Russia’s legal landscape

▪ Conducive FDI policies ▪ Weak judicial system
▪ Easy immigration policy ▪ Unfair competitive practices
▪ Judicial reforms ▪ Slowdown of structural reforms
▪ International co-operation for legal assistance
Current strengths
Conducive FDI policies
The Russian government has put in place policies which favor foreign direct investment (FDI). The 1991 Investment Code
guarantees foreign investors rights equal to those of Russian investors, while the 1999 Law on Foreign Investment also
follows this principle of equal treatment. Moreover, to lure foreign investors, both federal and regional governments are
establishing special economic zones and high-technology parks, and special tourist regions to encourage foreign
investment. Local laws are also being amended to suit the needs of foreign investors. FDI inflows for 2004 were $28.75
billion, but reached $70 billion in 2008. The jump in FDI in Russia before the economic crisis set in is reflective of the
impact of such policies.
Easy immigration policy
After the end of Soviet rule, Russia’s labor efficiency decreased with a corresponding fall in population for many years. This
led to the availability and provision of employment opportunities for foreign workers in various industrial sectors of Russia.
The liberal immigration laws brought in many foreign workers, especially from the EU. It was reported that the number of
legal foreign workers in Russia reached eight million at the end of March 2008, an increase of 20% from the previous year.
The immigration laws play a vital role for FDI and in Russia they are presently adding to its strength.

PESTLE analysis
Current challenges
Weak judicial system
Russia’s judicial system is still relatively weak and unpredictable. Corruption is rampant among law-enforcement bodies
and judges, and court decisions are often difficult to implement. Many foreign investors have experienced problems
executing judicial rulings and obtaining approval on contractual agreements. There are also extended court sessions and
judicial delays for many cases, exacerbating the situation. Furthermore, the judicial system is also under-funded, under-
staffed and extremely slow in implementing decisions. This makes judicial processes in Russia highly inefficient.
Unfair competitive practices
After the Soviet era, Russia created competition laws and bodies based on the laws prevailing in western countries. In
practice, however, Russian competition policy often differs from the norms familiar to foreign firms in the western world.
Russian authorities tend not to follow a consistent approach to competition. This is mainly due to the influence and corrupt
practices of large monopolies which wield power among the authorities. As a result, smaller companies with less influence
face tough competition laws. The selective application of these laws often results in the restriction of competition.
Furthermore, foreign investors have, on a number of occasions, experienced discrimination in obtaining licenses from local
authorities. In some situations, local interest groups have influenced authorities. Foreign investors have been forced to pay
several fees by local governments and have been offered less favorable terms to develop their projects. Also, many
criminal organizations in Russia have gained access to sensitive information from companies and used it against them,
leading to the failure of products. These unfair practices have become a barrier to investment in Russia.
Future prospects
Judicial reforms
The present government, headed by Dmitry Medvedev, is keen on implementing judicial reforms in the country. The
president held a special meeting in July 2008 to procedurally implement a phased reform of the judicial system. As part of
this, the president, along with the judicial heads and ministry of justice, reached a consensus on the implementation of a
new law. The new law stringently addresses issues related to damages borne by the citizens and compensations regarding
the violations of their rights. The president has also considered an immediate course of action to implement a special
training and education program for all of the judges to discourage them from indulging in corrupt practices. Furthermore, in
December 2009, the EU allocated E3 million for measures intended to boost the efficiency of the enforcement of court
rulings in Russia. The implementation of these reforms is expected to bring in positive changes in the Russian judicial
system.
International co-operation for legal assistance
Russia is extending its relationships with the international community to gain legal assistance in various civil and criminal
cases. In one such move, the country entered into a legal assistance program with Japan in mid-2008. According to the
Russian ministry of justice, the agreement has already been co-ordinated at the level of judicial bodies and is passing co-
ordinating procedures in the legal institutions of the countries. Furthermore, the country is also entering into other similar

PESTLE analysis
legal assistance treaties with China, India and Sri Lanka. These programs are expected to bring in more positive changes
to the judicial system in Russia.
Future risks
Slowdown of structural reforms following economic crisis
Although the investment climate in Russia has improved following liberalization, the slow pace of structural reforms has
continued to irk foreign investors. The Russian governance system has been accused of a lack of transparency. Since the
Russian government has begun to intervene to support various sectors, there are apprehensions that the functioning of
government entities will lose transparency even further. Moreover, no adequate steps are being taken to increase clarity
and consistency in the Russian tax laws and administration. If the legal regime continues to remain unreliable, it will
dissuade investors from entering Russia.

PESTLE analysis
Environmental analysis
Overview
Although an environmental management system exists in Russia, a lack of resources to tackle environmental problems is
preventing Russia from effectively implementing environmental protective measures. However, the government is planning
to introduce an environmental security system to address this problem. The country has also agreed upon various
international environmental agreements to take up conservation activities.
Table 8: Analysis of Russia’s environmental landscape

▪ Environmental management systems ▪ Spillages causing environmental hazards
▪ Lack of resources to tackle environmental problems
▪ Environmental security system ▪ Deteriorating water quality
▪ International co-operation ▪ Difficulties with environmental monitoring
▪ Increased investment in global environmental facility
Current strengths
Environmental management systems
Russia’s environmental management systems are well equipped with various levels of controls and streamlined monitoring
systems. The systems are headed by a three-tier executive federal governance body comprising federal ministries
(charged with developing state policies), federal services (supervision and control functions), and federal agencies
(resource development and service provision). The three-tier system enables effective policy making, implementation and
supervision. This system is presently playing a vital role in co-ordinating various conservation activities in Russia.
Current challenges
Spillages causing environmental hazards
Russia is one of the most important contributors of oil to world markets and transports most of its produce through
seaways. There have been many cases in the past where spillages from sea containers have resulted in the pollution of
sea waters. In November 2007, a Russian oil container carrying about 4,000 tons of fuel oil was wrecked in a storm,
causing a massive spillage into the Black Sea. Furthermore, four ships sank to the bottom, including two vessels each
carrying 2,000 tons of sulfur. The devastation in the wake of the storm was staggering. Endangered species such as the
Dalmatian pelican and the great black-headed gull were seen coated in oil, as the region is home to thousands of migratory
birds that nest along the waterways during winter. Fish caught in the Kerch Straight were deemed unsafe to eat, which

PESTLE analysis
threatened the livelihoods of locals. These kinds of incidents are leading to degradation of the marine environment around
the Russian coast. In February 2009, up to 300 tonnes of oil was spilled into the sea in the west Cork coast. However, the
government has not taken any proactive decisions to prevent such spillages and the possibility of such instances re-
occurring is posing a serious environmental challenge to Russia.
Lack of resources to tackle environmental problems
The biggest environmental problem facing the Russian government is its inability to tackle huge environmental issues that
may arise due to military and other toxic wastes. The federal funds available for the disposal of solid fuel missiles are not
sufficient for conducting any cleaning programs. There is also some concern that the current pollution charges may be
abolished and replaced by an ecological tax which will go to general revenue support, resulting in a decrease in funds for
environmental protection. Furthermore, there is also a scarcity of trained local staff in the country to implement
environmental regulations.
Future prospects
Environmental security system
The Russian government is planning to set up an effective security system to prevent pollution and man-made
environmental disasters. The main tasks outlined by the government include the implementation of environmental decisions
consistently and completely, and the creation of an effective system for ecological security in the country. The system is
expected to effectively deal with man-made pollution and provide solutions to new environmental problems and challenges.
Strict measures will also be taken for the disposal of waste accumulated over years of economic and military activities. The
government is simultaneously going to introduce an exclusive sector for clean technology and is set to draw measures to
minimize environmental consequences resulting from oil pipeline and offshore hydrocarbon projects.
International co-operation
Russia is extending and participating in various international co-operation agreements related to different aspects of the
economy. In June 2008, the country agreed to co-operate with China on a variety of environmental activities. Under the
new agreement both Russia and China have made great progress in environmental co-operation and have pledged to
boost their co-operation in the coming years. This co-operation is mainly designed to boost cleaning-up activities in areas
which are affected by toxic waste in both countries. The Russian government has entered into similar agreements with
Indonesia, Japan and the Czech Republic to develop various technologies designed to improve environmental protection
and conservation. In February 2010, the country also joined hands with the Iranian government to conduct research on the
Caspian Sea. These environmental pacts will further the cause of environmental protection in Russia.
Increased investment in global environmental facility
The Global Environmental Facility (GEF), established in 1991, helps developing countries to finance projects and programs
to protect the global environment. Russia attaches great importance to GEF’s activities and has co-operated with it since
1992. Although the country is a participant in many activities conducted by GEFI, it has never financially supported the
organization. However, in the beginning of 2008, Russia invested about $270m in GEF. This will bring adequate resources

PESTLE analysis
to the organization in the coming years to successfully run 24 projects dealing with issues like biological diversity, climate
change, international waters and ozone depletion taken up by various governments.
Future risks
Deteriorating water quality
The quality of water in Russia has been deteriorating for many years now. The deterioration has been especially noticeable
in water protection zones close to cities. In these areas, the quality of drinking water is especially poor. The last reported
government public health data indicated that 20% of drinking water samples from piped sources did not meet chemical
quality standards and 9% did not meet bacteriological standards. For rural non-piped sources, the levels were even higher,
with 31% and 28% falling below chemical and bacteriological standards. This has led to regular intestinal infections
affecting around 3,000 people every year in the country. It is expected that the water quality is going to further deteriorate in
Russia in the coming years.
Difficulties with environmental monitoring
In Russia, Hydromet, a federal body accountable for the collection of data on different environmental conditions, and the
General Department of Natural Resources and Environment Protection (GDNR) are responsible for environmental
management systems. However, there is no consensus between the GDNR and Hydromet for the circulation of information
on a routine basis. Furthermore, the information collected by the GDNR itself is not fully shared with the sub-national
regions and Hydromet. For example, Hydromet receives an annual environmental performance report from the GDNR but
no details on performance at the enterprise level. This has led to an inefficient system of monitoring, with insufficient
amounts of the accurate data compared to the amount required for effective reporting. There have not been any reforms to
co-ordinate the activities of the two organizations, which is leading to difficulties in monitoring the environment.

Political landscape
POLITICAL LANDSCAPE
Summary
Russia entered the 20th century in a quasi-feudal condition: its economy was in disarray and its government corrupt, ruled
by an ineffective authoritarian monarchy. Entering into World War I made matters even worse for the country. With the
support of communist agitators like Lenin and Trotsky, Russia seized the power from the monarchy in 1917. The country
then withdrew from the war and commenced a radical transformation of the social and economic order. During seventy
years of communist rule which followed, the country went through a rapid period of industrialization and achieved victory in
World War II at a terrible human cost. Towards the end of the century it became increasingly apparent that the country's
economy could not match up to the completive capitalist economies of the West, and eventually the state edifice collapsed,
bringing down the Soviet system in 1991 and plunging Russia into a seven year economic crisis (1991–98).
Former President Vladimir Putin, who achieved victory in the 2000 elections on the back of his brutal but politically popular
suppression of the separatist movement in Chechnya, overcame a number of potential crises and pitfalls throughout his
presidential career. In 2004, he was re-elected as the president of Russia with a significant majority, garnering three
quarters of the total votes cast. After successfully completing three terms as president, Putin handed over the office to
Dmitry Medvedev in May 2008. He won the presidential election with a popular vote of more than 70%. Soon after, Vladimir
Putin was appointed as the prime minister of Russia. The first few months of Dmitry Medvedev’s presidency was dominated
by the Russia-Georgia war, as Russian support increased for the Georgian breakaway region of Abkhazia. Russia
subsequently recognized the territories of South Ossetia and Abkhazia, leading to further protests from Georgia. The war
has adversely affected Russia’ relations with the west. Russia also engaged itself in another standoff after it cut the gas
supplies to Ukraine, disrupting supplies to southeastern Europe too. The aggressive stance maintained by Russia in its
foreign relations has not gone down well with its neighbors in the west. However, with President Obama assuming power in
the US, the two nations have agreed to co-operate in areas of mutual interest.
The economic challenges that the country faces have assumed paramount significance, as the investment grade for Russia
has been lowered.
Evolution
Pre-1991
During the 19th century, Russia was ruled by autocratic rulers. Social and economic modification programs implemented
during the 1860s and 1900s failed to tackle Russia’s vital problems. In 1914, Russia became a participant in World War I
due to its rivalry with Austria, resulting in a widening of the economic gap between Russia and Western Europe. This,
combined with the stress of the war effort, allowed the radical Bolshevik Party, led by Vladimir I. Lenin, to seize power from
the provisional government which took over after the failure of monarchy. At the end of a fierce, four- year civil war, Russia
entered into a 70 -year period of one-party rule and came to be known as the Soviet Union. Initially, the union embraced
Ukraine, Byelorussia, and three Transcaucasia republics, with the ruling party Communist Party of the Soviet Union
(CPSU) at the helm.

Political landscape
Figure 3: Russia’s political events timeline
1991–2000
In 1991, Russia became independent after the collapse of the Soviet Union and was renamed the Russian Federation.
Boris Yeltsin was elected as the first president of newly christened country. During his nine year tenure in office (1991–
2000), Yeltsin oversaw a disorganized makeover that ended the domination of communism but brought irregular reforms in
the economic, political, and social spheres. Although the constitution of 1993 made the executive the dominant branch of
government, Yeltsin contended the legislative branch over many issues. Economic reforms were destabilized by corruption
and confusion as Russia supposedly moved towards a free-market system. Furthermore, in 1998, the Russian ruble
collapsed and the government gave a notice of intention of default on foreign debts. This resulted in the president making a
hasty decision to sack the then prime minister. This was followed by the sacking of two more prime ministers during March–
August, 1998. In December 1998, Vladimir Putin was appointed as the prime minister and eventually became the president
after Yeltsin’s resignation in 1999.

Political landscape
2000–04
International ties with the West, which began in the 1990s, soured to some extent over issues such as the expansion of the
North Atlantic Treaty Organization, Russia’s ongoing conflicts with the Republic of Chechnya, and opposition to the US led
war against Iraq in 2003. A new concentration of executive power began with the presidency of Vladimir Putin (elected in
2000), who sought to restore Russia’s regional power while maintaining relations with the West. Putin was reelected
overwhelmingly in 2004 as well. Although the country was developing fast economically, political relationships with
Chechnya were deteriorating quickly and the suicide attacks on the government agencies were prevalent.
2005 onwards
During the first six years of Putin’s presidency, political opposition became greatly fragmented, media freedom decreased
drastically, and the government was able to shift the center of economic influence from a group of autonomous
entrepreneurs to state-controlled enterprises and allies. Although the government’s relationship with the west became
increasingly strained for some time, it was reinvigorated in 2006 when Putin hosted a meeting of the G8 nations. During
these years, the government also signed treaties with Germany and China for gas supply. However, since that time
relations have continued to worsen. In 2007, Russia signed a law suspending the country's participation in the 1990
Conventional Armed Forces in Europe (CFE) treaty that limits the deployment of heavy military equipment across Europe.
In 2008, Putin stepped down and Dmitri Medvedev was elected as the new president. The first few months of his
presidency found him engaged in a military conflict with Georgia and a standoff with Ukraine over gas supplies. In July
2009, President Medvedev and Barack Obama reached an outline agreement to cut back their countries' stockpiles of
nuclear weapons. Russia also supported the US decision to shelve controversial missile defense bases in Poland and the
Czech Republic. The new strategic arms agreement was signed between the US and Russia in April 2010.

Political landscape
Structure and policies

Key political figures
President: Dmitry Medvedev
Prime Minister: Vladimir Putin
Figure 4: Russia – Key political figures
Dmitri Medvedev was elected President of Russia on March 2, 2008. He was earlier the Chief of Staff under
Vladimir Putin until 2005, when he became the first deputy prime minister of the Russian government. His main
focus is set to protect civil and economic freedom. Furthermore, he intends to fight against the laws which
undermine and hamper modern development.
Vladimir Putin was Russia’s president for more than eight years from December 1999 until May 2008. Due to
constitutionally mandated term limits, Putin could not run for a third term. To his credit, he has brought the
Russian economy into the growth path. After choosing Dmitri Medvedev as the presidential candidate, Putin was
nominated by the later to be the prime minister. Putin is currently holding office as the prime minister.
Structure of government
Russia is a democratic federation of 89 sub-national jurisdictions, divided into republics, oblasts (provinces), autonomous
oblasts, autonomous regions, and territories. At the national level, the constitution of 1993 describes the three branches of
government as the executive, legislative, and judiciary. In the Russian political system, the president has superseding
powers as head of the armed forces and the Security Council. These powers include the authority to appoint a broad
mixture of government officials without effective oversight or verification. The houses of the bicameral legislative branch
have a weak opposition because of their constitutional arrangement and the non-existence of opposition parties. The
judiciary, a sanctioned branch of government under the Soviet system, has shifted gradually as an independent authority.
On the whole, the power is well centralized in Russia. Former president Vladimir Putin has utilized this structure to increase
the power of his office and control the government. In May 2008, Dmitri Medvedev took over the office of the president.
Legislative branch of government
The Federal Assembly of Russia comprises two houses: the Federation Council (178 members) and the State Duma (450
members). Members serve the respective houses for four -year terms. Among the responsibilities allotted between the two
houses, the State Duma has an authoritative role of primary deliberation of all legislation. Although the Federation Council
has the authority to appraise and force compromise on legislation, in reality its role has principally been as a counseling

Political landscape
and reviewing body. In the 1990s, the Federation Council was fabricated in such a way that it contained the heads of
government and the legislative leaders of the 89 sub-national jurisdictions of Russia. In 2000, Vladimir Putin, the then
president, increased his control on the Federation Council by replacing ex-officio membership with a process of
appointment by the president. The Duma can vote for no-confidence on an existing government, but the president has the
powers to ignore the vote and dissolve the Duma, in case a second vote is taken within three months. Furthermore,
amendments in the constitution require two -thirds of the vote in the Duma. The elections were last held in December 2007,
in which United Russia won 315 seats, the Communist Party of Russian Federation (CPRF) won 57 seats, the Liberal
Democratic Party of Russia (LDPR) won 40 seats, and Just Russia (JR) won 38 seats.
Executive branch of government
In Russia, the president is the head of state with a maximum of two four-year terms. However, in 2006, Vladimir Putin (the
then president of Russia) gathered substantial public support to amend the constitution. This allowed Putin to seek a third
term in the presidential office. In Russia, the president appoints the prime minister, who is head of government and the
Central Bank of Russia, and the chairman of the Constitutional Court, the highest judicial body. All the nominations require
approval by the State Duma. However, the president may dissolve the Duma if it fails three times to confirm a nominee for
the prime ministerial post. A number of other high level presidential nominations, however, require no approval from the
legislative branch. The president also issues decrees that go into effect without the parliament’s approval. The last held
presidential elections were in March, 2008. Dmitri Medvedev won the presidential race with more than 70% vote, and since
May 2008, he has held the position of president of Russia. In November 2008, the Russian parliament voted in favor of a
bill to extend the next president's term of office from four to six years.
Administrative divisions and local governments
Russia is segregated into 89 sub-national jurisdictions and each jurisdiction has two spokespersons in the Federation
Council. However, the jurisdictions differ broadly in size, composition, and nomenclature. They comprise 21 republics, 49
oblasts (provinces), six territories, 10 autonomous regions, one autonomous oblast, and two cities (Moscow and St.
Petersburg) with separate oblast grades. The independent regions and oblasts are elements of larger sub-national
jurisdictions. The chief executive of all 89 jurisdictions is the governor who was previously elected through popular vote. In
December 2004, however, the president took over the right to appoint the governor. There are several regional governors
and city mayors in Russia.
Structure of legislature
Key political parties
United Russia (UR)
United Russia is one of the largest political parties in Russia and is currently the ruling party of the country. UR was formed
in 2001, as the result of a merger between two anti-communist parties: Fatherland-All Russia and the pro-government Unity
Party of Russia. UR gained most of its momentum due to its popular leader, Vladimir Putin. The party follows a
conservative democratic stand point with policies focusing mainly on improving the economy and living conditions, freedom
to elect and controlling mass media. The party is very centralized in its structure and is sometimes referred to as ‘the

Political landscape
presidential party’ by the press. UR has won the general elections continuously since 2000 and won the 2007 elections
comprehensively by garnering 315 seats in the State Duma.
Communist Party of Russian Federation (CPRF)
The CPRF has it roots in the traditional Communist Party of the Soviet Union (CPSU) and the Bolshevik Party. It claims to
follow pure Russian patriotism and officially follows the doctrines of Marxism-Leninism. The party was formed in 1993 by
Gennady Zyuganov. Though it had a slow start in the 1993 elections with only 12.4% of the votes, slowly it grew to 22% in
1995, and 24% in 1999. However, the party won only 13% and around 11% of the votes in the 2003 and 2007
parliamentary elections.
Liberal Democratic Party of Russia (LDPR)
The LDPR was founded in 1989 by Vladimir Zhirinovsky, intended as a party which focuses particularly on democratic and
centrist ideologies. The LDPR considers itself to be in opposition to the communist party. The LDPR has never been in
power and has had a minimal share of votes in all the elections. In the 1993 elections the party had 23% of the votes. In
1995 and 1999, this decreased to 11% and 6%. Although in 2003 it gained some additional votes (12%), in 2007 the vote
share fell to 8.8%.

Political landscape
Composition of government
Currently, UR holds the most number of seats (315), followed by the CPRF (57), the LDPR (40), and Just Russia (JR) (38).
Figure 5: Distribution of seats by political parties in the Duma, 2007
Others
8%
JR
8%
LDPR
8%
CPRF
12% UR
64%
Key policies
Economic
Russia went through a tough period during the 1990s, with continuous negative growth for seven years. There were no
sufficient reforms in place and, as a result, the country's economy suffered. After Vladimir Putin took over as the president
in 1999, the economy began to recover and has been continuously making efforts to integrate itself into the world economy.
Under many reforms that were adopted, the tax system has been streamlined to enhance compliance and reduce chances
for corruption. Deregulation of business licensing and registration arrangements has been another important focus for
recent reforms. Again, this is expected to reduce the scope for bribery and corruption, and should also enhance tax
compliance by making it less costly for firms to enter the ‘formal’ economy. Property rights have been strengthened through
changes in land ownership rules.

Political landscape
The need to diversify the economy and reduce the dependence on the energy sector has been explicitly recognized, and is
reflected in a number of measures taken by the authorities recently. These measures include changes in tax rules and tax
breaks to promote innovation-related activities and the creation of special economic zones and technology parks to boost
the manufacturing and IT sectors, respectively. To bolster exports, subsidized credits for exporters have been proposed.
Since the later part of 2008, the Russian stock market collapsed as the Russian economy was hit by the world financial
crisis. In October 2008, the Russian parliament approved a $68 billion package to help banks hit by the global credit
crunch. The government moved to devalue the ruble, to avoid a run on the ruble and bank deposits. The country managed
to maintain 6% growth in 2008, however, the real GDP contracted by 8% in 2009. With the prevailing economic
deterioration, the government has initiated policies to reduce budget deficit from 6% of GDP in 2009 to around 3% by 2012.
Social
Most health indicators in Russia suggest a worrying decline in health outcomes during the 1990s. Due to the long and
continued economic crisis over 1991–98, there was an increase in poverty and alcohol and drugs-related problems, and a
virtual collapse of the public health system. This has translated into falling labor market participation rates and increased
social costs, which further hampered growth and development. On the other hand, despite a dramatic decline in education
expenditure during the 1990s, Russia’s large stock of human capital and its tradition of strength in applied scientific
research are considerable assets and the government is making efforts to improve the education and health systems.
Foreign
Following decades of confrontation with the West, Russia’s conversion to capitalism has seen its relationship with
Washington markedly improve in recent years. This has been reflected in the extension of the G7 grouping to include
Russia (and its subsequent renaming to G8), and the May 2002 partnership agreement between Russia and NATO. The
improving relationship has been helped by strong Russian support for the US ‘war on terrorism’ in the wake of the
September 11 attacks. Russia’s support for the US has reflected in part its own experience of fighting militant Islamists in
Afghanistan and more recently to the breakaway Russian republic of Chechnya. Russia has been keen to foster stronger
ties with the EU, which it sees as a bulwark against a US-dominated world. The signing of an agreement with Germany to
build a gas pipeline under the Baltic Sea between the two countries in September 2005 further consolidated the ties
between Russia and its western neighbors. However, many of the former Warsaw Pact countries queuing up to join the EU
remain deeply hostile towards Russia’s own expansionist tendencies and strengthened strategic ties. Relations with China
have also been strained.
Russia has continued to support separatist regimes in Georgia and Moldova. In 2008, Russia maintained its aggressive
stand by engaging in a military conflict with Georgia and subsequently recognized the territories of South Ossetia and
Abkhazia. The hostilities continued for more than a week. Although the two sides signed a French-brokered peace
agreement and Russia withdrew most of its combat troops, it still maintains forces around Abkhazia and South Ossetia.
Furthermore, in another instance of Russia’s aggressive foreign policy, in January 2009, Russia stopped gas supplies to
Ukraine. Subsequently, supplies to southeastern Europe were also disrupted for several weeks. Russian relations with the
west have not been cordial due to such standoffs.

Political landscape
However, in its bid to normalize relations with the west and the US, Russia halted its plans to deploy short-range missile in
Kaliningrad enclave. This action was in response to the Russian government’s assessment of change in the US's attitude
under President Barack Obama. The beginning of 2009 was marked with both sides coming closer to co-operate in areas
of mutual interest. Russia has also announced the end of its "counter-terrorism operation" against separatist rebels in
Chechnya.
Defense
Russia has a constant military reform agenda which includes streamlining all units and modernizing equipment. The
Russian government has begun serious efforts to modernize its military. The focus has shifted toward practical training, and
the government is introducing bills to improve the organization of the military. The government has increased its budget
spending but that is not enough for its over-sized military. It is a legacy which has been maintained since the Cold War
days and there have been few changes in the defense set-up.
Troop discontent and low funding have hindered expansion of this program beyond individual units. Reforms would also
reorganize the military districts and the status of the main branches. The Chechnya disagreement, which decreased in
intensity in 2006, dented self-esteem throughout the military and exposed Russia's inability to adapt existing doctrine to
non-conventional combat. Furthermore, Russia has many international customers for the purchase of its military
equipment. Among all the countries, China and India have been the top customers for Russia’s military exports. In 2005,
the military exports reached a new high of $6.1 billion. In 2005, Russia and China conducted a joint military exercises on
the coast of China’s Shandong Province, and in 2006 plans were agreed on continued sales of advanced arms to China.
India had earlier agreed to extend military co-operation with Russian forces after conducting large-scale bilateral naval
exercises in 2003. In 2005 and 2006, Russian forces took part in various joint exercises with the military forces of Armenia,
Canada, India, Kyrgyzstan, Sweden, Turkey, and the US. In early 2006, joint naval and antiterrorism exercises were
conducted in the Ionian Sea to weigh up the inter-operability of the North Atlantic Treaty Organization (NATO) and Russian
systems.
In May 2007, Russia test fired a long-distance missile. This, according to former President Putin, marked a new arms race,
as the US was planning to expand its missile defenses into Eastern Europe. Furthermore, Russia revived Soviet-era
Atlantic navy exercises in neutral waters in the Bay of Biscay off the coast of France. This is indicative of Russia's
demonstration of its new military might. President Putin took the territorial expansion policy to newer heights as Russia
mounted an Arctic expedition and planted the Russian flag on the seabed at the North Pole.
In July 2009, President Medvedev and Barack Obama reached an agreement to cut back their countries' stockpiles of
nuclear weapons. Russia also supported the US decision to shelve controversial missile defense bases in Poland and the
Czech Republic. The new strategic arms agreement was signed between the US and Russia in April 2010.
Performance
Governance indicators
The World Bank report on governance uses voice and accountability, political stability and absence of violence,
government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for 212 countries and
territories over the period 1996–2008. The study has been carried out by Daniel Kaufmann and Massimo Mastruzzi of the

Political landscape
World Bank Institute and Aart Kraay of the World Bank Development Economics Research Group. For any country, a
percentile score of 0 puts it at the lowest rank and 100 correspond to the highest rank.
Russia ranked in the 21.6 percentile on the voice and accountability index in 2008. Voice and accountability measures the
extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression,
freedom of association, and the availability of free media. Russia ranks very low due to its closed and controlled attitude
towards the press. Among the BRIC countries Russia, ranks below its counterparts like Brazil and India, which are in the
higher percentile of 50–75. However, Russia is still ahead of China in this particular category, with China in a lower
percentile rank of 5.8 in 2008.
Russia ranked in the 23.9 percentile on political stability and absence of violence in 2008. Political stability and absence of
violence measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional
or violent means, including domestic violence and terrorism. Russia is ranked higher than India, which has a percentile rank
of 16.7. However, Russia is behind Brazil and China, which are in the 25–50 percentile ranks.
Russia ranked in the 42.9 percentile on government effectiveness in 2008. Government effectiveness measures the quality
of public services, the quality of the civil services and the degree of its independence from political pressures, the quality of
policy formulation and implementation, and the credibility of the government's commitment to such policies. Russia’s rank
on this indicator has been impressive in comparison to other negative ranks which it received. The government led by
former President Putin broadly pursued consistent economic policies leading to stability in policy formulation and
implementation. This was mostly followed by the Medvedev government in the subsequent years. In this indicator, it ranks
in a lower percentile in comparison to other BRIC countries which are in the 50–75 percentiles.
Russia ranked in the 31.4 percentile on regulatory quality in 2008. Regulatory quality measures the ability of the
government to formulate and implement sound policies and regulations that permit and promote private sector
development. A low ranking indicates incompetence of policies and regulations for the private sector. The regulation over
the private sector is still a matter of concern in the country, with many restrictions and procedures for the private sector in
place. Furthermore, there is no comparable support for other public companies. Russia is still far behind Brazil in this
indicator which has implemented fair policies and is in the 58.0 percentile rank. However, the other BRIC countries except
for Brazil are in the same percentile as Russia.
Russia ranked in the 19.6 percentile on rule of law in 2008. Rule of law measures the extent to which agents have
confidence in and abide by the rules of society. The quality of contract enforcement, the police, the courts, and the
likelihood of crime and violence are also assessed. In Russia, the issue of human rights has been highly contentious. This
situation has been exacerbated by the government's increased usage of judicial custody in recent times. As a result, the
rule of law is somewhat ineffective in the country. Russia lies far behind other BRIC countries that are in higher percentiles
and have better implementation of rules.
The country ranked in the 15.5 percentile on control of corruption in 2008. Control of corruption measures the extent to
which public power is exercised for private gain, including both petty and grand forms of corruption, as well as the "capture"
of state by elites and private interests. Corruption remains one of Russia’s enduring weaknesses and the country is totally
unsuccessful in controlling corruption in comparison to other BRIC countries.

Political landscape
Outlook
Russia is on course to further integrate itself with the world in future. The country's prospects became even brighter with the
election of Dmitri Medvedev as the new president in 2008. President Medvedev was successful in reaching an agreement
in July 2009 with the US to cut back military grade nuclear weapons in both countries. While supporting the US decision to
shelve controversial missile defense bases in Poland and the Czech Republic, the country also was successful in signing a
new a new strategic arms agreement with the US in April 2010. The new agreement enforces plans for both the countries
to cut arsenals of deployed nuclear warheads by 30%.
The government has set goals to completely change the outlook of Russia by westernizing the country along the lines of
Europe. Russia’s long-term economic policy relies on the comprehensive modernization of key industries and
infrastructure. The successful run of the economy spanning for nearly a decade came to an end with the economic crisis,
and fixing the economic recession has become the first priority of the government. The government’s decision to devalue
the ruble in December 2008 provided respite to the economy; however, the fallout has meant a lower investment grade for
the economy. The present government has to work through these challenges by improving the investment climate of the
country. Furthermore, with the deepening economic crisis, the government faces the challenge of rising unemployment and
poverty. Although, the country managed to maintain 6% growth in 2008, the economy contracted by 8% in 2009. With the
prevailing economic challenges in the form of inefficient public spending, the government has initiated policies to reduce
budget deficit which was about 6% of GDP in 2009 to around 3% by 2012.
Despite the social and economic developments, Russian foreign policies, especially its assertive approach with its
neighbors, has not found favor with the western world. Moreover, Russia has shown scant regard for the peace deal with
Georgia brokered by the French president. Russia walked out of the Geneva discussion on Georgia held in May 2009 in
support of South Ossetia and Abkhaz, and its continued support for separatist forces in Georgia and Moldova is likely
create further instability in the region.
In April 2010, Ukraine and Russia signed an inter-governmental protocol on the supply of goods on industrial cooperation in
2010. The sides also signed protocols on cooperation in the aviation industry and on industrial policy. The industrial
ministries from both the countries are also keen on further development of cooperation in general and farm engineering, as
well as in the chemical and steelmaking industries. These discussions and deliberations are making the country more
industrial friendly in terms of international trade.

Economic landscape
ECONOMIC LANDSCAPE
Summary
The 1990s are sometimes seen as 'Russia’s lost decade'. Industrial production halved as wages fell sharply and the social
safety net collapsed. Although reform efforts which aimed to replicate western-style capitalism were initiated, the programs
were poorly sequenced and inadequate attention was paid to institutional reforms and the peculiarities of post-communist
societies. For instance, privatization of state assets went ahead before the establishment of legal systems to enforce
property rights. As a result, economic liberalization descended into asset-stripping and thievery on a massive scale. Rather
than creating a broad-based property-owning middle class, the reform program led to the rise of the ‘oligarchs’: business
magnates who are at the center of vast (and often corrupt) monopolistic business empires.
During 1998–2008, the government has shown an increased willingness to challenge the political and economic clout of the
oligarchs by instituting legal and institutional reforms and improving tax collection. Further economic liberalization is on the
cards, particularly as Russia moves ever closer to World Trade Organization (WTO) membership after 12 years of
negotiations. The economy’s successful run which began in 1999 came to an end in 2008 as a result of the mounting
economic crisis. During 1999–2007, the country had one of the highest growth rates, touching around 8% in 2007, but fell
back to 6% in 2008. The global economic slowdown gripped the Russian economy, which entered recession in 2009.
Evolution
Soviet era (1922–91)
The Russian economy was administered by the erstwhile Soviet Union for more than 62 years. The economy was
completely centralized and the state had control over almost all means of production, consumption and investment. The
Communist Party designed economic policy centrally for all of the soviet nations, and, until 1987, the economic system
itself ran in the same way as when it was established by the founders of Soviet Union. There were changes during 1953
and 1987, but the system remained relatively unchanged throughout the period. During the Soviet rule the State Planning
Committee formulated output targets for specific planning periods. All economic activities were centrally planned and
implemented at various lower levels.
1991–2009
During the 1990s, the Russian economy went through a long period of depression. Following the collapse of the Soviet
Union in 1991, economic growth declined sharply. Industrial production more than halved between 1991 and 1998, while
total labor force declined by 15%. Misguided policy advice from the IMF and western countries led to privatization and
deregulation instead of prioritizing institutional and legal reforms for achieving macroeconomic stability. As a result, output
and investment levels collapsed, the ruble quickly lost value and the social safety net, once one of the world’s most
generous, totally diminished. Meanwhile, opportunities for corruption and petty bureaucracy—already prevalent during the
Soviet era—expanded under the economy with a skewed set of mixed principles of anarchism and capitalism reigning
during the immediate post-communism years.
The privatization programs taken up by the government transferred the control of the market to economic forces from the
state. This nominal transfer without fundamental macroeconomic or policy changes resulted in the transformation of

Economic landscape
inefficient state monopolies into inefficient private sector monopolies, completely dependent on political support to maintain
their profitable positions. A new elite—the ‘oligarchs’—consisting of powerful monopolists and politically connected
business leaders, appeared to be above the law and beyond the reach of the taxman.
Meanwhile, ordinary Russians struggled under increasingly harsh economic and social conditions. Investment dollars which
poured into Russia during the emerging markets boom of the 1990s suddenly looked risky following the East Asian financial
and economic crisis in 1997. Western investors and international institutions became increasingly jittery, triggering a major
financial crisis in 1998. The Russian authorities defaulted on $40 billion of ruble-denominated international debt, though
maintaining payments on international bonds. However, since 2006, its external debt, especially government debt, has
been under manageable limits.
The GDP growth was at a negative 2.8% in 1990, immediately after the economic changes took place. Following a decline
of 1.9% in 1998, GDP growth bounced back to above 5.7% in 1999 and 9% in 2000. Thereafter the growth rate showed a
decline, falling back to 4.6% in 2001 and 4.3% in 2002. However, growth accelerated to around 7% in 2003 and 2004,
driven largely by buoyant oil prices following the US invasion of Iraq, and, to a lesser extent, by a pick-up in investment
flows in 2004. In 2005, growth was mainly driven by the continuous expansion of domestic demand and income. Prospects
of the strengthening global oil prices fueled investor confidence and investment surged. However the contingent
appreciation of the ruble resulted in a GDP growth of 6.3% in 2006. In 2007, the growth rose to 8.1% but fell back to 6% in
2008. During 1999–2007, the country had one of the highest growth rates, touching around 8% in 2007.
The global economic slowdown gripped the Russian economy and since then the economy has been on a downward trend.
In 2008, the economy recorded a much lower growth rate of 6%. The country’s fiscal and current account surpluses have
also come under pressure following the meltdown. At the same time, the economic crisis has also exposed the vulnerability
of the Russian system, which is dependent on oil exports with inadequate development of the industrial sector. In 2009, the
economy went into recession recording a contraction of 8%.

Economic landscape
Figure 6: Evolution of GDP growth in Russia, 1990–2009
10
4
Growth rate (%)
0
1991 1993 1995 1997 1999 2001 2003 2005 2007 2008 2009
-2
-4
-6
-8
-10
Year

Financial system
Overview
Since 1991, Russia has made efforts to stabilize its economy through many macroeconomic stabilization measures.
Although there were many policies implemented, the Russian economy was largely affected by the Asian Financial Crisis in
1998. As a result, the country devalued the ruble and stopped payment on its government debt, creating a bigger financial
crisis within the country. Though the country has shifted from being a market based economy, the financial system portrays
a socialistic picture. The government still has a significant amount of control on the banking industry and currency
movements.

Economic landscape
Financial authorities/regulators
Bank of Russia
The Bank of Russia was established in 1990, based on the Russian Republic Bank of the State Bank of USSR. Until
December 1991, before it was renamed as the Bank of Russia, the bank was known as the State Bank of USSR. The Bank
of Russia carries out its functions, which were established by the Constitution of the Russian Federation and the Law on
the Central Bank of the Russian Federation (Bank of Russia), independently from the federal, regional and local
government structures. The Bank of Russia formulates and implements monetary policies in the country. Its main
objectives are to maintain financial stability and create conditions conducive to sustainable economic growth. The Bank of
Russia is also responsible for the rate of exchange and is the regulatory authority of the foreign exchange market.
Russian trading system stock exchange (RTS)
The RTS was established in 1995 as the first regulated stock market in Russia. The RTS index is the main benchmark for
the Russian securities industry and is based on the exchange’s 50 most liquid and capitalized shares. The RTS stock
exchange trades the full range of financial instruments, from cash equities to commodity futures. The RTS has four
divisions catering to different segments:
• RTS Classic Market – the only stock market in Russia where trading can take place in rubles or any other
foreign currency. The most liquid stocks are traded using order-driven technology and are available for direct
market access.
• RTS T+0 Market – a segment where trading is done exclusively by retail investors with full preliminary deposit of
assets and ruble settlement.
• RTS Board – a quote driven market for unlisted stocks and bonds.
• FORTS – a futures and options market with ruble settlement.
The net profit of the RTS doubled in the year to RUB128.8 million ($4.41 million) in 2009 from RUB64.1 million ($2.2
million) in 2008.
Insurance
The insurance market in Russia has grown continuously for the last five years, despite sharp declines in the life insurance
segment’s value since 2003. The Russian insurance market generated a gross premium income of $36.9 billion in 2008,
representing a compound annual growth rate (CAGR) of 18.4% for the period spanning 2004–08. In comparison, the
French and German markets grew with CAGRs of 3.5% and 2.1% respectively, over the same period, to reach respective
values of $266.6 billion and $244.6 billion in 2008. Non-life insurance sales proved the most lucrative for the Russian
market in 2008, generating a gross premium income of $36.2 billion, equivalent to 98% of the market's overall value. In
comparison, sales of life insurance generated a gross premium income of $728.9 million in 2008, equating to 2% of the
market's aggregate income. The performance of the market is forecast to decelerate, with an anticipated CAGR of 14.2%
for the five-year period 2008–13, which is expected to drive the market to a value of $71.6 billion by the end of 2013.

Economic landscape
Comparatively, the French and German markets will grow with CAGRs of 0.1% and 0.3% respectively, over the same
period, to reach respective values of $267.9 billion and $248.4 billion in 2013.
SK Sogaz-Zhizn holds a 19.9% share of the Russian life insurance market. Russkiy Standart Strakhovanie has a further
16.8% share. In the non-life insurance segment, Rossgosstrah and Ingosstrakh Insurance Company are the leading
players with a share of 5.2% and 3.9%, respectively.
Key policies
The Russian economy went through a severe phase of recession during 2009-10, with economy contracting by 8%. Prime
Minister Vladimir Putin announced that the country’s recession is over, promised a strong budget and healthcare reforms
and pressed ahead with a hike in social contributions in an address to parliament in mid-April 2010.The prime minister
proposed that state money should be spent more wisely rather than increase the tax burden on the fragile economy and
proposed fiscal reforms aimed at halving the budget deficit to 3% of GDP by 2012.
Performance
GDP and growth rate
During 1992–96, the first five years after the soviet rule, Russia’s GDP went through a negative run due to the sudden
transition in economic policies. The GDP fell at a rate of 14.2% in 1992 and this negative trend continued until 1998.
Another factor which caused this downtrend was the economic crisis in 1997–98. Immediately after the crisis, however, the
GDP began to expand with a 5.7% growth rate in 1999, which continued until 2006. The major factors in this rise were
rapidly expanding oil and gas sales, government tax reforms, and improved investor confidence. During 1999–2007, the
country had one of the highest growth rates, touching around 8% in 2007. However, the global economic slowdown gripped
the Russian economy too and since then the economy has been on a downward trend. In 2008, the economy recorded a
much lower growth rate of 6%. In 2009, the country was severely hit by the global economic crisis and the economy
contracted by 8%. However, it is expected that the country would record a growth of 3% by 2010.

Economic landscape
Figure 7: GDP and GDP growth rate of Russia, 2002–13
500.0 10.0
450.0 8.0
400.0 6.0
350.0 4.0
Growth rate (%)

300.0 2.0
$ billion
250.0 0.0
200.0 -2.0
150.0 -4.0
100.0 -6.0
50.0 -8.0
0.0 -10.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
GDP GDP growth rate
GDP composition by sector
The services sector contributes nearly 58.4% to GDP in Russia. This is followed by the industrial sector, which contributes
36.8% to GDP. A minuscule share of around 4.8% is contributed by the agricultural sector.

Economic landscape
Figure 8: Sector specific GDP in Russia, 2009
Agriculture, 4.8%
Industry, 36.8%
Services , 58.4%
Agriculture
Russia’s agricultural output is restricted by climatic and soil factors. Moreover, only 32% of the country’s land area is used
for agriculture. Furthermore, the farming resources were exhausted by policies like intensive farming, overuse of chemicals,
and unsuitable crop choice. Failure to effectively convert inefficient collective farms to private ownership after soviet rule
has further hampered production.
Grains remain the largest crop, occupying more than 50% of cultivated land. Other key crops are sugar beets, sunflower
seed, and vegetables. The main livestock outputs are cow’s milk, beef and veal, eggs, and pork. During 2000–08, the
agricultural output (based on current prices) grew at an annual average rate of around 18%. Though the share contributed
by agriculture to GDP is low, the rate at which the output had grown in Russia during 2001–08 is impressive. However,
agricultural output fell during 2009 to RUB 1.8 trillion ($61 billion) from around RUB 2.1 trillion ($71 billion) in 2008. The
agricultural output declined by more than 9% in 2009.

Economic landscape
Figure 9: Agricultural output in Russia, 2002–09
2,500.0 30.0
25.0
2,000.0 20.0
15.0
Growth rate (%)

1,500.0
10.0
RUB billion
5.0
1,000.0
0.0
-5.0
500.0
-10.0
0.0 -15.0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Agricultural output Growth rate
Source: Datamonitor
Note: Sectoral breakup given in local currency due to exchange rate fluctuations DAT AMONITOR
Industry
After 1991 Russia’s industrial sector relied heavily on defense and heavy manufacturing industries, despite an obvious
requirement for diversification. The manufacturing and industrial infrastructure was decaying after the soviet rule. The rising
industrial avenues were energy-intensive industries, a wide range of chemical, metallurgical, and machine-building
products, communications and transportation equipment, and shipping. Due to the absence of subsidies and captive
markets of the Soviet era, the industrial sector in the 1990s was not internationally competitive. After a period which saw a
fall in production, the Russian industrial sector picked up pace after 1999. The industrial output (based on current prices)
recorded an annual average growth rate of around 22% during 2001–08. In 2009, the industrial output decreased by 6%.

Economic landscape
Figure 10: Industrial output in Russia, 2002–09
16,000.0 50.0
14,000.0
40.0
12,000.0
30.0
Growth rate (%)

10,000.0
RUB billion
8,000.0 20.0
6,000.0
10.0
4,000.0
0.0
2,000.0
0.0 -10.0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Industrial output Growth rate
Source: Datamonitor
Note: Sectoral breakup given in local currency due to exchange rate fluctuations DAT AMONITOR
Services
Russia’s services sector has expanded rapidly since the Soviet era. The sector contributed around 58.4% of GDP in 2009.
Financial and retail services have expanded especially fast during 2000–07. Some of the important services sectors in
Russia are retail, advertising, marketing and sales, and tourism. Financial services growth had picked up in recent years,
yet it lags behind those of other countries that are at similar economic levels. Services sector output recorded an average
growth of around 22% during 2001–08.The services sector output declined by around 4% in 2009 in comparison to 2008.

Economic landscape
Figure 11: Services output in Russia, 2002–09
25,000.0 30.0
25.0
20,000.0
20.0
Growth rate (%)

15.0
15,000.0
RUB billion
10.0
10,000.0
5.0
0.0
5,000.0
-5.0
0.0 -10.0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Services output Growth rate
Note: Sectoral breakup given in local currency due to exchange rate fluctuations
Fiscal situation
The Russian economy recorded a growing budgetary surplus during 2001–07. The tax system underwent a major
overhaul in 2000–01, resulting in improvements in tax collection. In 2007, Russia’s budgetary surplus reached 5.5% of
GDP. Despite the economic slowdown, the government managed a surplus of 4.1% of GDP in 2008. However, the
economic slowdown has put pressure on government finances. In 2009, Russia registered a federal budget deficit of
RUB2.33 trillion ($79.6 billion), around 5.9% of GDP. The Russian Finance Ministry has reviewed the budget revenues for
2010 and made a new prognosis for next year. It predicted that in 2010 revenues are expected to reach RUB92.9 billion
($3.2 billion), which is higher than 2009, despite higher oil prices and an improved forecast of economic growth. In 2010,
the treasury is expected to incur more loses due to strengthening the ruble than it receives because of rising oil prices. In
general, the budget will miss out on RUB173 billion of income. According to the government, the 2011 budget has a
planned income of RUB7.5 trillion ($256.9 billion) and expenditure of RUB9.4 trillion ($321 billion).

Economic landscape
Current account
The current account balance in Russia has maintained a surplus position since 2000. Improved competitiveness and higher
oil prices facilitated a dramatic turnaround in the current account, from a deficit of around 0.5% of GDP in 1998 to a surplus
of 12% of GDP in 1999. This surplus increased further during 2000 to 18% of GDP. The marked improvement in fortunes
facilitated the stabilization of the ruble in international markets. Although export growth remained strong, a bounce back in
import demand subsequently eroded the current account surplus to 8.5% of GDP in 2002 and 8.2% in 2003. However,
increase in oil prices (to more than $30 per barrel for Russian oil) in 2004 saw the current account surplus widen to more
than 10% of GDP. Accelerated export growth and rising oil prices boosted net export earnings and the current account
surged to a record high of 11% of GDP in 2005. The current account surplus was more than $76 billion in 2007, accounting
for 6.2% of GDP. Though Russia has continued to post a current account surplus, its magnitude has declined. In 2008, the
current account surplus stood at around 7% of GDP. The country’s current account surplus came down from around $102
billion in 2008 to around $47 billion in 2009. According to Central Bank of Russia, the current account surplus grew by
250% to $33.9 billion in the first quarter of 2010, up from $9.7 billion in the same quarter in 2009.

Economic landscape
Figure 12: Current account balance in Russia, 2001–08
110.00 12.0
100.00
90.00 10.0
80.00
8.0
70.00
Percentage
$ billion
60.00
6.0
50.00
40.00
4.0
30.00
20.00 2.0
10.00
0.00 0.0
2001 2002 2003 2004 2005 2006 2007 2008
Year
Current account balance Current account balance as % of GDP
Foreign trade
After a period of economic transition during 1991–98, Russia’s export position improved after the ruble was devalued in
1998. From 2000 onwards, the country started to record positive trade surplus, taking advantage of the devalued currency.
Exports as a percentage of GDP grew from a value of 18.3% in 1994 to 44.2% in 2000 and stood at around 32% in 2007.
Exports increased from $103 billion in 2000 to nearly $471 billion in 2008. Similarly, imports increased from $34 billion in
2000 to $291 billion in 2008.However, due to severe recession, both exports and imports fell during 2009 to $369 billion
and $233 billion, respectively.
Since the collapse of communism, Russia’s trade with the West has grown significantly, while its trade links with the former
Eastern Bloc countries and other parts of the former Soviet Union have become less significant in relative terms. The EU
has emerged as the largest trading partner of Russia, accounting for more than 50% of total trade. The EU is followed by
the Commonwealth of Independent States (CIS) countries, which constitute around 14% of the Russian trade. On the
export side, the Netherlands was the biggest export destination in 2008, accounting for 12.2% of total Russian exports;
Germany and Italy account for another 6.9% and 9%, respectively. Among the CIS countries, Ukraine is the biggest export
destination and receives around 5% of total Russian exports. China (4.5%) and Poland (4.3%) account for the remaining

Economic landscape
exports. In terms of imports, China accounts for 12.9% of total Russian imports, followed by Germany which accounts for
12.6%. Among the CIS countries, Ukraine (6%) and Italy (4.1%) are the most important markets. China (7.4%), Japan
(6.9%), and the US (5.1%) are the other key markets.
Figure 13: Russia’s external trade position, 2002–09
900.0
800.0
700.0
600.0
$ billion
500.0
400.0
300.0
200.0
100.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Exports Imports Total trade
External debt
In 1991, the former Soviet Union’s outstanding debt of $67.5 billion was passed completely on to Russia. By 1997,
additional borrowing had doubled that figure, and Russia’s external lenders postponed the debt several times between
1995 and 2001. Since 2001, the international pressure for repayment has intensified because of Russia’s favorable trade
balance and increasing foreign exchange reserves. Russia prepaid its entire Soviet-era Paris Club debt of $22 billion in late
2006. The total foreign external debt stood at $540 billion in October 2008, but declined to $453 billion by the end of March
2009, of which government debt was minimal at $28 billion. Banks' and other corporations' debts have added heavily to the
total debt. The total external debt by the end of 2009 amounted to around $369 billion.

Economic landscape
International investment position
Foreign investments
The level of foreign investment in Russia has remained low throughout the post-Soviet era mainly due to an unfavorable tax
system, corruption, the lack of production sharing agreements in the fuel sector, and overall economic uncertainty. During
1991–2001, more than one-third of the total foreign investment was from the US. A significant development in the FDI
arena was a $6.7 billion direct investment by British Petroleum in the Russian petroleum industry. In 2006, a new legislation
on FDI was passed, under which foreign firms can obtain only minority ownership of any energy project deemed “strategic.”
However, laws restricting foreign banks from opening branches in Russia were not reformed. As a result these restrictions
still remained a significant hindrance to Russia’s accession to the World Trade Organization.
The FDI inflows for 2004 were $28.75 billion, with consumer goods and services and construction receiving the largest
shares among the economic sectors. In 2006 the inflow of FDI rose to $30.8 billion, with the largest investments coming
from Luxembourg, Cyprus, the Netherlands, Germany, the UK, the US, and France. The most lucrative sectors for FDI are
the extraction industries which accounted for more than 50% of total FDI in 2007. The other attractive sectors are
manufacturing, retail industry and real estate services. Total FDI inflow rose to $70.3 billion in 2008.

Economic landscape
Figure 14: FDI inflow in Russia, 2002–08
80
70.32
70
60 55.07
50
$ billion
40
29.70
30
20 15.44
12.89
10 7.96
3.38
0
2002 2003 2004 2005 2006 2007 2008
Year
Foreign exchange position
The foreign exchange position in Russia has been steadily growing since 1998. This was mainly due to devaluation of the
Russian ruble and subsequent increase in exports and trade balance. The foreign exchange reserves increased from being
around $76.9 billion in 2003 to more than $314 billion in 2006. At the end of December 2007, the reserves were more than
$475 billion. Furthermore, in July 2008, they rose by more than $100 billion, reaching $575 billion. However, deteriorating
economic conditions leading to the flight of capital from the country has led to a fall in foreign exchange reserves. On May
1, 2009, the official reserves stood at $383 billion. As of December 31, 2009, the total foreign exchange reserves including
gold amounted to $439 billion.

Economic landscape
Credit rating
Standard & Poor's retained a stable outlook on Russia in April 2010. The reason cited for this was government efforts to
rescue the country's financial markets and the financial system. Furthermore, in April 2010, S&P retained its long-term and
short-term credit foreign currency obligations ratings of BBB+/A-2 from BBB/A-3 in 2009. The long-term sovereign credit
rating on national currency obligations was decreased from A-3 to BBB. The estimate of the risk of translation and the
conversion of foreign currency for Russian non-sovereign borrowers was decreased from BBB+ to BBB. The short-term
national currency obligations rating remained unchanged (A-2). According to the ratings agency, the downgrade is due to
the risks arisen from a sharp reduction of the international reserves and investment flows, which resulted in the rise of costs
and problems with raising funds required to meet the needs for external financing.
Monetary situation
Inflation
The level of inflation was very high in Russia during the years 2002 and 2003, with rates touching 15% and 13%,
respectively. With prudent monetary policy measures taken by the CBR, inflation was decreased to around 9% in 2006 and
2007. However, inflation shot up again in 2008 and reached 13.1%. However, it decreased to 10.7% in 2009 and it is
expected to come down to 8.9% by 2010.

Economic landscape
Figure 15: Consumer price index (CPI) and CPI-based inflation in Russia, 2002–13
450.0 18.0
400.0 16.0
350.0 14.0
Consumer price index
300.0 12.0
Inflation (%)
250.0 10.0
200.0 8.0
150.0 6.0
100.0 4.0
50.0 2.0
0.0 0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Consumer price index Inflation
Money supply and interest rate
The CBR cut its key lending rate by 0.25percentage points to 8.25% per annum with effect from March 29, 2010, following
a slowdown in consumer price growth. The CBR last cut its refinancing rate by 0.5 points to 12% in May 2009.
In March 2010, the money supply (M2) increased by 2.8% from the previous month, according to the Bank of Russia. Cash
money in circulation (the M0 aggregate) decreased from RUB 4.38 trillion to RUB 3.98 trillion during January–March 2010,
while non-cash funds increased from RUB 11.66trillion to RUB 12.1 trillion.
(The money supply in national definition, the M2, is defined as total cash in circulation (outside banks) and balances in the
domestic currency on accounts of resident non-financial organizations, financial organizations (except for credit ones) and
individuals. It doesn't include deposits in foreign currency).
Banking sector
There has been a rapid increase in banking and financial sector services in Russia during 2000–08. By the end of 2008,
there were around 1,000 banks in Russia, however, the top 200 banks control 90% of the banking assets. Although total
bank assets in Russia have recently shown an annual growth of close to 30%, they represent just 45% of GDP in 2008.

Economic landscape
The proportion of the market held by the top 10 banks has remained more or less constant for several years, with the big
state-owned banks (Sberbank, VTB and Gazprombank) having dominant positions. Foreign bank penetration in Russia has
been low, but is increasing. The share of foreign-owned banks in the total assets of the Russian banking sector increased
from 8% in 2002 to almost 20% in 2008. The increasing number of M&A deals in the banking sector is not driven by the
arrival of foreign players.
There has also been consolidation among local institutions, either through mergers (such as Uralsib) or acquisitions
(Vneshtorgbank’s acquisition of Guta Bank). Many leading banks have been evaluating their entry into the Russian market,
which is dominated by Sberbank and a few strong regional banks (such as AKBars and Chelindbank). At the end of 2009,
the Bank of Russia reported the number of banks to be 1,058. However, only the 50–70 biggest banks are important to the
functioning of the sector as a whole. The remaining 1,000 are mostly small or very small. A new law governing the minimal
amount of capital banks must hold was formulated on January 1, 2010. This legislation requires banks to have capital of at
least RUB 90 million ($3 million) and this would be raised to RUB 180 million from 2012. After enforcing the new regulation,
it was seen that there were only 22 banks with capital lower than the minimal requirement. Even after going through severe
financial crisis, it was reported that more than 57% of banking assets were state owned in the country.
Employment
Russia has a well-educated and skilled labor force spread across different sectors of the economy. In 2008 around 58.1%
of workers were employed in the services sector, 31.9% in industry, and 10% in agriculture. The employment scenario in
Russia has been on a sluggish trend throughout 2000–08. The total employed people reached 71 million in 2008 from 65
million in 2001. The highest amount of growth was seen in 2007, when the employment grew by 3.2%. In 2009, the number
of employed came down to 69 million.

Economic landscape
Figure 16: Employment in Russia, 2002–13
72.00 4.0
71.00 3.0
70.00 2.0
Employment (millions)
Growth rate (%)

69.00 1.0
68.00 0.0
67.00 -1.0
66.00 -2.0
65.00 -3.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Total employment Growth rate
Outlook
The Russian economy went through a severe recession during 2009, with GDP contracting by 8%. However it was seen
that the GDP grew by 4.5% in first quarter of 2010, compared to a 7.9% contraction during the same period in 2009. During
November 2009–March 2010, since the oil prices have hovered between $60–80 a barrel, the Russian ruble has tended to
strengthen slightly. Fuelled by increasing liquidity in the domestic banking system and foreign capital inflows, the Russian
stock exchange indices have more than doubled from their lows at the end of February 2008. The net profit of the RTS
doubled to RUB128.8 million ($4.41 million) in 2009 from RUB64.1 million ($2.2 million) in 2008. The improving financial
markets along with improving GDP growth is a healthy sign for speedy recovery for the economy.
The country's excessive dependence on oil as an export commodity has also exposed the structural weakness of the
economy. Moreover, the infrastructural weaknesses and low competitiveness of the Russian economy has led to
insufficiently developed small and medium-sized businesses. However, inflation will not pose a major problem for the
Russian economy as it is forecast to come down to around 8.9% by 2010 and may further come down to 7% by 2013.
Unemployment will certainly be a problem in the country as it rose to more than 8.4% in 2009 and it is expected to cross
9% by the end of 2011.

Social landscape
SOCIAL LANDSCAPE
Summary
The social welfare system in Russia went through turmoil after the disintegration of the USSR. During the period of
transition after its downfall, a number of policies were changed. As a result of this, the social system of the country was
neglected. A weak healthcare system is one of the biggest challenges faced by Russia currently. Though the system is
decentralized in the country, it has been ill functioning, with under-qualified doctors and corrupt officials undermining the
quality of treatment. Furthermore, Russia faces a severe demographic challenge resulting from low birth rates, poor
medical care, and an increasing AIDS situation. The human capital quality of Russia also compares unfavorably with other
nations at the same level of development. However, the government is making efforts to revamp the social welfare system
with a set agenda for the coming years.
Evolution
Social welfare was also neglected in Russia during Soviet rule. During the 1990s, the economic shift pushed many
Russians into poverty. This was the result of incompatibility between the state supported social support programs and the
needs of a new economic system. After a period of settlement, from 1998 many enterprises started to provide an extensive
social safety net for their workers, including maternity leave, child allowances, housing, paid vacations, and medical care.
Furthermore, pensions for workers were funded by employers through a single social tax and direct assessment on self-
employed workers. However, many workers were required to delay their retirement as the post-Soviet pension system was
not adequate to provide for retirees. Furthermore, there was a declining ratio of employed workers to pensioners, which
decreased the system’s capability. In 2002, Russia introduced a new pension system in which a share of the statutory
pension payments of employers was invested into pension funds whose earnings are earmarked for the pensions of
workers (who were born after 1967).

Demographic composition
Age and gender-wise composition
Russia is the seventh most populous country in the world with a population of 140.0 million as of July 2009, and there are
about 106 males for 100 females in the country. The total life expectancy is 66.03 years, with males living for 59.33 years
and females living for 73.14years. The Russian population has been on a decreasing trend since the 1990s and the
country’s aging population is beginning to increase. The fertility rate stood at 1.41 in 2009.

Social landscape
Table 9: Mid-year population by age (m) in 2009
Mid-year population by age Female Male
0–4 3.7 3.9

5–9 3.3 3.4
10–14 3.2 3.3
15–19 4.2 4.4
20–24 6.0 6.2
25–29 5.7 5.7
30–34 5.3 5.2
35–39 4.9 4.8
40–44 4.8 4.5
45–49 6.1 5.5
50–54 6.2 5.2
55–59 5.5 4.2
60–64 3.5 2.4
65–69 3.5 2.0
70–74 3.8 1.9
75–79 2.8 1.1
80+ 3.2 0.8
Urban/rural composition and migration
Around 73% of Russians live in cities and towns, while the remaining 27% live in rural areas. Around one million residents
of Russia come from other countries. The migration rate in Russia has been decreasing since 2004. The net migration rate
came down by 7.5% in 2005 to 1.07 per 1,000 people. In 2009, net migration rate stood at 0.28 per 1,000 people, much
lower than 1.03 in 2006.
Religious composition
The official state religion in the country is Russian Orthodoxy which is followed by 20% of the population. The Islamic
population is slowly increasing in Russia with about 15% of the population being Muslims. A small group—around 2% of the
population—belongs to Christianity. The majority of the population (63%) is atheist.

Social landscape
Figure 17: Major religions in Russia
Russian Orthodox
20%
Muslims
15%
Atheists
63%
Other Christians
2%
Education
Overview
Russia traditionally has high numbers of educated populace. According to the 2002 census, the literacy rate in Russia was
99.4%. The Russian constitution guarantees the right to education with free preschool, elementary and vocational
education.
System of education
Under the Russian educational system, nine years of basic general education is compulsory, spanning from ages 6–15.
The first three years constitute primary education and from then on it is secondary education. After secondary school,
students have an option to pursue a two year degree at a tradesmen school. This kind of degree is linked to obtaining a
blue collar job in the country. Conventionally, after the students obtain a certificate of complete secondary education, they
can enter a university. The duration of degrees vary from four to six years. The Russian educational system confers both
Bachelors (graduate) and Masters (post-graduate) degrees. The syllabus is generally standardized by the state across the
universities and only 20% of it is structured by the universities. The PhD programs come under long post-graduate
programs and they span between 2–4 years.

Social landscape
Healthcare
Healthcare services
In Russia, healthcare services are free in principle, but adequate treatment depends on affordability. Even after the Soviet
era, the healthcare system in Russia remained completely decentralized and this reduced the quality of healthcare services
provided in the country. As a result there is an increasing trend of people turning towards the private sector for better
treatment. The healthcare services are provided through various channels in Russia. Among these channels, 30% of the
population receive primary healthcare services through work related clinics and hospitals. Another channel is for
government servants like police, railway employees, university staff, and high level government officials, who receive
healthcare services through specialized health care centers. There are also polyclinics in various parts of the country,
where all other sections of society can visit for healthcare services.
Social welfare
Social welfare policies
Social security and welfare programs supply modest support for the most susceptible sections of Russia's population.
Various sections of society which benefit from the welfare programs are pensioners, senior citizens, infants and children,
pregnant mothers, families with more than one child, and people with disabilities. The Ministry of Social Protection is the
regulatory authority handling welfare programs in Russia. The Ministry focuses more on the needs of people who are
retired or disabled. There are four components of the budget that fund welfare activities and social welfare benefits at the
federal level: these are the social insurance fund, the pension fund, the employment fund, and the fund for social support.
Currently, the government’s antipoverty measures have been destabilized by continuing inflation. In 2006, the Ministry of
Economics undertook a fundamental overhaul of Russia’s state welfare system. This was mainly due to welfare agencies
following a local agenda rather than a nationalized policy, and thus suffering from inadequate funding and corruption.
Furthermore, the fund for social support, which sustains a number of social assistance programs, has also suffered from
corruption scandals. With a motive to stem Russia’s demographic crisis, the government has doubled child support
payments to $55 per month and offered a one-time payment of $9,200 per year to women who had a second child. Even
though the country went through a severe economic crisis during 2009, the government was able to carry out large-scale
anti-crisis measures without any cuts in social spending. The actual social spending increased by over 27% in 2009
compared to that of 2008.
Performance
Healthcare
The Russian healthcare system is one of the most decentralized forms of healthcare systems. However, this has resulted in
a major decline in the quality of treatment provided at various hospitals in the country. The death rate in Russia is as high
as 16.06 deaths per 1,000 people. The infant mortality rate is similarly high, with almost 10.81 deaths per 1,000 people.
The main reasons for the high death rates are the prevalence of non-communicable diseases like heart attacks and cancer,
and traffic accidents. Indeed, the rate of deaths occurring due to traffic accidents is nearly twice that of Western Europe.
Moreover, high consumption of tobacco and alcohol has been recognized as important factors behind the low life

Social landscape
expectancy of Russian males. The low quality of air and water in many urban areas, and increased smoking and alcohol
intake, aggravate the already existing poor health. Furthermore, in the early 2000s, decreased healthcare and housing
standards amplified communicable diseases such as tuberculosis, diphtheria, and cholera. Among children, meager
nutritional supplies have led to a prevalence of anemia, stomach ulcers, endocrine disorders, and iodine deficiency.
In 2006, Russia’s Federal AIDS Center confirmed 1.5 million cases of human immunodeficiency virus (HIV), 341,000 of
which were officially registered. As an effort to take appropriate measures against AIDS, the government allocated an
estimated $115m to HIV and AIDS programs. The government also put healthcare as one of the top five priorities of its
policy. The sector has begun to receive increased attention from the government, resulting in an increase in healthcare
expenditure as percentage of GDP since 2005. There are further plans to increase expenditure on public health by nearly
1.5 times during 2009–13, during which time the government targets a healthcare spend of over 4% of GDP. In 2009, the
government spent around 4.15% of GDP as a part of healthcare expenditure and it is expected that it might be over 4.7% of
GDP by 2013.
Figure 18: Healthcare expenditure in Russia, 2002–13
80.0 5.00
4.50
70.0
4.00
60.0
3.50
Percentage (%)
50.0
3.00
$ billion
40.0 2.50
2.00
30.0
1.50
20.0
1.00
10.0
0.50
0.0 0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Healthcare expenditure Healthcare expenditure as % of GDP

Social landscape
Income distribution
Standard of living
After the fall of Soviet Union, there was a transitional period during which the government established various policies to
create a new economic system. During this time, the country was faced with high corruption and crony capitalism. As a
result, a natural divide between an affluent high class of rich people and low labor class was formed in Russia. The Gini
coefficient (a measure of income disparity, with 0 meaning complete equity and 1 meaning extreme inequity) more than
doubled during the first six years of the transition period (1993–99). According to the Russian Statistics Service, the Gini
coefficient was 0.42 at the end of 2008. This shows that although the income is less evenly distributed than in some of the
European countries, it is more equitable compared to the US or China. Russia's Gini coefficient was 0.29 when the Soviet
Union collapsed. Income inequality has been sharper in the cities of Russia. Along with rising income inequality, poverty is
also on the rise in Russia. The living conditions of Russians are set to deteriorate with the economic slump. According to
the Federal State Statistics Agency (Rosstat), 19.7 million citizens (14% of the population) were below the poverty line as of
third quarter 2009. However, unofficial sources state that more than a third of Russian population is living in poverty. Russia
also faces a severe housing shortage, with about 7% sharing living space with other households and one in two persons
having less than 10 square meters (108 square feet) per capita.
Education
Literacy rate
According to the 2002 census, Russia’s literacy rate has reached a new high of 99.4%, which is one of the highest in the
world. The literacy rate was 99.7% for males and 99.2% for females. Despite the grave economic crisis during 2009, the
government was still able to maintain a good level of spending on the educational sector. The education expenditure for
2009 was around 5% of GDP compared to 3.6% of GDP allocated in 2008.

Social landscape
Figure 19: Education expenditure in Russia, 2002–13
100.0 6.0
90.0
5.0
80.0
Education expenditure ($ billion)
70.0
4.0
60.0
Percentage (%)
50.0 3.0
40.0
2.0
30.0
20.0
1.0
10.0
0.0 0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Education Expenditure Expenditure as % of GDP
Outlook
The healthcare systems in Russia are highly decentralized and spread across the country. This is uncommon compared to
any other country’s healthcare system. Although the decentralization has increased access to healthcare services in
Russia, the quality of treatment and maintenance of different hospitals has been very poor and substandard. The
insufficient government efforts caused health levels in the country to deteriorate further. In December 2007, the Ministry of
Health and Social Development announced that it has set a long-term agenda until 2017, to wholly develop healthcare
systems in Russia under a well structured phase-wise development plan. Despite the economic crisis during 2009, the
government was successful in allocating $48.9 billion towards healthcare expenditure amounting to 4.15% of GDP. It is
expected that the healthcare expenditure would rise to 4.7% of GDP by 2013.
The Russian government increased the social security benefits and welfare payments in May 2008. The government has
raised all the pension levels by 15% from August 2008. The government has also agreed to increase child tax exemptions
from the existing $26 to around $35; the additional tax money was allotted for education, healthcare and housing programs.
This move enabled the government to maintain a 5% of GDP spending for education in 2009. It was also seen that despite
various pressures, the social spending did not come down in 2009. The social expenditure rose by over 27% in 2009 in
comparison to 2008. In March 2010, it was seen that remuneration to workers in the public service increased by 8.5% since

Social landscape
August 2009. These increasing efforts to improve the social development policy bode well for Russia’s social structure in
the coming years. Nevertheless, with high levels of corruption prevailing in the country, the implementation of policy still
remains questionable. In addition, the challenge of rising unemployment and poverty still haunt the Russian government.
Besides tackling the unemployment and poverty issues, the government also needs to implement urgent measures to meet
the challenges emerging from the country's low birth rates and shrinking working age population.

TECHNOLOGICAL LANDSCAPE
Summary
Russia is renowned for its advanced defense technologies and military equipments. Over a period of time the country has
also become one of the leaders in space research and development. Russia has to its credit many successful space
missions, and Russia’s space station Mir plays a vital role in co-ordinating with the International Space Station on many
space missions. Although, the country is unable to play a part in fundamental research in science and technology, it has
been successful in gradually moving over to IT sector development and related services.
Evolution
Russia is historically known to be one of the technologically advanced countries in space research. The Russian Federal
Space Agency (RKA), formerly known as the Soviet Space Program, is the primary scientific body driving space research in
the country. The RKA was established after the dissolution of Soviet rule in 1992. However, the RKA still uses the
technology and launch sites that belonged to the erstwhile Soviet space program. The RKA has been part of many space
missions in the past, and also has co-operation agreements with the International Space Station. The International Space
Station receives significant technical support from the Russian space station ‘Mir” which was launched in 1986. During the
1990s, the RKA took a new direction to enter into commercial satellite launches and space tourism.
Russia, as well as being advanced in space research, is also a country with high engineering skills. Although in the past the
country spent most of its time and funds in building military equipment, with the establishment of the International Science
and Technology Centre (ISTC) in 1992, it has entered into various other modes of research.

Intellectual property
The country is among the G8 group; however, it received a very low number of patents. During 2000–08, the highest
number of patents was received in the year 2001, with 239 patents. After 2002, there was a decrease in number of patents
received, with the least being 154 received in 2005. In 2008, the country received 204 patents. The Federal Service for
Intellectual Property, Patents and Trademarks (Rospatent) is a government body which exercises the functions of control
and supervision of legal protection and use of intellectual property in Russia. Furthermore, the government—together with
the patent office—has taken up a project called strategy for science and innovation in the Russian Federation until 2010, for
the creation of a balanced sector based R&D and effective innovation system. This strategy is expected to bring in more
funds and infrastructure into science and technology fields in Russia.

Table 10: Patents received by Russia – 2000–08
Year Patents received

2000 185
2001 239
2002 203
2003 203
2004 173
2005 154
2006 176
2007 193
2008 204
Research and development
Technology agreements/pacts
Many of Russia's international agreements and pacts are held in space research and related areas. The country has
several space pacts with the US and also the European Space Agency in the development of international space station.
These mutual co-operations have been running from 1993. In 2007, Russia and the US collaborated to form a new pact for
a space program to find water on the surface of moon and Mars. This will be done through the help of the Russian space
instrument, the lunar exploration neutron detector (LEND). Russia has also inked technological pacts with many Asian
countries like India, China, Japan and South Korea. These pacts mainly cover the exchange of defense technologies, but
with India the technology pacts extend to different areas of information technology.
Performance
Opportunity sectors
Telecommunications, broadband and internet
After the dissolution of the Soviet Union, the Russian telecommunication network went through a major shift. This shift
happened with liberalization in the licensing regime and the resultant plethora of licenses given to hundreds of companies
to provide services. Important developments took place during the late 1990s which included increased access to digital
lines in urban areas and infrastructural improvements in all parts of the country. With widespread foreign investment, there
was considerable growth between 2003 and 2005, increasing the ratio of land lines per 1,000 inhabitants from 24.3 to 29.5.
During this time there were about 60 regional capitals which offered modern digital systems. However, in 2004 around
54,000 rural communities lacked telephone service totally. Furthermore, the fixed line service is still not provided
completely, especially in the rural areas of the country.
Due to increased delay and slow installation of conventional lines, use of mobile phones has increased significantly since
2000 in the country. Between 2002 and 2003, the number of mobile phone subscribers doubled to 36 million and by 2005 it
had reached 120 million; mobile phones accounted for almost 43% of the total telecommunications market. By 2005 around

60% of Russians had started using mobile phones. The growth of mobile phones came down from around 62% in 2005 to
around 8% in 2009. It is expected that the mobile phone market would soon reach saturation by 2013.
Russia has been facing difficulties with the telecommunications and broadband infrastructure. The insufficiency of hardware
and the high rates of services have been major obstacles for any infrastructural development in the broadband sector.
However, after a period of revitalization of the sector during 2000–06, there was rapid growth in internet use in the country.
In 2009, the number of users was more than 37.7 million: growth has been particularly remarkable in urban centers,
especially Moscow, Irkutsk, Krasnodar, Nizhniy Novgorod, Novosibirsk, Vladivostok, and Yekaterinburg. The government
has also supplied 10,000 public terminals in most regions to avail the usage of broadband.
Figure 20: Growth of fixed and mobile phones in Russia, 2002–13
140.0
120.0
100.0
Growth rate (%)
80.0
60.0
40.0
20.0
0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Mobile phones growth Fixed line growth

Figure 21: Internet users in Russia, 2002–13
70.00 120.0
60.00 100.0
80.0
Internet users (millions)
50.00
Growth rate (%)

60.0
40.00
40.0
30.00
20.0
20.00
0.0
10.00 -20.0
0.00 -40.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Internet users Growth rate
IT sector
Russia has a comparative advantage in IT with its previous identity as one of the super powers. For one, Russia has a
large technological research infrastructure. The Russian technological institutions and universities have produced
advanced military equipment for many years. Currently there is an ongoing transformation of the defense industry into
consumer applications and the infusion of western technology through joint ventures with other countries. If this is done by
production of technologically advanced utilities, then the country would soon find more avenues to develop more IT base
products. In 2005, the Russian government made IT a national policy priority, with an agenda to establish a series of IT
oriented ‘techno-parks’. Furthermore, the government approved laws to provide tax and other incentives for companies
specializing in IT.
The Ministry of IT and Communications launched a new ‘computer for every home’ program in February 2007. This
program, developed jointly with Russian Post, Intel and Microsoft, is intended to facilitate wider PC ownership among
inhabitants of small cities, and those in the rural areas. The wider objective is the growth of a ‘computer culture’. With
average monthly earnings at around the $400 level, inhabitants of the remote regions will be able to order computers at a
set price of around $300–350, at least 10% below the lowest market prices.

The Russian software market generated total revenues of $3.8 billion in 2009, representing a compound annual growth rate
(CAGR) of 20.9% for the period spanning 2005–09. In comparison, the French and German markets grew with CAGRs of
7.2% and 5.2% respectively, over the same period, to reach respective values of $15.3 billion and $22.6 billion in 2009.
General business productivity and home use applications sales proved the most lucrative for the Russian software market
in 2009, generating total revenues of $895.2 million, equivalent to 23.6% of the market's overall value. In comparison, sales
of network and database management generated revenues of $813.8 million in 2009, equating to 21.5% of the market's
aggregate revenues.
Pharmaceuticals
The Russian pharmaceuticals market generated total revenues of $8,182.6 million in 2009, representing a compound
annual growth rate (CAGR) of 18.6% for the period spanning 2005–09. In comparison, the French and German markets
grew with CAGRs of 3.2% and 3.1% respectively, over the same period, to reach respective values of $37,306.2 million
and $37,139.2 million in 2009.
Alimentary/metabolism sales proved the most lucrative for the Russian pharmaceuticals market in 2009, generating total
revenues of $1,569.1 million, equivalent to 19.2% of the market's overall value. In comparison, central nervous system
sales generated revenues of $1,091.8 million in 2009, equating to 13.3% of the market's aggregate revenues.
Research and development
R&D expenditure
The R&D expenditure in Russia has been considerably lower than many industrialized nations around the world. The
percentage share of R&D expenditure in GDP has consistently been around 1% in Russia. In comparison, other BRIC
countries like India and China allocate much higher percentage shares than Russia. Russia has made progress in
formulating innovation policy and creating an innovation governance system in 2008. To regain its former position in global
science and technology, the government has adopted a strategy to foster science and industry linkages. The R&D
expenditure in 2009 amounted to $12.6 billion (1.07% of GDP). This was much lower compared to $17 billion allotted in
2008.

Figure 22: R&D expenditure in Russia, 2000–10
20.0 1.40
18.0
1.20
16.0
R&D expenditure ($ billion)
14.0 1.00
Percentage (%)
12.0
0.80
10.0
0.60
8.0
6.0 0.40
4.0
0.20
2.0
0.0 0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
R&D expenditure R&D expenditure as % of GDP
Outlook
Russia has been on the forefront in global technologies related to space research. Space research and technology in
Russia has a wide reach in this area, with R&D in areas like high energy astrophysics, planetary exploration, space plasma
physics, and space weather. Apart from advanced research capabilities, Russia in the past has been instrumental in many
successful space missions. During the late nineties it also entered into commercial satellite launch missions. The country
has scheduled many space missions for the future. In 2010 and 2011 the country is also set to consecutively launch a fleet
of three earth-orbiting astronomy observatory satellites. Furthermore, the country is set to begin a mission to Venus in
2015.
Apart from being well versed in space technology, the country is gradually enhancing its capabilities in information
technology and related areas. The Russian government is currently placing an increasing emphasis on IT as a device of
reform in various economic sectors. The government is planning to invest $350 billion during 2008–13 into IT for enhancing
the functioning of the education, healthcare, defense and power sectors. Furthermore, the country launched a series of IT-
oriented ‘techno-parks' in 2009, and laws were passed to provide tax and other incentives for companies specializing in IT.
As a part of this initiative, the government announced in mid April 2010, that it would welcome the participation of
companies from the US in projects linked to its future research and development center in the Moscow Region city of

Skolkovo. The future research and development center will focus on the energy, IT, telecommunications, biotechnology,
and nuclear industries. The construction of the center may take three to seven years according to the government.
Furthermore, in December 2009, Prime Minister Vladimir Putin also ordered for forming of a unified plan for research into
and development of armored vehicles of the future. The unified plan of R&D includes areas such as power plants,
armaments, aviation technologies and ammunition.

Legal landscape
LEGAL LANDSCAPE
Summary
The Russian legal system has a civil law system and is influenced by traditional European laws. Various codes like the civil
code, tax code, customs code, civil and corporate legislation and labor code govern all major spheres of business activity.
The judicial system in the Russian Federation is split into three branches. They comprise of the courts of general
jurisdiction (of which the federal Supreme Court is the court of last resort), the 'arbitrazhniy' or commercial court system
with the High Court of Arbitration as the supreme body, and the Constitutional Court. The judicial system is also divided into
a federal system and a system of local courts of the various 'subjects' of the Russian Federation.
Evolution
The judicial system of Russia was first established as a part of government reforms in 1864. The judicial system was based
on both British and French laws of judiciary, and was distinguished from administrative functions of the state. There was
also a democratic element of having a jury system. This system was established based on two courts: the justices of peace
and the other ordinary tribunals (these were adopted from the English and the French models respectively). This system
was reformed under the law of the Soviet Union, after the country joined the union in 1917. The legal system was
developed under the traditional Western Civil law, with many laws originating from Russian legal tradition and Byzantine
secular law. The Constitutional law was first passed in 1924 and later on amended in 1936 and 1977. In 1993, after the
erstwhile Soviet Union broke up, Russia adopted a new constitution. From then on judiciary became a part of legislative
administration in Russia. The 1993 constitution provides for some degree of judicial reform by establishing an independent
judiciary and specifying that justices may only be removed or their powers curtailed or terminated in accordance with the
law. The Ministry of Justice was established in the same year making it the regulatory body administering Russian judicial
system. The ministry's responsibilities include the establishment of courts and the appointment of judges at levels below the
federal district courts.

Judicial system
Structure of the system
The Russian judiciary comprises the Supreme Court, the Constitutional Court and the High Court of Arbitration. Under
these branches there are several districts, regional and federal level courts. However, Supreme Court is the highest court
of authority for all civil, criminal and administrative cases in Russia. The judges for three branches are nominated by the
president and appointed by the Federal Council. The judges for these three courts are allowed to serve for life. The
president directly appoints judges of federal district courts. The Ministry of Justice is accountable for appointing judges to
regional and city courts. However, selections of judges below the national level are still made by the chief executives of
sub-national jurisdictions.

Legal landscape
Constitutional Court
The Russian constitution of 1993 authorizes the Constitutional Court to arbitrate disputes between the executive and
legislative branches. This also includes arbitration of disputes between Moscow and the regional and local governments.
The court is also empowered to rule on infringements of constitutional rights, to inspect and scrutinize appeals from various
government bodies, and to participate in any impeachment proceedings against the president. The court has many regional
and district level branches under the name of charter courts.
Supreme Court
The Supreme Court of Russia is the highest court of authority for all the criminal, civil and administrative cases. It is also
the court of last resort for all the cases heard in lower courts at district and regional levels. Apart from judicial powers in
state administration, the court also has the right to challenge individual acts passed under the Federal Assembly, including
presidential decrees and the policies passed by the government. The court is also authorized to hear criminal cases against
members of the Federal Council of Russia and State Duma.
High Court of Arbitration
The High Court of Arbitration is the highest court for the resolution of economic and business disputes. The branches of
these courts are called courts of arbitration and circuit courts of arbitration at regional level. Whenever there is a dispute
between business entities, the case is taken for trial by the courts of arbitration. There are 82 courts of arbitration in Russia,
staffed by almost 2,000 judges addressing about 300,000 disputes annually.
Trials and legislations
Under the provisions of the constitutional laws of 1994, trial by jury may be allowed in specific kinds of cases, including
those linking to a death penalty. This reform supersedes in part the older system of trial by judges and "people's
assessors", laypeople who usually complied with the judges' verdicts. In reality, trial by jury has made negligible
development in the conservative court system of Russia. In 1995, jury trials were accessible only in nine out of the 89 sub-
national jurisdictions, although other jurisdictions sought permission to introduce them. Currently, the jury trial is only
available in cases with serious crimes.
Legislation affecting business
Industrial acts, legislations and regulations
Russia is principally occupied by large industrial enterprises, with a small number of small and medium-sized enterprises
(SMEs). SMEs account only for 10–15% of the Russian GDP, compared to developed market economies where more than
50% of shares is represented by SMEs. Historically, Russia has mostly concentrated on developing large scale industries.
However, the government is slowly easing regulations for SMEs by reducing tax and regulatory barriers to small
enterprises. This was done by introducing a simplified tax regime for small companies in 2003.
Foreign licensing in Russia has become widespread in a number of sectors in Russia, including retail and media. Domestic
companies with local knowledge can now expand outlets or brands that offer consistent cash flow for foreign companies.

Legal landscape
This approach has reduced the uncertainty among foreign companies. However, the drawbacks lie largely in the
underdeveloped legal environment of Russia: the enforcement of ownership rights is still weak, and forged and pirated
goods are widespread throughout the market. As a result, many foreign companies have put a ceiling on their licensing
agreements with Russian subsidiaries, providing them only with the rights to distribute their parents’ products or pay
royalties to use the trademark in domestic production. In line with its thrust for WTO accession, the government has
changed its focus to improve the judicial system and to develop stringent laws on copyright, trademarks and patents that
comply with the WTO’s Trade-Related Aspects of Intellectual Property (TRIPS) agreement. Furthermore, the Competition
Law limits mergers between companies where there is a possibility of a monopoly.
Establishing operations as a foreign enterprise
A foreign company looking at setting up operations in Russia can choose among the following options:
Joint stock company (JSC)
JSCs in Russia are of two forms: open JSCs and closed JSCs. The first refers to a company whose shares are openly
traded and freely transferable. They can also place their shares in predetermined circle of investors. A closed JSC refers to
a company where shares may be distributed to a limited circle of investors but most importantly to the founders. The
minimum capital is 1,000 times the minimum monthly wage ($47) for an open JSC and 100 times minimum wage for a
closed JSC. A minimum of 50% of the shares to be distributed must be paid for within three months after the initial
registration. Until 50% of the shares distributed are paid for, the company may not carry out any transactions other than
those connected with founding the company. A mandatory 5% legal reserve is to be maintained by the JSCs.
Representative office or branch
Under Russian company law, representative offices and branches are not considered to be legal entities. A representative
office or a branch may carry out business activities on behalf of this entity. Both forms must be registered with the tax
authorities and accredited before commencing operations. The State Registration Chamber under the Ministry of Justice
must recognize representative offices of foreign companies.
Limited liability company (LLC)
The wholly owned subsidiaries of foreign investors are called LLCs in Russia. An LLC is not allowed to have more than 50
members to have rights and obligations, which may either be established by a charter of the company or granted by a
decision of the shareholders’ meeting. An LLC does not issue shares. Instead, the charter capital is divided into
contributions, which are not considered securities. As a result, the LLCs need not be registered with the Federal Service for
Financial Markets. The liability of participants is generally limited to the amount of their original contributions.
Tax regulations
Corporate profit in Russia is charged at a tax rate of 20%. The tax on company profits is made up of two rates: federal tax,
at a rate of 2.5%; and a regional tax of 17.5% (with a possible incentive reduction of up to 4%). This is significantly lower

Legal landscape
than that in most other neighboring countries. However, social tax, levies and other taxes, along with the administrative
procedures (such as registration requirements and tax audits), increase the pressure on companies in Russia.
Taxable income in Russia is either sales income or non-sales income. Sales income is commonly the income from a
corporation’s main business activities, while non-sales income is income from all other sources like dividends, interest,
royalties, rents, foreign exchange gains, compensation for losses and certain contributions and reserves.
Individual income tax
In Russia, individual income tax is charged according to the residential status of a person. Individuals who spend a
minimum of 183 days in Russia in the calendar year, regardless of their citizenship, are deemed to be liable for taxation.
Tax residents are taxed on most types of their worldwide income. Non-residents for tax purposes are individuals who spend
less than 183 days in Russia in the calendar year. Non-residents are taxed only on Russian-source income. Tax residents
are taxed at a flat rate of 13% on worldwide income, which is one of the lowest individual tax rates in the world. However,
different tax rates apply to certain types of income received by Russian tax residents (9% for dividends, 35% on imputed
interest on beneficial loans, etc). Non-residents are taxed at a flat rate of 30% on income sourced from Russia.
Withholding tax
Russian-source income of a foreign enterprise may be subjected to withholding tax at source. Withholding is possible up to
20% on interest on government securities, 10% on income from international freight, 15% on dividends, 20% on royalties
and income from leasing activities.
Other local taxes
Besides these national taxes, there are a few other local taxes that are imposed on businesses. Examples of such local
taxes include unified social tax (UST), property tax, mineral extraction tax, and transport tax.
Labor law
In Russia, the Russian labor code is the main legislation governing workplace issues. A wide-ranging new code was
approved in 2001 and was implemented in January 2002. Russian labor laws apply to all enterprises and all employees,
regardless of their origin. Employers who fall short of compliance with the labor code are subjected to civil, administrative,
disciplinary and even criminal liabilities. An important feature of the Russian labor law is its prescribed nature, and it is
important for employers to have all necessary documents in order.
The standard working week is of 40 hours. For children younger than 16 years, the maximum working week is 24 hours; for
teenagers aged 16–18 years and for workers engaged in dangerous work, 36 hours per week. Students and schoolchildren
younger than 18 years are not permitted to work more than 18 hours a week during the school or university year. Overtime
cannot exceed more than 120 hours per year. The first two hours of overtime must be paid at a rate at least one and one-
half times the normal rate; additional overtime hours must be paid at least double the normal rate.
Termination of employment is stringently governed by law. Extensive documentation is required to dismiss an employee.
Some of the reasons for a possible termination include liquidation of the employer; employee health problems; absenteeism

Legal landscape
and stealing, and embezzlement or willful destruction of property. An employee may appeal against a dismissal in court
within one month of receiving the dismissal notice.
Social security charges
In Russia, the social security charges are provided in the form of insurance and medical reimbursements (termed as sick
pay). The employees are entitled to sick pay if they provide the employers with a medical certificate. If the employee has
been sick for more than a month, he has to provide a certificate from the commission of clinical experts. Furthermore,
employees can receive sick pay for more than 10 months, after which they are eligible to avail disability benefits from the
social security fund. Disability benefits, unemployment benefits and the state pension are paid out of social insurance and
pension funds, which are in turn refunded via the UST, a payroll tax levied on all employers.
VAT and customs duty
In Russia, VAT is payable by all corporate businesses, including representative offices and branch offices of foreign
companies. The transactions subject to VAT are sales of goods, work and services carried out in Russia, construction and
installation work for an enterprise’s own use, and imports. The different rates of VAT include 18% on domestic sales, 10%
on certain food stuffs, children’s goods, and scarce medicines. In general, VAT must be paid to the tax authorities on a
monthly basis, and penalties are imposed for late filing or payment.
Furthermore, import duties are charged on the basis of the type of goods imported and their origin. Duties as a rule are
expressed as a percentage of the value of the goods imported. Currently there are rates applicable from 5% to 25%. Export
duties are levied on goods and raw materials such as crude oil and natural gas. The rates are ordinarily established in US
dollars per unit or as percentage of value.
Performance
Effectiveness of the legal system
Russia is in the midst of economic and legislative reforms. In 1990, the government brought a statutory framework
introducing modern standards of legislation. The legal structure developed at a rapid pace during the 1990s, with
noteworthy reforms being attempted in almost every sphere of law. The process of consolidating and rationalizing the legal
framework of Russia's market economy remains ongoing, with major changes anticipated in a number of key areas.
Russia's judicial system is administered by the Ministry of Justice. It performs responsibilities like managing the court
system, supervising court activity and monitoring various prisons. The General Prosecutor's Office (Procuratura), which has
several branches in cities and provinces, carries out functions related to law enforcement. This office is headed by the
Ministry of Internal Affairs and Federal Security Service. The General Prosecutor's Office supervises the law enforcement
agencies, investigates crime and prosecutes offenders. The Ministry of Internal Affairs also manages all police agencies.
The Federal Security Service is responsible for counterintelligence and also investigates organized crime and terrorism.
Legal indicators
rd
Russia has been ranked in the 143 position in the Wall Street Journal’s Index of Economic Freedom 2010 and it ranks
th
120 in the doing business indicators of the World Bank for 2010. Russia’s index score of 50.3 is less than the world

Legal landscape
average of 60.3, indicating a restrictive environment for business. Russia ranks highly only in fiscal freedom, but does not
score as highly in terms of property rights, freedom from corruption, freedom from government intervention and investment
th
freedom. In ‘Doing Business 2010’, Russia was ranked in the 106 position in the Starting a Business index, down 18
places from the 2009 rank of 88. In the Employing Workers index, the country was ranked in the 109th place and in
Protecting Investors, down by five places to 93. In Dealing with Construction Permits, the country was ranked 182nd and the
country was 45th in Registering Property, compared to its 44th rank in 2007. According to Doing Business 2010, nine
different stages are needed to start a business in Russia. Moreover, it takes 30 days and 2.7% of per capita gross national
income to start a business in the country. In contrast, the OECD average is 5.7 stages, 13 days, and 44.7% of per capita
GNI.
Russia’s performance with respect to corruption has also worsened. According to Transparency International (TI), Russia
has scored 2.2out of 10 in terms of corruption perception index (CPI) in 2009, down from 2.3 in 2007, which is the lowest
standing in the last eight years. Out of the 180 countries surveyed in the 2009 in terms of the CPI, Russia was in 146th
place (down from 143rd place in 2007).
Outlook
The legal regulations in Russia have been changing ever since the end of the Soviet rule. Although the country has
assigned laws and law governing bodies, they have been ineffective in enforcing law in the country. The main problems
affecting the Russian judiciary and legal bodies are lack of funds, lack of staff, and non-implementation of reforms. The
current government is determined to reduce the red tape that fuelled widespread corruption. The federal law on the
prevention of corruption was adopted in 2008 and the federal laws outlining the procedures for conducting anti-corruption
tests were passed in 2009. In May and September 2009, the Russian president issued decrees outlining the procedures for
releasing, checking and publishing information on the property situation of public officials and their family members. Despite
the new rules, the country has not been successful in decreasing the corruptive practices in the country during 2009. It was
reported by the Russian Prosecutor’s office, that the number of corruption cases opened in 2009 was 4,821 which is 43%
more than in 2008. Also, over 263,000 breaches of the law on corruption were identified and 36,000 people were brought to
civil liability which was again over 58% more than in 2008.
As part of legal reforms, President Dmitri Medvedev drafted, in April 2010, a national anti-corruption strategy to minimize
corruption. Among the proposed measures to combat corruption is the harmonization of Russia's financial reporting
standards with that of Europe and the US. Furthermore anti-corruption steps also include an obligation of the Russian
presidential administration officials to publish their income and property statements in the near future. Increased public
attention will be given to information about income and property that are now being submitted by all public servants and
officials. In 2010, income and property statements will also be submitted by the administration officials and are due to be
published by the end of the year. Increased tightening on the legal front is expected to bring in greater transparency in
governance and reduce corruption in the country.

ENVIRONMENTAL LANDSCAPE
Summary
Russia has been suffering from the problems of environmental pollution for quite some time. In the 1990s, Russia suffered
from a deep socioeconomic crisis that lead to a decrease in industrial output by 50% with no sign of any upsurge, even in
1996. Contrary to the expectations and forecasts of many scientists and economists, however, the drastic drop in
production has not been accompanied by corresponding reductions in pollution and contamination, and the environmental
situation in the country has not showed any signs of improvement. Russia has also become the third largest emitter of
carbon dioxide in the world, following China and the US. Although the government is taking many measures in terms of
environmental protection, Russia’s nuclear reactors and nuclear wastes pose major threat to the surrounding regions.
Evolution
The Soviet and Russian environmental conservation history has been by and large gloomy. Seven decades of Soviet rule
left decreased landscapes and marine ecological units, a scorched inland sea, contaminated rivers, and toxic urban air as
reminders of the hunt for industrialization at any cost. Furthermore, Russia and the other Soviet republics reacted to the
consequences of the Cold War by raising a defense-oriented, production-fixated economy in the middle of environmental
destruction. As a result of large military production there were many disasters in Russia leading not only to environmental
damage but also to an increased human death toll due to accidents during production. One such accident was the
Chernobyl disaster, which is considered to be the largest nuclear accident ever. This brought in substantial changes in the
public's outlook towards environmental conservation in Russia. After the disaster, the public were occupied in exceptional
discussions on the dangers that the country’s environmental policies posed to public health, citing polluted water supplies,
violation of public health regulations, and air pollution. Russians were also unaware of fundamental issues such as loss of
biodiversity, deforestation, and acid rains. In 1989, a national poll positioned environmental pollution fifth among citizens'
key concerns, but only one-third of respondents articulated their willingness to forfeit economic advantages to improve the
environmental situation. Nevertheless, a sizeable green interest group arose in the late 1980s. However, due to the
deteriorating economic situation and uncertainty in markets, issues related to environmental conservation were
compromised, particularly in instances where the closing of a polluting plant threatened the livelihood of a town or city. In
1993, Russia's total investment in environmental preservation was about $2.3 billion, less than 4% of the national budget
group entitled "industrial construction," in which environmental expenditures were included. In 1995, the State Duma
approved a law requiring environmental impact assessments for a wide range of construction and development projects,
large-scale industrial development, large usage of natural resources, manufacturing of new technology and materials, and
alterations of existing commercial facilities.

Environmental regulations
Overview
The Ministry of Natural Resources of the Russian Federation is the regulatory authority for performing the role connected to
state policy formulation, revitalization, and management of natural resources. The ministry also is responsible for
administration of the subsoil stock and forestry; the use and preservation of water resources; the use, conservation, and

fortification of the stock of wooded forests; and reproduction. Furthermore, the operation and safety of multipurpose
reservoirs and water-resources systems, protection of other hydraulic structures; the use of wildlife resources and their
habitat are all maintained and procedurally streamlined by the ministry.
Policy
Environmental regulations have been taken seriously only since 1991 in Russia. Since then, several laws were passed
such as the Law on Environmental Protection (1991), the Law on Environmental Impact Assessment (1995), the Law on
Conventional Shelf of the Russian Federation, the Law on use of Atomic Energy and the Law on Protection and Use of
Fauna. Furthermore, the country also ratified many international conventions during this period. The government policy on
environment focuses on the following areas:
• Strengthening the legal and regulatory framework.
• Fostering international co-operation and integration in environmental conservation.
• Building an effective compliance and enforcement system.
• Encouraging public participation in environmental activities.
• Directing investment towards environmental management and control.
• Incorporating advanced technologies to set standards for pollution control.
• Strengthening environmental monitoring systems.
Environmental actions
Climate change and energy efficiency
The Russian government, along with various European organizations, is making efforts to implement policies protecting the
country from the ill-effects of climate change. As part of this initiative the Russian Regional Environmental Centre (RREC)
has taken up a project to implement an awareness program among the public and policy makers on climate change and the
Kyoto protocol. An information exchange network would be crafted under the project to assist collaboration on
implementation of the Kyoto mechanisms, and expansion and implementation of the climate policies. Furthermore, the
government, along with private partnerships, is also implementing other initiatives like the promotion of energy efficiency
and GHG emission reduction in glass manufacturing sector, energy security programs, and building institutional capacity to
develop and implement climate change policies.
Environmental protection and health
The government has implemented several policies in the country to encourage environmental protection and health. The
Department for Environment, Food and Rural Affairs (DEFRA) along with the Department for International Development
(DFID) of the UK, has implemented projects such as municipal water and wastewater management project (MWWP). This
is a five year program (2006–11) aiming at improving managerial and operational standards at water and wastewater
utilities plants. The main objective of this project is to improve water and wastewater services in 14 cities with a population

of about 300,000 to 1,100,000. Furthermore, during 2002–05, the government had already completed projects related to
establishing corporate priorities in the field of environmental protection and health, conservation and development of the
surface water resources in several regions of Russia, and several other projects on air contamination and sustainability of
lakes spread across Russia.
Biodiversity
As one of the largest countries in the world, Russia boasts rich natural resources, flora, fauna and ecosystems. The country
has also rich traditions in the field of biodiversity conversation. A system of protected areas has been functioning for about
100 years, and there have been some noteworthy achievements in the ecological efficiency of agriculture in the country.
Russian basic sciences (forestry, agrarian, hunting, fishery) have created conditions for sustainable use of biodiversity, its
identification, evaluation and monitoring of its status. The World Conservation Union division of Russia is currently running
two projects under the biodiversity protection. Forest governance and reduction of illegal logging is one of the projects
aimed at improving legislation and interagency relations in Russia. The objective of the project is to provide support toward
correcting defects in the legal framework related to forests and markets. Furthermore, it aims to regulate the poor co-
ordination of state and public control over the consumption of forest products. This disagreement between state and public
in this regard is a current problem for the government.
Participation in global efforts/agreements/pacts
European Neighborhood Policy (ENP)
Under the EU-Russia strategic partnership, the environment is also an important component among several other issues.
There are also other countries of former soviet rule that are part of the ENP. They include Belarus, Ukraine, Moldova, and
Armenia. The countries are important partners in global, European regional and sub-regional environmental issues, such as
climate change, sustainable development, and other pollution issues in Baltic and Arctic regions. Furthermore, the EU and
Russia also have a special agreement on the Northern Dimension which tackles the explicit challenges and opportunities
arising in North-west Russia, the Baltic Sea and the Arctic Sea region. The Northern Dimension Environmental Partnership
(NDEP) is a partnership of the European Commission, several EU Member States, Russia, Norway and international
funding institutions (EBRD, EIB, NIB, World Bank) to catalyze and leverage environmental investments with a focus on
North-west Russia. This agreement aims to reinforce the exchange of ideas between the EU and its member states and the
northern countries including Russia, Norway and Iceland. The policy framework for the NDEP 2007 was approved in the
EU-Russia Summit in 2006. The European Commission has contributed more than $47m towards non-nuclear projects
under the NDEP Support Fund. NDPE grants have leveraged over $992m IFI loans and $1.9 billion investments.
Copenhagen conference on climate change
The United Nations Framework Convention on Climate Change (UNFCCC) sets an overall framework for intergovernmental
efforts to tackle the challenge posed by climate change. It recognizes that the climate system is a shared resource whose
stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases. The convention
has a universal membership, with 192 countries having ratified the convention. Russia only pledged to make a 10% to 15%
reduction below 1990 levels by 2020 as part of a commitment to the Kyoto Protocol, but said that it would reduce emissions
by 20% to 25% as part of an agreement on long-term cooperative action. No deal could be clinched in Copenhagen,
however, talks on a binding international climate change pact continue in 2010.

Table 11: International environmental treaties signed and ratified by Russia
International treaty Year of ratification

Vienna Convention for the protection of the Ozone Layer, 1988 1988
Montreal Protocol on Substances that deplete the Ozone Layer 1988
Framework Convention on Climate Change 1995
Convention on Biological Diversity 1995
UN Law of the Sea 1997
UN Convention to Combat Desertification in Countries which Experience
Serious Drought and/or Desertification, Particularly in Africa 2003
Kyoto Protocol to the Framework Convention on Climate Change (year of
ratification/signature) 2004
Cartagena Protocol on Biosafety -
Performance
Environmental impact
Environmental pollution has had a substantial negative impact on Russia's economy. It is leading to health-related
budgetary pressure, decreased labor productivity, reduced tourism and investment, and also decreased yield of natural
resources. Russia has been largely affected because of the Soviet-era industrial, energy, and agricultural policies. These
policies disregarded environmental protection and as a result many sectors of Russia are deemed environmentally
dangerous. Most of the industrial centers have poor air and water quality. The Caspian and Black seas, the Sea of Azov,
the Volga River, and Lake Baikal are areas significantly affected by pollution in Russia. Air pollution is largely caused by
industrial clusters in the Kola Peninsula, central Siberia, and the Urals. Furthermore, swiftly increasing vehicles using
unleaded gas aggravate air pollution. Soil erosion is increasing in Russia due to harmful agricultural activities, overgrazing
and unrestricted harvesting. This is also resulting in the reduction of forest cover. On the other hand, increased disposal of
unsafe radioactive materials is polluting coastal water, rivers, and terrestrial areas in Russia. Russia’s operational nuclear
reactors are considered highly unsafe and some reactors are not scheduled for shutdown until after 2010.In 2009, Russia's
carbon dioxide emissions rose by 1.9%. However, it is expected that the country will reduce its CO2 emission rate to
around 0.9% by 2013.

Figure 23: Carbon dioxide emissions in Russia, 2002–13
1,900 4.0
1,850
3.5
1,800
3.0
1,750
2.5
1,700
Million metric tons
Percentage (%)
1,650 2.0
1,600
1.5
1,550
1.0
1,500
0.5
1,450
1,400 0.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
Volume Growth rate
Outlook
The Russian government is currently initiating various environmental agreements around the world to step up the
environmental conservation efforts in the country and also contribute to the global efforts on various environmental issues.
The Russian President, Dmitri Medvedev, has elevated the environment to one of the prime issues in government policy
making. In July 2009, the Russian government announced that it would join the International Convention on Oil Pollution
Preparedness, Response and Co-operation (OPRC Convention). This was followed by government’s decision in February
2010 to introduce a program to combat pollution in Baltic Sea. Furthermore, the country also joined hands with the Iranian
government to conduct research on the Caspian Sea. Caspian Sea being the world’s largest lake is one of the most
polluted lakes in the world and both the governments are hoping to initiate measures to curb further deterioration.
The Ministry of Natural Resources in Russia has completed an environmental code for the country. This environmental
code is packaged with different measures implementing environmental protection at various levels. The code will promote
the reduction of harmful impact on environment and upgrading production techniques on the basis of best available
technologies. The project also contains a proposal to combine all nature preservation functions in a single federal body.
Furthermore, the government is also developing a “climate doctrine” aiming to introduce energy-saving technologies and to
improve the energy efficiency of the entire economy. With many environmental programs arranged for the future, Russia is
expecting to maintain its environmental targets going forward.

APPENDIX
APPENDIX
Ask the analyst

Datamonitor’s Country Analysis Practice consists of a team of economists, analysts and researchers, all with expertise in
their given fields. For any questions or comments about this report you can contact the author directly.
countryanalysis@datamonitor.com
Datamonitor consulting
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Datamonitor’s consulting capabilities, please contact us directly at consulting@datamonitor.com.
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COUNTRY ANALYSIS REPORT

Publication Date: May 2009

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 2

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 3

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 4

Table 1: Russia – key fundamentals

2008 2009 2010 2011 2012 2013 2014

Source: Datamonitor DAT AMONITOR

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 5

Key facts and geographic location 10

Structure and policies 35

Structure and policies 45

Structure and policies 62

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 6

Structure and policies 70

Structure and policies 77

Structure and policies 83

Ask the analyst 88

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied Page 7

Figure 2: Unemployment in Russia, 2002–13 17

Figure 3: Russia’s political events timeline 33

Figure 4: Russia – Key political figures 35

Figure 5: Distribution of seats by political parties in the Duma, 2007 38

Figure 6: Evolution of GDP growth in Russia, 1990–2009 45

Figure 7: GDP and GDP growth rate of Russia, 2002–13 48

Figure 8: Sector specific GDP in Russia, 2009 49

Figure 9: Agricultural output in Russia, 2002–09 50

Figure 10: Industrial output in Russia, 2002–09 51

Figure 11: Services output in Russia, 2002–09 52

Figure 12: Current account balance in Russia, 2001–08 54

Figure 13: Russia’s external trade position, 2002–09 55

Figure 14: FDI inflow in Russia, 2002–08 57

Figure 16: Employment in Russia, 2002–13 61

Figure 17: Major religions in Russia 64

Figure 18: Healthcare expenditure in Russia, 2002–13 66

Figure 19: Education expenditure in Russia, 2002–13 68

Figure 20: Growth of fixed and mobile phones in Russia, 2002–13 72

Figure 21: Internet users in Russia, 2002–13 73

Figure 22: R&D expenditure in Russia, 2000–10 75

Figure 23: Carbon dioxide emissions in Russia, 2002–13 87

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

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Table 2: Russia – key facts 10

Table 3: Analysis of Russia’s political landscape 13

Table 4: Analysis of Russia’s economic landscape 16

Table 5: Analysis of Russia’s social landscape 20

Table 6: Analysis of Russia’s technology landscape 23

Table 7: Analysis of Russia’s legal landscape 26

Table 8: Analysis of Russia’s environmental landscape 29

Table 9: Mid-year population by age (m) in 2009 63

Table 10: Patents received by Russia – 2000–08 71

Table 11: International environmental treaties signed and ratified by Russia 86

Russia: Country Analysis Report – In-depth PESTLE Insights Published 05/2010

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