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Factba.se: Australia DFAT Country Briefs - Russia
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COUNTRY BRIEFS


INTRODUCTION

The Russian Federation is the largest country in the world. It covers more than an eighth of the Earth's land area and stretches from the Baltic and Black Seas in the west to the Pacific Ocean in the east.

Russia's population of 139 million celebrates Russia's National Day on 12 June.

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POLITICAL OVERVIEW

The Russian Federation consists of 83 administrative units, known as 'federal subjects'. Executive power resides with the President (Dmitry Medvedev), who is the head of state, and the Prime Minister (Vladimir Putin), who is the head of government. Under the constitution, the President appoints the Prime Minister. Legislative power resides in the two houses of Parliament: the State Duma (Lower House, 450 seats), and the Federation Council (Upper House, 176 seats).

Since the Duma elections in December 2003, both Houses have been dominated by the centrist United Russia Party, which has close links to former President Vladimir Putin.

Under the Russian Constitution, which was adopted in 1993, a President may serve only two terms consecutively. In the 2 March 2008 presidential election, Dmitry Medvedev, former First Deputy Prime Minister, won a landslide victory with more than 70 per cent of the vote and was inaugurated as President on 7 May 2008. He confirmed his predecessor, Putin, as Prime Minister on 8 May 2008.

Russia is a permanent member of the United Nations Security Council (chairing it in 2007), a member of the G8, the G20, the ASEAN Regional Forum (ARF), the Asia-Pacific Economic Cooperation (APEC) grouping, and a wide range of other international organisations. Russia held the rotating Presidency of the G8 in 2006, hosting the G8 Leaders' Summit in St Petersburg in July 2006. As a permanent member of the UN Security Council, Russia plays a key role in formulating the international response to Iran's nuclear program. It is also one of the countries involved in Six-Party Talks with the DPRK and a member of the Middle East Peace Process Quartet.

While human rights and civil freedoms have improved dramatically since the collapse of the Soviet Union, some concerns remain. These include human rights violations in Chechnya and the North Caucasus, lack of media freedom, racially motivated attacks and systemic problems in the legal system.

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ECONOMIC OVERVIEW

Russia is a vast country with a wealth of natural resources. It is the world's largest exporter of natural gas and second largest exporter of oil, of which it produced about 12 per cent of global supply in 2009. Russia's economy is heavily dependent on these exports. Prior to the global financial crisis, the oil and gas sector generated more than 60 per cent of Russia's export revenues, and accounted for 30 per cent of all foreign direct investment (FDI) in the country.

The Russian economy was severely affected by the spread of the global financial market crisis in 2008 and 2009. Macroeconomic stability was threatened by a slump in energy prices and the sudden withdrawal of external financing. Russia's gross domestic product (GDP) fell by 7.9 per cent in 2009, but positive growth in the fourth quarter signalled an end to the recession. The International Monetary Fund (IMF) predicts Russia's economy will grow by 4.25 per cent in 2010.

Russia has been undertaking WTO accession negotiations since 1995. Work is continuing on the multilateral aspects of the WTO accession, but a number of key issues are still to be resolved, including the level of agriculture subsidies. Australia and Russia signed a bilateral agreement in relation to Russia's WTO accession in June 2006.

In 1997, OECD countries formally acknowledged that the accession of the Russian Federation as a full member of the OECD was a shared ultimate goal. The OECD Council approved the 'roadmap to accession' for the Russian Federation in November 2007.

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BILATERAL RELATIONSHIP

Official contact between Australia and Russia began in 1807, when the Russian naval vessel Neva arrived in Sydney. Consular relations began in 1857 and diplomatic relations began in 1942. Australia has had an Embassy in Moscow since 1943 and has Consulates in Vladivostok and St Petersburg. The Russian Federation has an Embassy in Canberra, a Consulate-General in Sydney and Consulates in Brisbane and Adelaide. The Russian community in Australia numbers around 67,000, based on figures released in the 2006 Census.

Australia and Russia cooperate in a number of important international and multilateral forums, including those involved with non-proliferation issues and regional security. Russia is involved in the Asia-Pacific region, including APEC, which Russia will host in 2012.

Australia and Russia concluded a bilateral Double Taxation Agreement in September 2000, which came into effect in 2004.

Then President Putin became the first Russian leader to visit Australia when he attended APEC Leaders' Week in September 2007. Putin was accompanied by five Ministers and a delegation of 150 senior business leaders. Joint statements noted Australia's and Russia's shared commitment to addressing the global challenges of climate change and energy, reaffirmed both countries' interest in combating terrorism and in expanding bilateral trade and investment through the reconvening of the Australia-Russia Joint Commission on Trade and Economic Cooperation (JCTEC), which first met in 1995.

During Putin's visit, Australia and Russia signed an Agreement on Cooperation in the Use of Nuclear Energy for Peaceful Purpose (Nuclear Cooperation Agreement) (http://www.dfat.gov.au/geo/russia/treaties/faq.html). The Agreement was tabled in Australia's Parliament in May 2008. In April 2010, during a visit to Moscow, the Minister for Foreign Affairs, the Hon Stephen Smith, indicated the Government would move towards entry into force of the Agreement at a future date. During the visit, Mr Smith also signed a Memorandum of Understanding on Agricultural Cooperation with Russia's Agriculture Minister, Dr Elena Skrynnik, and announced that Russian students would be eligible to apply for certain Endeavour Award scholarships under the Australia Awards,

Several other high level visits have taken place in recent years. On 31 October 2008 the then Minister for Trade, the Hon Simon Crean MP, co-chaired in Moscow the second Australia-Russia Joint Commission on Trade and Economic Co-operation (JCTEC) with Russia's then Agriculture Minister, Mr Alexsey Gordeyev.  In June 2006 the then Treasurer, the Hon Peter Costello MP, attended a G8 Finance Ministers meeting in St Petersburg. The then Governor-General, Major General Michael Jeffery AC CVO MC, visited Moscow in May 2005 to represent Australia at the 60th anniversary celebrations of the end of World War II in Europe. The then Minister for Foreign Affairs, the Hon Alexander Downer MP, visited Russia in 2002 and Russia's then Agriculture Minister, Mr Gordeyev, visited Australia in 2004 and again in 2007. The then Speaker of the House of Representatives, The Hon David Hawker MP, led a parliamentary delegation to Russia in January 2007 for the 15th Annual Meeting of the Asia Pacific Parliamentary Forum (APPF). A Russian Duma delegation visited Australia in May 2007. The Chairman of Russia's Federation Council, Mr Sergei Mironov, visited Australia in March 2009.

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BILATERAL ECONOMIC AND TRADE RELATIONSHIP

Russia is growing in importance as a market for Australian exports and investment, a trend that is expected to accelerate once Russia's WTO accession is complete.

Two-way merchandise trade between Australia and Russia was worth $942 million in 2009, a decrease of 45.1 per cent on the previous year. This fall reflected the effects of the 2009 global financial crisis on Russia's economy and net imports.  Russia is now Australia's 35th largest merchandise trading partner. Australian merchandise exports to Russia in 2009 were worth $585 million, and imports from Russia totalled $358 million. Key Australian exports to Russia in 2009 included meat (particularly beef), hides and skins, and electrical equipment. Crude petroleum dominated Australian imports from Russia in 2009, which also included fertilisers and electrical machinery and parts.

Australia's exports of services to Russia in 2009 were valued at $106 million, and imports of services from Russia were valued at $77 million. Services exports are growing in areas such as education, tourism and specialist services for the mining, metallurgy, oil and gas industries.

Fact sheet summarising the Russian economy and bilateral trade relationship in 2009 [PDF] (http://www.dfat.gov.au/geo/russia/fs/russ.pdf" title="russ.pdf)

Australian companies have had some success in winning business in the Sakhalin Island oil and gas province, located in the Russian Far East near Japan. Sakhalin is among the world's largest oil and gas fields.

Bilateral investment grew rapidly between 2005 and 2008. In August 2007 Macquarie Bank and Moscow-based Renaissance Capital announced a joint venture to develop infrastructure advisory and fund management opportunities in Russia and other CIS countries. In 2006, BHP Billiton and Rio Tinto separately announced joint ventures with Norilsk Nickel to explore and develop mineral resources in Russia.

The first large-scale Russian investment in Australia took place in 2005 when Rusal (Russian Aluminium) invested US$461 million to acquire 20 per cent of Queensland Alumina. Russian investment in Australia has increased substantially since then. In 2006-2007 Norilsk Nickel acquired, indirectly, Australian assets estimated between US$3.5-4.5 billion through its third-country acquisitions of OM Group (USA) and LionOre Mining (Canada). In August 2007, Russia's Magnitogorsk Iron and Steel Works (MMK) purchased a 5 per cent share of Fortescue Metals Group Limited for $550million.

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EXPORT OPPORTUNITIES

Russia represents a growing market for Australian agricultural products, including meat, livestock, dairy products and skins and hides. Russian agribusiness has expressed interest in Australia's advanced technologies for tracing livestock and services for improving herd output. Opportunities also exist in education services, as over 20,000 Russian students study abroad every year.

Blessed with enormous resources and energy reserves, Russia is an important market for advanced Australian technologies that improve the efficiency of resource and energy extraction. Russia is planning to double its level of coal-powered electricity over the next 15 years. While Russia has the world's second largest coal reserves, it has been slow to adopt many modern technologies. As a result, there are significant opportunities for Australian business to export coal expertise and modern equipment. Austrade led a mission of Australian coal technology companies to Russia in March 2010 and major Russian coal companies regularly visit the coal-focused Queensland Mining Exhibition in Mackay. Additional opportunities exist for Australian mining equipment, technology and services (METS) in hard-rock mining.

Trade successes

Bovis Lend Lease

Bovis Lend Lease entered the Russian market in 1992, providing project and construction management services on large-scale real estate, infrastructure and industrial projects. Since that time Bovis Lend Lease have completed over 70 projects for clients including local developers such as RBI and East Line, as well as major international corporations such as Mars, Heinz, Pepsi, BP, Philip Morris, Volvo, Pilkington, Danfoss, and LG Electronics. With a local headquarters and team located in Moscow, the company now successfully operates in a number of cities across the region, including St Petersburg, Yekaterinburg, Samara, Stavropol and Rostov-on-Don.

BHP Billiton

BHP Billiton, the world's largest mining company, has undertaken a number of exploration assignments in the Russian Federation, both independently and via partnerships. In 2006, BHP Billiton announced a joint venture with Norilsk Nickel to explore and develop mineral resources in Russia.

Macquarie Renaissance

Macquarie Group and Renaissance Capital, a leading emerging markets investment banking firm in Russia, joined forces in 2007 to form Macquarie Renaissance. The joint venture was established to develop infrastructure advisory and fund management opportunities in Russia and participate in the estimated US$1 trillion that will be spent on infrastructure projects over the next decade.

More success stories

For more information on exporting Australian goods and services to Russia, or on conducting business in Russia, please visit the website of the Australian Trade Commission (Austrade) (http://www.austrade.ru/eng/). Austrade has offices in Moscow and Vladivostok.

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Last Updated: August 2010

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