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COUNTRY PROFILES


PROFILE

Country Profile

Area: 17,075,400 square kilometres
Population: 141.9 million (2009)
Capital City: Moscow
People: 81.5% Russians; 3.8% Tatars; 3% Ukrainians (more than 100 nationalities in all)
Languages: Russian, Tatar, other
Religions: Orthodox Christianity; Islam; Judaism; Buddhism
Currency: 1 Rouble = 100 Kopeks
Major political parties: United Russia, Communist Party, Liberal Democratic Party, A Just Russia
Government: Federation
Head of State/President: Dmitry Medvedev
Prime Minister/Premier: Vladimir Putin
Foreign Minister: Sergei Lavrov

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ECONOMY

Basic Economic Facts

GDP: $ 1.3 trillion (2009)
GDP per head: $ 9161 (2009)
Annual growth: -7.9% (2009)
Inflation: 8.8% (2009)
Major industries: Oil, gas, timber, metals, machinery, chemicals and arable farming.
Major import partners (IMF 2009): China 14.8%, Germany 14.4%, Ukraine 5.1%, Italy 4.8%, US 4.4%, South Korea 4%, France 3.8%, Japan 3.3%, Netherlands 2.9%, Poland 2.7%.
Major export partners (IMF 2009): Netherlands 8.6%, Germany 7.5%, Italy 6.4%, China 5.8%, Turkey 4.9%, Ukraine 3.9%, US 3.7%, Poland 3.7%, Finland 3.3%, Kazakhstan 3.1%.
UK exports to Russia: £2.3 billion (2009)
UK imports from Russia: £4.5 billion (2009)
UK investment in Russia: £30 billion (2008)

Impact of the Economic Crisis on the Russian Economy

From 1999 to 2008, the economy benefited from strong growth, averaging about 7% a year. This growth was accompanied by budget surpluses (4% in 2008), allowing the Russian government to accumulate reserves of almost $600bn. Oil and gas are crucial to the economy, accounting for over 25% of GDP, 45% of federal budget revenues and 70% of exports.

The Russian economy, like many around the world, was severely affected by the global financial crisis. GDP contracted by 7.9% in 2009; this was the largest fall recorded by any G20 economy. The freezing of international capital markets reversed the flow of finance into Russia. At the same time, a collapse in commodity prices (Russia is now the world’s largest producer of hydrocarbons) put pressure on the trade balance and public finances. The government implemented anti-crisis measures focused on three areas: maintaining the currency, preventing a banking collapse and ensuring social stability. To date, these stabilisation tactics have been successful but costly. Russia recorded positive growth for the last quarter of 2009, officially putting it out of recession.

For 2010, the Government are projecting a growth in GDP of around 3% that would result in a budget deficit of $100bn, or 7.5% of GDP. The current budget is calculated with an average oil price of $59 per barrel.


The Russian Rouble

The value of the Russian rouble is closely aligned to the oil price and so has also dropped since the summer of 2008. From mid-November 2008 the Russian Central Bank began a managed devaluation of the rouble. By 22 January 2009 the rouble had lost more than 30% of its value against the bi-currency basket (dollar and euro). Since that time a hike in oil prices and a renewed inflow of foreign capital has seen the rouble strengthen from its record lows during the crisis.

World Trade Organisation Accession

Russia has been negotiating WTO accession for over 17 years. The exact terms of such a bid are currently under negotiation with the WTO Secretariat. In the meantime it is continuing dialogue with the OECD over possible membership.

Other Economic Challenges

Russia faces wider economic problems, some previously masked by the oil boom. Businesses complain of high levels of bureaucracy and corruption. The 2009 World Bank’s Ease of Doing Business survey ranks Russia 120th out of 181 countries, indicating significant bureaucratic challenges in the business environment. Corruption is endemic in Russia. Russia is currently 147th out of 180 countries in Transparency International’s corruption perception index. This is underlined by the small size of Russia’s SME sector (around 13% of GDP).

In the longer term, Russia’s demographic deficit may lead to significant labour shortages. Russia’s population is falling. In 2009, it fell by over 250,000 per year. Some analysts predict that it could fall from its current 142m to 120-125m by 2025. There is already a shortfall of appropriately-trained workers, which is exacerbated by low labour mobility.

The UK and Russia - Trade

Russia is an important trading partner for the UK and British firms have invested heavily in Russia.

Russia is the UK's 23rd largest export market, with around 600 UK companies operating in Russia in 2009. Russia enjoys a historically strong performance in the field of engineering, financial services, information technology, power and energy -. Over the past few years, trade between Russia and the UK has increased significantly. Exports of UK goods were valued at £2.3bn in 2009, substantially down as a result of the economic crisis and falling demand for luxury imports, particularly automobiles. But trade is now recovering, with exports in first half of this year 17% up on the same period in 2009.

For more detail on trade between the UK and Russia, see the UK Trade and Investment Country Profile:

UKTI Country Profile : Russia (https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/countries?_nfls=false&_nfpb=true&_pageLabel=CountryType1&navigationPageId=/russia)

Development Assistance

DFID’s bilateral engagement with Russia started in the early 1990s, initially supporting Russia’s transition to a market economy. After 2002 the focus shifted to supporting the Russian government’s administrative and social reforms. Over the period 2001 – 2006, over £50m was allocated to support this. In addition, there were annual contributions of between £2-3 million for humanitarian operations in the North Caucasus.

DFID closed its bilateral aid programme March 2007, a sign of Russia’s strong economic growth since 2000 and its position as one of the richest Middle Income Countries. As a G8 member and an emerging donor, Russia has the potential to play a major role in global poverty reduction. DFID’s modest remaining programme in Russia now works through the World Bank and the EBRD across three main areas: building Russia’s aid management capacity; supporting public administration reforms; and promoting energy efficiency.

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HISTORY

The origins of the Russian state can be traced back to the sixteenth century when the trading principality of Muscovy emerged as the dominant player among a number of small principalities and fiefdoms. Ivan IV (Ivan the Terrible, 1533-1584) was the first prince of Muscovy to style himself as Tsar. The Romanov family emerged as Russia's leaders in the early 17th century, and ruled Russia for the next 300 years. Perhaps the best known of the Romanovs are Peter the Great (1682-1725) and Catherine the Great (1762-1796), who did most to reform and modernise the country.

Bolshevik Revolution

By the early 20th century, discontent at all levels of Russian society was high. Harsh working conditions in the newly industrialised cities, coupled with an absolutist monarchy which was perceived as being indifferent to the suffering of the mass of the population, created conditions which were ripe for the growth of political radicalism. The year 1903 saw the emergence of the Bolshevik Party, led by Lenin, inspired by the teachings of Karl Marx. Public dissatisfaction grew following the Bloody Sunday Massacre in 1905, defeat in the Russo-Japanese War and the disastrous course of Russia's involvement in the First World War. February 1917 saw the first of two revolutions, culminating in October of that year in the fairly bloodless seizure of power by the Bolsheviks. The following year, Russia withdrew early from the First World War with the costly Treaty of Brest-Litovsk. Tsar Nicholas II and his family were shot.

Soviet Union

The early years of Lenin’s rule were marked by civil war and mass starvation. Later, there was considerable rivalry for power as Lenin became increasingly incapacitated. Stalin emerged as the undisputed leader of the Communist Party in 1929. Stalin’s Five Year Plans saw rapid industrialisation but his leadership was characterised by political purges, mass deportations and imprisonment on an unprecedented scale. In June 1941 Germany invaded the USSR, triggering a four-year war during which up to 27 million Soviet citizens died. Russia emerged from the war victorious, having secured effective political control over most of Central and Eastern Europe. Stalin remained firmly in control until his death in 1953, although he became increasingly paranoid and reclusive. During this period the Communist Party consolidated its hold on every aspect of life by means of a vast security apparatus. The USSR had become an industrial and military superpower, but at immense human cost.

Khrushchev, Stalin's successor, attempted to address the worst excesses of Stalin's rule while preserving the key elements of Communism. He eased censorship and fostered a foreign policy of peaceful co-existence with the West, while, in response to the Hungarian Uprising of 1956, maintaining strong control over the Soviet satellite states. But the Party establishment distrusted him and he lost credibility over his handling of the 1962 Cuban Missile Crisis. He was deposed in 1964 in a political coup. Brezhnev, Khrushchev’s successor, presided over a period of consolidation. Life became more predictable and comfortable for the bulk of the population, though political repression remained in force. However, with growth rates slowing and social problems growing, Brezhnev’s rule became know as ‘the era of stagnation’. From 1979 the Soviet Union became involved in a prolonged and bloody occupation of Afghanistan which scarred a whole generation.

Gorbachev

The stagnation of the Brezhnev era was continued by a quick succession of short-lived Party leaders who died in office, but reform took off the mid-1980s, when Mikhail Gorbachev came to power. Glasnost (openness) and perestroika (restructuring) liberalised the political system and, to a lesser extent, the economy. Gorbachev’s goal was to build a better form of socialism. Gradually, however, the process of democratisation took on a pace of its own. Gorbachev made it clear that he would not intervene in the internal affairs of the Eastern European satellite states, which prompted widespread protest movements that brought about the collapse of unpopular communist governments which had previously relied on the threat of Soviet military support. At the same time, pressure was growing among some of the republics of the USSR for greater independence, and in 1990 the Russia republic within the USSR (headed by Boris Yeltsin) declared its independence in a symbolic gesture. In August 1991, a coup was mounted against Gorbachev by a group of hard-liners seeking to stop the fragmentation of the USSR. Yeltsin supported Gorbachev and the coup was defeated. But when Gorbachev returned to Moscow from the south where he had been under house arrest, it became clear that Yeltsin held the political initiative, and many of the republics of the USSR hastened to declare their independence. The dissolution of the USSR on 31 December 1991 left Gorbachev with no option but to resign as its President.

Yeltsin

President Yeltsin launched an agenda for Russia's transition to a democratic, market-based form of government. In 1992, Acting Prime Minister Yegor Gaidar began a programme of radical economic reforms, known as ‘shock therapy’, including measures to cut subsidies and de-regulate prices. These quickly ran into stiff opposition, and change was as a result much more gradual and patchy than many had hoped. The exception was the field of privatisation where huge strides forward were taken between 1992 and 1994 to create the bases of a privately owned economic system. Russia was hamstrung by a constitutional crisis in 1992 and 1993, with Yeltsin contesting power with the Russian Parliament. In September 1993 Yeltsin broke the impasse, dissolving Parliament and calling fresh elections. When parliamentary supporters took to the streets in violent protest, Yeltsin ordered tanks to fire on the White House, which broke the deadlock but left deep political scars.

Out of that debacle a new Constitution and political institutions emerged. Yeltsin was re-elected in 1996 but his second term was crippled by severe economic problems, culminating in August 1998 in the devaluation of the rouble and a default on Russia’s rouble debt. Yeltsin installed the virtually unknown Vladimir Putin as Prime Minister in the summer of 1999 and resigned on 31 December 1999, before the official end of his presidential term.

Putin

Vladimir Putin was formally elected President on 26 March 2000, and served two terms as President before stepping down to become Prime Minister, appointed by his successor Dmitry Medvedev in May 2008.

During his first term as President, Putin moved to re-centralise power, cutting back the positions of regional governments and big business. He also pushed forward an ambitious programme of domestic reforms, particularly in the economic sphere, including banking reforms, tax reform, anti-money-laundering legislation, and administrative and judicial reform (perhaps the key to genuine change in Russia). Favourable economic conditions, fuelled by the high oil prices, ensured Putin’s continuing personal popularity.

Putin won a second presidential term on 14 March 2004 with a landslide majority. The pace of reform slowed notably during Putin’s second term, and progress on politically and socially contentious issues such as economic reform and pensions was limited. Nonetheless, overall the years of Putin’s presidency were the most stable and prosperous period for Russia since the break up of the USSR, at least in part on the back of high commodity prices.

State Duma (parliamentary) elections on 2 December 2007 gave an overwhelming victory for the incumbent majority party, United Russia, which now won a constitutional majority. Parliamentary observers from the OSCE and Council of Europe described these elections as ‘neither free nor fair’ and drew attention to unbalanced media coverage and the use of state resources to favour United Russia.

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INTERNATIONAL RELATIONS

Russia is a member of international institutions such as the UN Security Council, the G8, G20, Council of Europe and the OSCE. Russia maintains close relations with many of the other former Soviet republics through the framework of the Commonwealth of Independent States, the Collective Security Treaty Organisation, the Shanghai Cooperation Organisation, and others.

Russia maintains a dialogue with NATO through the NATO/Russia Council, including on Afghanistan, combating piracy, counter-proliferation and counter-terrorism. Meanwhile, negotiations continue between the EU and Russia on a successor to their Partnership and Co-operation Agreement, covering a wide-range of areas including trade and investment, global and regional security and stability, and climate and energy security.

Differences with the international community arose following the conflict in Georgia in 2008 and Russia’s recognition of the Georgian regions of South Ossetia and Abkhazia as independent states.

Russia and the UK maintain contacts at all levels to discuss a wide range of bilateral issues and key foreign policy issues. The State Visit by HM the Queen and the Duke of Edinburgh to Russia in October 1994 was the first ever by a reigning British Monarch. The then President Putin came to the UK on a State Visit in summer 2003, the first such visit by a Russian leader since 1874. He also visited the UK in October 2005, during the UK Presidency of the European Union.

Cultural Relations with the UK

The British Council operates in Russia through its Moscow offices, managing a wide-ranging programme of cultural and educational activity.

British Council Russia (http://www.britishcouncil.ru/index.htm)
For further details on the UK’s relations with Russia, you may wish to see the Foreign Affairs Committee's Global Security: Russia (http://www.fco.gov.uk/resources/en/pdf/Russia-Global-Security) report and the FCO’s Command Response (http://www.fco.gov.uk/resources/en/pdf/FAC-Response) .

BBC News Country Timeline: Russia (http://news.bbc.co.uk/1/hi/world/europe/country_profiles/1102275.stm)

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GEOGRAPHY

Russia is the largest country in the world, spanning 9 time zones. The landscape varies widely, from vast open tracts in the European heartlands and the taiga and tundra of Siberia, to mountainous terrain. Agriculture is largely confined to the European regions and the southern belt of Siberia. Further north, the main industries are forestry and extraction of energy and minerals.

The main communications across the country are by air, and the Trans-Siberian railway. The road system is not well developed countrywide. Russia's great rivers also play an important part in transportation as well as in hydroelectric power generation.

Russia's population is small relative to its size, and unevenly distributed, with the vast bulk in the European areas and the Ural regions. In inhospitable regions, e.g. the far north and much of Siberia, population density is often less than one person per square kilometre.

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POLITICS

The Russian Federation is recognised in international law as continuing the legal personality of the Soviet Union which was dissolved on 31 December 1991. The Russian Federation is currently divided into some 80 administrative units officially known as subjects of the Federation.

LEADERSHIP

Presidential elections took place on 2 March 2008. Having served two consecutive presidential terms, Putin was constitutionally required to stand down. His close associate Dmitry Medvedev won 70.2% of the vote and immediately appointed Putin as Prime Minister. This established the – for Russia – unorthodox arrangement often referred to as the “tandem.” Medvedev has tried to make modernisation of the Russian economy and society the keynote of his presidency. He advocated reforms to entrench the rule of law in Russia, sought to strengthen the independence of the judiciary, and pushed forward anti-corruption legislation.

In late 2008, Medvedev initiated amendments to Russia’s Constitution which extend future Presidential terms of office to six years and the State Duma’s term to five years. The next Presidential election is due in 2012. Both Putin and Medvedev have hinted they may stand, though not in competition.

State Duma (parliamentary) elections on 2 December 2007 gave an overwhelming victory for the incumbent majority party, Putin-led United Russia, which won a constitutional majority. Parliamentary observers from the OSCE and Council of Europe described these elections as ‘neither free nor fair’ and drew attention to unbalanced media coverage and the use of state resources to favour United Russia.

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HUMAN RIGHTS

While human rights and civil freedoms have improved significantly since the collapse of the USSR, concerns remain about respect for basic rights in Russia. Activists continue to report human rights violations in Chechnya and the North Caucasus, torture, constraints on freedom of assembly, freedom of expression and civil society, xenophobic or racially motivated attacks and poor conditions in the armed forces. President Medvedev has taken some steps to improve conditions for civil society, and proposed reforms to law enforcement bodies, but these are yet to translate into significant progress.

Further details on the human rights situation in Russia can be found on page 136 of the 2009 FCO Annual Report on Human Rights:

Human Rights Report 2009 (http://centralcontent.fco.gov.uk/resources/en/pdf/human-rights-reports/human-rights-report-2009)

Chechnya the North Caucasus

Throughout the1990s the campaign for Chechen independence led to serious political unrest and violent clashes between Russian and Chechen forces. Much of the republic's urban and rural infrastructure was destroyed in fighting between separatist rebels and federal troops allied with local forces loyal to Moscow, especially through the indiscriminate use of heavy artillery and aerial bombardment by the Russian military. Chechnya’s current pro-Moscow leadership have made some progress, especially with high-profile rebuilding work. However, social and economic conditions still remain poor with high levels of poverty and unemployment. There are continuing, credible allegations of extra-judicial killings, forced disappearances, torture, rape and arbitrary detention in Chechnya and some neighbouring regions.

In April 2009, Russia announced the end of its Counter-Terrorism Operation in Chechnya. However, continued instability has led to the re-introduction of local counter-terrorism regimes in some areas and small numbers of rebels continue to operate in the republic.

There has also been a noticeable increase in violence in other republics in the North Caucasus, in particular Dagestan, Ingushetia and Kabardino-Balkaria. The main targets for such attacks are federal and local law-enforcement bodies but incidents involving civilian casualties have occurred across the region, such as the attack on a Vladikavkaz market in September 2010.

The North Caucasus remains an unstable region overall, with difficult socio-economic conditions underpinned by widespread corruption, ethnic and clan tensions and religious divisions. President Medvedev has sought to address this situation with a development agenda, and appointed a special representative for the region to lead this.

Because of the security situation and the threat from terrorism and kidnappings, the FCO advises against travel to certain regions of the North Caucasus. See the FCO Travel Advice (http://www.fco.gov.uk/content/en/travel-advice/europe/russia/fco_trv_ca_russianfederation) for more information.

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Last Updated: October 2010

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