Economy of Russia

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Economy of Russia:

Economy of Russia

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Russia has been growing steadily since the financial crisis of 1998. high oil prices, a cheap ruble, consumer demand and investment have played an important role in fighting the aftermath of the crisis. poverty has decreased steadily and the middle class has continued to expand. Russia has also improved its international financial position since the 1998 financial crisis. Oil export made Russia the third largest oil reserve in the world. Russia has signed an agreement with the US as a prelude to possible WTO entry. Fraud at the elections, corruption, and lack of trust undermine domestic and foreign investment. The currency of Russia is the Ruble.

Exports :

Exports fuels, energy, metals, machinery & equipment, chemicals,  and oil, Vodca , and clothes. Export markets : Ukraine, Germany, Belarus, Netherlands and China. Russia is a major exporter of iron ore , with most production occurring in the Kursk Magnetic Anomaly of south central Russia. Russia is also a notable exporter of copper and nickel . Copper and nickel ores are mined primarily in the Urals, the Kola Peninsula near Murmansk. The country is one of the world's leading producers of gold , which is mined in the Urals, western Siberia, and eastern Siberia in the valley of the Lena River. Russia is also a major diamond producer.

Imports :

Imports machinery & equipment, food and agricultural raw materials, chemicals and metals. Major Import Markets :Germany, Ukraine, Belarus and the US.


Agriculture Russia is a major producer of wheat ( пшеница) , barley (ячмень) , oats (овес) , and rye (рожь) , corn (кукуруза) , millet (просо) , buckwheat (гречка) , rice, and soybeans, apples, pears (груши) , and cherries (вишня) .


Fishing Russia's fishing industry is one of the largest in the world. In the early 1990s the annual catch ( улов) was about 9.2 million metric tons.

Mining (горная промышленность):

Mining (горная промышленность) Mining is a major sector of the Russian economy and provides : energy-bearing minerals, including petroleum, coal, and natural gas. Functions: to meet domestic demands provide for nations in its economic sphere, export to industrial nations of the West in return for needed hard currency .

Collapse (развал) of the USSR (СССР):

Collapse (развал) of the USSR (СССР) independence of the USSR's republics on 26 December 1991 In 1991 the USSR stopped existence. The Yeltsin government dissolved ( распустить) the USSR. Yeltsin became the first president of the Russian Federation. Yeltsin made many economic reforms: privatization macroeconomic stabilization


Reforms Domestic markets were opened to foreign trade and investment Market economy instead of central planning “shock therapy”


Optimism The USSR had a huge foreign debt (=sovereign debt) The investors didn’t believe Russia could pay this debt and refuse to invest money. In 1996 and 1997 everything seemed fine : There was balance between export and import The World Bank invested $3 billion per year Inflation decreased from 131% in 1995 to 22% in 1996 and 11% in 1997 The exchange rate: 5-6 rubles = 1 dollar Oil export: $23 per barrel (which made 45% fo the GDP in 1997) Economic growth = 0.8%


Problems Real wages were VERY low (1/2 from what people earned in 1991) Only 40% of people were paid in full and on time Unrest in the Duma Low taxes => public sector deficit the first war in Chechnya cost Russia $5.5 billion Corruption


1997-1998 The foreign investors began to sell the ruble and buy the dollars The oil prices (цены) dropped (упали) on March 23, President Yeltsin fired ( уволил) his entire (все) government, including Prime Minister Viktor Chernomyrdin. The Duma and the CBR (Central Bank of Russia) (ЦБ) were in conflict

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The CBR lent (давать в долг) money at 150% The oil prices dropped (упали) to $11 per barrel The government formed an anticrisis plan

Default (дефолт, неплатеж) "Ruble crisis":

Default ( дефолт, неплатеж) " Ruble crisis" August 17, 1998 the Russian stock ( акции) , bond (облигации) , and currency (валюта) markets collapsed (рухнуть) because the investors were afraid to invest money in Russia in August 1998 Russia devalued (обесценить) the ruble and declared (объявить) a stop of payments to foreign creditors ( default on domestic debt (внутренний долг)


Result The export increased The import was low Inflation reached 84% Many banks were closed The debt on salaries was $5 billion Prices on domestic food increased 100% Prices on imported food increased 4 times (x4) People stocked up for bad times ( запасались на «черный день») Millions of people LOST their life savings when the banks closed Mass protests and manifestations

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Rationing of food (food cards ( продуктовые карточки) were introduced) The new Foreign Minister Yevgeny Primakov restored (восстановил) political stability But on October,9 Russia asked for humanitarian aid

Recovery («выздоровление»):

Recovery ( «выздоровление») Oil prices rose Barter exchange helped to restore economy Demand of Russian goods and services rose Unemployment decreased

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