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Russian Federation Country Report
Eurasia Center Analysis
Geography/Natural Resources
 Russia is the largest country in the world with a total area of 17,098,242
km2. 1 It extends from the Caucasus to the Pacific Ocean, and from the
Arctic Ocean to the southern steppes.
 Climate ranges from continental humid near European Russia to tundra
and polar in the north. Severe seasonal changes from extremely hot to
extremely cold.
 Natural resources include sizable oil, natural gas, coal and other mineral
deposits. Little arable land relative to size (7.3%).2
 As of 2014, Russia accumulated 49 trillion cubic meters (tcm) of natural
gas reserves (largest worldwide), 160 billion tonnes of coal reserves
(ranked 3rd) and 60 billion barrels (bbl) of oil reserves (ranked 7th in the
world).3
“Russia.” 2015 CIA World Factbook.
Ibid.
3 Russia 2014. International Energy Agency <http://www.iea.org/publications/freepublications/publication/Russia_2014.pdf>
1
2
Demographics
 By 2015, Russia’s population reached 142,423,773 people with a negative
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replacement rate of -0.04% and a median age of 39.1, which corresponds
to a relatively young bulk of the population.4
Life expectancy for men is 64 years, yet women live an average of 76
years. Additionally, the male-female ratio is 1.06.5
The state recognizes Russian and Russian Orthodox Christianism as the
official language and religion respectively.
77.7% of the population are ethnically Russian, while the minority ethnic
groups include Tatar (3.2%), Ukranian (1.4%), Chechen (1%) and other
groups (16.7%).6
Urban population comprises 74% of the total population. The main cities
are Moscow (12 million), St. Petersburg (5 million) and Novosibirsk (1.5
million).7 A high percent urban with relatively small metropolis suggests
that the population is evenly spread around several clusters, with the sole
exceptions of Moscow and St. Petersburg.
In 2015, health expenditures amounted to 6.5% of the GDP.8
Education
 Russia’s education spending has increased throughout the last decade,
accruing for 11.5% of the government budget to education.9
 The Russian government provides general public education free of charge
to all its citizens. Higher education is also financed by the central
government or by the local state upon merit and/or performance on
standardized tests.10
 Students end the general education cycle at age 15 and receive technical
instruction for the following 2-3 years. Thereafter, they can aspire to
pursue advanced careers at Higher Education Institutions (HEI).11
Economic Overview
In the early 1990s, Russia began a massive transition from a centrally
planned economy to a capitalist regime. Mikhail Gorbachev’s reforms,
perestroika (“restructuring”) and glasnost (“openness”), privatized a significant
number of enterprises – except in the energy and defense sectors – and turned
Russia into a giant of international trade. Russia is a major producer of energy
resources, including oil, coal and natural gas, which comprise more than half of
“Russia.” 2015 CIA World Factbook.
Ibid.
6 “Russia Demographics Profile 2014.” Index Mundi <http://www.indexmundi.com/russia/demographics_profile.html>
7 “Russia.” 2015 CIA World Factbook.
8 Ibid.
9 “How Countries Spend Their Money.” Credit Loan <http://visualeconomics.creditloan.com/how-countries-spend-their-money/
10 “Russia.” The European Education Directory <http://www.euroeducation.net/prof/russco.htm>
11 Ibid.
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5
its exports. Additionally, it is also Europe’s major supplier of these commodities
and holds a significant share of the global market as well.
One issue that has prevailed since the dissolution of the Soviet Union is
the poor enforcement of property rights and the strict government regulations in
the private sector. These persistent complications have created disincentives for
companies to invest in R&D and to expand to their full potential. Moreover, the
past three years have been plagued with political crises and economic
shortcomings that have shocked the national economy. First, the Crimea affair
and the corresponding US sanctions have crippled Russia’s position in
international trade. These measures have plunged the value of the ruble, while
increasing international debt and draining foreign investment from the country.
In addition, the recent decline in oil prices due to excess supply in the world
market has undermined Russia’s export core. These critical factors have forced
the country into a stiff economic downturn.
Economic Indicators and Structure
 In 2015, Russia posted a
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GDP of $1.861 trillion,
which ranks 10th in the
world, and the economy
contracted by 3.8%.12
The inflation rate for 2015
soared to 15.4%, nearly
twice as in 2014.
This year, Russia recorded
$337.8 billion in exports
and $197.3 billion in Sources: Trading Economics, Federal State Statistics Service
imports, both significantly low compared to previous years.13
Russia’s main exporting partners are the Netherlands (14%), China
(7.5%), Italy (7.4%) and Germany (7.3%), who purchase mostly oil and
its derivatives, natural gas, metals and other raw materials. Most of
Russian imports come from China (17.6%) and Germany (11.5%) and
consist mostly of machinery/vehicles,
pharmaceutical products and food.14
Russia’s GDP per capita decreased by
1.2% from the previous year to $6843.91,
while the real wage dropped by 9%. This
shows an overall decline in the standard of
living, yet the unemployment rate barely
“GDP Ranking.” World Bank Group. <http://data.worldbank.org/data-catalog/GDP-ranking-table>
“Russia.” 2015 CIA World Factbook.
14 Ibid.
12
13
Sources: Bloomberg, The Economist
rose to 5.8%, with a 0.6% change from December of 2014.15 16
 The country’s poverty rate spiked from 13.1% in 2014 to 15.1% in 2015,
which accounts for approximately 2 million people.17
 GDP by sector (2015) - agriculture: 4.4% industry: 35.8% services:
59.7%.18
 Even though agriculture is a minority share of Russian GDP, it employs
9.4% of the workforce.19
Political Structure
 Russia’s current political regime is a presidential-parliamentary system
with a strong centralized executive (President and Prime Minister) and
balancing bicameral legislature (Federal Assembly: Federation Council and
Duma) and judiciary branches
(Constitutional and Supreme
Courts).20
 The President serves as the
head of state and is the most
powerful
domestic
and
international position. It has
the power to appoint the
premier (head of government),
his deputies and ministers, as
well as serving as commander
of the military and most
important diplomatic figure.
Vladimir Putin and Dimitriy Sources: The Telegraph
Medvedev are the current president and premier respectively.21
 The Federation Council (Upper House) is in charge of passing legislations
and the Duma (Lower House) has veto power over the decisions of the
Council and the Executive, including the approval of the nominated prime
minister.
 The Russian Central Bank has a strong influence on the economy and has
set the key interest rate at 11%. Bank Governor Elvira Nabiullina claims
that this measure aims towards controlling the rampant inflation, stabilize
the devalued ruble and mitigate the effects of volatile global markets.22
“Russia Indicators.” Trading Economics <http://www.tradingeconomics.com/russia/indicators>
“Phase Two.” The Economist <http://www.economist.com/news/finance-and-economics/21688932-russias-economic-problemsmove-acute-chronic-phase-two>
17 “Russian Federation.” The World Bank Group <http://www.worldbank.org/en/country/russia/overview>
18 “Russia.” 2015 CIA World Factbook.
19 Ibid.
20 Russia. US Department of State <http://www.state.gov/documents/organization/160474.pdf>
21 “Russia.” 2015 CIA World Factbook.
22 Ellyat, Holly. “Russia central bank leaves key interest rate at 11%.” CNBC <http://www.cnbc.com/2015/12/11/russia-central-bankleaves-key-interest-rate-at-11.html>
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 The Russian government has incurred a debt of 13.5% of the GDP, aiming
to salvage public and other domestic industries from the current crisis.23
Political Considerations
The governance of Russia a questionable democracy in which power is
primarily concentrated in the hands of Vladimir Putin, who alternates positions
between President and Prime Minister along with Dmitry Medvedev. The two
have shared control of the Executive Branch for over a decade and until the
economic crisis of 2008 they enjoyed a great deal of public support. Their
support is dwindling and this creative form of authoritarianism faces an unclear
future. Despite a large protest movement in Russia during the past four years,
today they face virtually no serious challenge to their power from independent
actors such as businessmen, the judicial branch, or the media.
Although the Russian people can exercise their right to vote freely, the
government control of the Duma, whose role is to check the executive, and
worrying corruption indexes within the courts and the bureaucracy turn the
perceived democracy into a political façade. Elections favor state-supported
candidates through state-run media. It is effectively impossible for new political
parties to form, and the threshold for representation in Parliament is 7% of the
votes in the single-member district – an incredibly high threshold. For
comparison, thresholds in European Parliament cannot exceed 5%.
Overall Freedom Indicator
According to Freedom House, Russia is considered ‘not free.’ Russia does
not enjoy a free press, and has only ‘partly free’ Internet. Russian parliament
passed legislation that criminalizes blasphemy and openly gay behavior, which
has the potential to hinder freedom of expression. Freedom House ranked
Russia’s Freedom Score as follows:24
Press freedom: 83 (0 being best, 100 being worst)
Legal environment: 25 (0 being best, 30 being worst)
Political environment: 34 (0 being best, 40 being worst)
Economy environment: 24 (0 being best, 30 being worst)
Attractions
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23
24
Energy Supply: even in a time of recession, Russia generated 1.064
trillion kWh of energy from fossil fuels, hydroelectric and nuclear power,
“Russia Government Debt to GDP.” Trading Economics <http://www.tradingeconomics.com/russia/government-debt-to-gdp>
“Russia.” Freedom House <https://freedomhouse.org/report/freedom-press/2015/russia
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and other renewable sources and remains as fourth major producer of
global energy.25
Size of Labor Force: Russia’s labor force of 75 million workers ranks 8th
in the world. During the recession, the economy has been able to maintain
a stable unemployment rate with a similar participation rate to those of
previous years. This has come to the expense of a drastic wage cut and
reduction of the standard of living, yet offers an opportunity for domestic
and foreign investors to pursue profitable, labor-intensive enterprises.26
Consumer Market: ranked 10th in total population with 142,423,773
people, Russia offers one of the largest consumer markets for both
necessity and luxury goods.
2018 FIFA World Cup: Russia will host the most viewed sports event in
the world in 2018. Although the investment in infrastructure required to
handle a tournament of such global dimensions, the promising returns
from tourism and international publicity, which include intensive brand
presence and elevated consumption, serve as an immense pull factor for
firms.
Freedom of Speech Allegations: President Putin pardoned members of
Pussy Riot, Nadezhda Tolokonnika and Maria Alekhina, two months before
their scheduled release. The two women are scheduled to attend an
Amnesty International concert in New York City in February. The President
also pardoned the oil tycoon Mikhail Khodorkovsky, who following his
release traveled to Germany to visit his mother who is there receiving
treatment for cancer as well as his business partner.
Current Challenges
 Crimean Crisis and Sanctions: the Crimean affair has become a
worldwide scandal that has strained Russia’s diplomatic relations with the
US and the EU. The leaders of these nations have determined to impose
heavy economic sanctions on Russia in order to isolate the country. Such
measures include the banning of Russian goods and even businesses from
various places and the freezing of Russian assets around the world.
Additionally, these situation has provoked a thunderous media uproar
worldwide and has turned Russia into a target of rash criticism.
 Economic Diversification: Russia’s economy is far too dependent on
hydrocarbons, which account for 58% of GDP, and other raw materials
(wood, natural gas, minerals, etc.). This is compounded to the absence of
developed industries – except for the military industry – to create an
unstable economy with extremely volatile currency, prices and capital
inflow.
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26
“Russia.” 2015 CIA World Factbook.
“Russian Investment Agency <http://www.investment-in-russia.com/site/en?view=RUSSIA-IN-FIGURES>
 Government Regulation of the Economy: even though Russia has
sustained a market economy for the last 25 years, the government still
imposes stiff controls to private industries, such as taxes and price
regulations, which implicate a substantial efficiency loss.
 Corruption: According to an Associated Press-GFK poll, 85% of Russians
say that corruption is a serious problem facing their country today.
Moreover, there is a poor enforcement of property rights, which cripples
companies’ investment in R&D and other sources of innovation.
 Substance Abuse: Russia also has a crippling problem with alcohol and
drug abuse, specifically heroin. Russia consumes more heroin than any
other country in the world.
Acknowledgements:
Research and Data Development Provided by: Juan Pablo Poch and Andrea Sestanovich,
Research Assistants. Under the Supervision and Coordination of: Gerard Janco, President,
Eurasia Center. Updated on February 10, 2016 by: Juan Pablo Poch, Research Assistant.