modern economy of Russia

Работа выполнена на английском языке. Есть введение, заключение и список использованной литературы ...

INTRODUCTION…………………………………………………………………….2
Chapter 1. Russian economy after collapse of the USSR……………………………3
Chapter 2. Russian economy in XXI century………………………………………..9
Chapter 3. Russian finantional crisis in 2014……………………………………….18
CONCLUSION……………………………………………………………………..19
LIST OF SOURCES……………………………………………………………….20

The acute economic crisis faced by many countries in the early 80s, demanded the restructuring of state regulation of the economy, the transition to the development of market relations. The main directions of the reforms was the privatization (transfer of state property into private hands), price liberalization, financial stabilization (the fight against inflation, the strengthening of the national currency).
Going from a command to a market economy it can not be done in a few days or months. It's a long, measured decade of transition, which includes a series of sequential steps. In Russia semi haphazard transition to the market it has lasted for more than a decade.
The need for social change is long overdue, which was reflected in the attempts of various economic reforms and experiments. But all these attempts did not go beyond improving the existing system. As a result, improvement of the economic situation did not occur. I needed a new, qualitatively different approach to understanding and progress to term. In fact, if a huge country has significant natural and human resources, solid intellectual potential, but no desired results, the cause must be sought in the very social system.





The acute economic crisis faced by many countries in the early 80s, demanded the restructuring of state regulation of the economy, the transition to the development of market relations. The main directions of the reforms was the privatization (transfer of state property into private hands), price liberalization, financial stabilization (the fight against inflation, the strengthening of the national currency).
Going from a command to a market economy it can not be done in a few days or months. It's a long, measured decade of transition, which includes a series of sequential steps. In Russia semi haphazard transition to the market it has lasted for more than a decade.
The need for social change is long overdue, which was reflected in the attempts of various economic reforms and experiments. But all these attempts did not go beyond improving the existing system. As a result, improvement of the economic situation did not occur. I needed a new, qualitatively different approach to understanding and progress to term. In fact, if a huge country has significant natural and human resources, solid intellectual potential, but no desired results, the cause must be sought in the very social system.








The acute economic crisis faced by many countries in the early 80s, demanded the restructuring of state regulation of the economy, the transition to the development of market relations. The main directions of the reforms was the privatization (transfer of state property into private hands), price liberalization, financial stabilization (the fight against inflation, the strengthening of the national currency).
Going from a command to a market economy it can not be done in a few days or months. It's a long, measured decade of transition, which includes a series of sequential steps. In Russia semi haphazard transition to the market it has lasted for more than a decade.
The need for social change is long overdue, which was reflected in the attempts of various economic reforms and experiments. But all these attempts did not go beyond improving the existing system. As a result, improvement of the economic situation did not occur. I needed a new, qualitatively different approach to understanding and progress to term. In fact, if a huge country has significant natural and human resources, solid intellectual potential, but no desired results, the cause must be sought in the very social system.

Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government.Many of them promptly invested their newfound wealth abroad producing an enormous capital flight1.
Difficulties in collecting government revenues amid the collapsing economy and a dependence on short-term borrowing to finance budget deficits led to the Russian Financial Crisis in 1998.
In the 1990s Russia was "the largest borrower" from the International Monetary Fund with loans totalling $20 billion. The IMF was the subject of criticism for lending so much as Russia introduced little of the reforms promised for the money and a large part of these funds could have been "diverted from their intended purpose and includedin the flows of capital that left the country illegally".
Russia bounced back from the August 1998 financial crash with surprising speed. Much of the reason for the recovery was devaluation of the ruble, which made domestic producers more competitive nationally and internationally.
Chapter 2. Russian economy in XXI century.
The three years from 2000 to 2002 were characterized by pro-growth economic reforms including a comprehensive tax reform, which introduced a flat income tax of 13%; and a broad effort at deregulation which improved the situation for small and medium-sized enterprises.
Between 2000 and 2008, Russian economy got a major boost from rising commodity prices. GDP grew on average 7% per year1.
Russia’s economic freedom score is 52.1, making its economy the 143rd freest in the 2015 Index. Its score has improved by 0.2 point since last year, with gains in business freedom, freedom from corruption, and labor freedom largely offset by declines in monetary freedom, property rights, and the management of government spending. Russia is ranked 41st out of 43 countries in the Europe region, and its overall score is below the world average.
Despite increased political and economic isolation and falling gas prices, Russia’s economic freedom score has increased by 1.6 points since 2011, with gains in half of the 10 economic freedoms led by a particularly notable improvement in business freedom. Significant declines in financial freedom and property rights have held back overall progress2.
The foundations of economic freedom in Russia remain weak. Apart from connections with Europe, Russia remains relatively closed to trade and investment. The government screens foreign investment, and subsidized state-owned businesses limit competition and market opportunities. Corruption and respect for property rights have improved little since the fall of Communism. The business environment is constrained by suffocating bureaucracy and a rigid labor market.
There is no aspect of contemporary Russia that has changed more rapidly and unexpectedly than its economic situation. When Vladimir Putin became President, Russia was effectively bankrupt as it owed more money to the International Monetary Fund (IMF) than it had in foreign currency reserves. Since then, Russia has achieved a virtual macroeconomic revolution to the point where it is one of the largest creditors of U.S. debt in the world. Its nominal dollar GDP has increased by more than a factor of six, and has the potential to reach more than $2 trillion by 2010. Growth of this magnitude would equate to nearly a ten fold increase in GDP over the course of a decade1.
In early 2009, the Ministry of Economic Trade and Development published an ambitious plan outlining Russian economic goals to the year 2020. If these goals are reached, Russia would become the largest economy in Europe and the fifth largest in the world following the United States, China, Japan, and India.
When examining the Russian economy, the first thing that needs to be considered is the sustainability of the current growth trends. Is the Russian government pursuing policies that are likely to constrain growth? How much does corruption tax economic expansion? How are Russian leaders weighing the trade-offs of investing in infrastructure modernization, growing social welfare demands, military modernization, etc.? Are the development and distribution of Russia’s vast energy resources driven more by political or commercial factors?
The fundamental question the United States needs to answer concerns the degree to which Russian economic resurgence presents an opportunity or a threat to its interests. To what extent should the United States encourage deeper integration and interdependence? In the realm of security, U.S. policy toward Russia today broadly consists of contradictory tendencies toward engagement and containment. However these tendencies are also very relevant when considering the economic future of the Russian Federation.
Never in its history has Russia been more prosperous or integrated into the global economy than it is now. Seemingly, this is a positive development and the achievement of one of the core goals of U.S. policy toward Russia since the Soviet collapse. However, like many aspects of contemporary Russia, this phenomenon is highly controversial in Washington, often due to the conflicting nature of economic information. This project seeks to clarify U.S. interests on the Russian economy and help place them in the broader context of U.S. policy toward Russia.
After a decade of stunning economic growth, fueled by rising commodity prices and cheap foreign credit, the Russian economy established itself as a very attractive seat for foreign investment. By July 2008, Russian foreign currency reserves totaled more than $588.9 billion and oil prices broke new records at more than $147.27 per barrel, while Russian banks acquired foreign debt amounting $500 billion Even after months of financial instability following the volatility that rocked U.S. financial markets during the spring of 2008, Russia appeared to be weathering the financial storm better than most. However, as the crisis deepened, it became apparent that Russia would not be exempt from the economic downturn. Frozen credit markets, rapidly declining energy prices, and significant investor pull-back began having an effect on the Russian economy. Initial reaction from the Kremlin downplayed the impact of the crisis on Russia, but instead levied scorn on American regulators for failing to foresee the downturn.
By the end of 2008, the ruble stood significantly weakened against the dollar and the main Russian stock index had all but collapsed. As industrial production slowed, unemployment increased and isolated incidences of civil unrest began to appear across the country. These factors, combined with a growing problem capital flight, forced the government to act by passing a broad economic stimulus package and injecting more than $200 billion into the economy. In spring 2009, oil prices climbed back from the low point they reached earlier in the year and the global impact of the crisis eased. Even so, experts predict Russia will continue to feel the effects of the crisis in the years ahead with economic contraction of between 7 and 8 percent expected in 2009 and only a modest growth in consecutive years. The global financial downturn has highlighted serious deficiencies in the economic policies of the Kremlin and the Russian economy itself. The speed and trajectory of Russia's recovery is highly contingent on the willingness of Russian policymakers to diversify their revenue streams and make much needed economic and monetary reforms.
Russia’s “2020” development strategy forecasts three possible evelopment scenarios: inertia, resource-based development, and innovation-based development. This would bring Russia up to the level of developedindustrial economies, with a GDP per capita of approximately $30,000 in purchasing power parity1.
In October 2014, the Russian economy set a number of negative records. The ruble’s exchange rate against the U.S. dollar for the first time exceeded 40 and reached 52 against the euro, which forced the Central Bank to spend several billion dollars on intervention. Political analyst Tatiana Stanovaya analyzes the key risks currently facing Russia’s economy2.
Since the beginning of Vladimir Putin’s presidency, Russia has not faced such dangerous and destructive processes in the country’s economic and financial spheres. The country is currently entering a zone of economic turbulence, making it extremely difficult to make medium-term forecasts about its future. The year 2014 may turn out to be one of the most difficult in recent years from the point of view of the risks facing the country’s economy.
Let us try to describe the five key types of risk the country is facing. The first category of risk is geopolitical, embracing the entire complex of sanctions against Russia and the “containment policy” adopted by the United States, the European Union, and a number of other countries with regard to Russia. Analysts from the Raiffeisen Bank, one of Russia’s major banks, expect that the sanctions will result in a fall in Russia’s GDP by 0.3 percent in 2014. According to the Russian Finance Ministry, Russia’s balance of payments has suffered a shock equal to 2 percent of GDP as a result of growing geopolitical tensions. Furthermore, the Russian government has as good as acknowledged that the country could fall into a recession.
According to forecasts by Fitch Ratings, consumer price growth will reach 7 percent in 2014 before declining only slightly to 6.8 percent in 2015 and 6 percent in 2016. The ratings agency also says that the international restrictions introduced with regard to Russia and the measures the country has taken in response have negatively affected the business environment, resulting in a falling value of the national currency, accelerating inflation, rising interest rates, accelerating capital outflow, the aggravation of structural flaws, and an increasing risk of recession as well as of Russian companies being cut off from international capital markets. According to Fitch, the capital outflow from Russia in 2015 will reach $100 billion. On October 15, experts from the Center for Macroeconomic Analysis and Short-Term Forecasting declared that Russia is experiencing a systemic banking crisis that will likely only deepen in the coming year.
These are only preliminary estimates. As became clear in late September, the European Union does not intend to review its sanctions against Russia despite the relative peace in Ukraine’s eastern regions. Russia still has not complied (and seems unlikely to comply) with the West’s primary demand that it pull its troops from Ukrainian territory. This means that geopolitical risks will remain the same and will produce further depreciation of the ruble, rises in inflation and capital outflow, and investor disappointment.
The second type of risk currently plaguing Russia is systemic risk, which has only become more acute in the face of external shocks. Systemic risks include the country’s high corruption level, ineffective ruling system, weak government, poor quality of lawmaking, and lack of parliamentary, civil, and media control.
Crisis tendencies in the economy that were obvious even before the Ukrainian revolution and the annexation of Crimea have made this program impossible to implement. The government, however, does not seem able to come up with a different plan.
The third category of risks is connected to the oligarchs. Western sanctions that have made it impossible for businesses to get long-term loans from abroad and have frozen relations with foreign investors have placed enormous pressure on businessmen from Putin’s close circle as well as on the state companies on which “Putin’s economy” is based. The U.S. energy giant ExxonMobil decided to withdraw from its joint ventures with Rosneft in the Arctic. Similarly, the French oil and gas company Total suspended its joint venture with Russia’s Lukoil to explore hard-to-recover oil in Western Siberia.
Under these rapidly deteriorating economic conditions, Rosneft asked the Russian government for 1.5 trillion rubles from the National Welfare Fund (NWF), an account created to service the debts of the Russian Pension Fund. The Russian Ministry of Economic Development recently approved the allocation of 150 billion rubles ($3.75 billion) from the NWF to Novatek, Russia’s second-largest gas producer, for the development of the Yamal LNG project to tap the resources of the South Tambey gas field. Gazprom is also facing difficulties and has announced that it will considerably decrease its production in the coming year.
The consequences of economic difficulties are not only financial. According to many observers, the much-publicized arrest of Vladimir Yevtushenkov, chairman of the Russian conglomerate Sistema, is connected with Rosneft CEO Igor Sechin’s ambitions to get his hands on Bashneft, an oil company owned by Sistema. The State Duma is considering a law that would allow Russian citizens whose foreign-held assets were frozen as a result of “unlawful decisions of foreign courts” to demand compensation from the Russian budget. This initiative, which was previously rejected in March 2013, was revived after the Italian government decided to freeze the assets of Arkady Rotenberg, an influential Russian businessman connected with Putin. If this law is adopted and all people blacklisted by the United States and the European Union seek compensation, it is hard to imagine the consequences for the Russian budget.
In other words, “oligarchic risks” are connected with the desire of the businessmen close to Putin to distribute assets among themselves and at the same time obtain privileged working conditions. These measures are being offered as a sort of compensation for the damages caused by sanctions—compensation that would be paid by taxpayers who still believe that Russia is surrounded by enemies.
The fourth category of risk is related to negatives conjunctures regarding energy markets. On October 16, Brent oil prices dropped below $83 a barrel, a historic low since 2010. Considering that Russia needs an oil price of around $90 a barrel to balance its budget, this low price poses a serious risk to the country’s economy. According to the Russian Finance Ministry, low oil prices could shave 2 percent off Russia’s GDP and reduce the value of its exports by $55 billion a year. “The current situation is the payment for the soft policy of the last few years,” said Maksim Oreshkin, head of the Finance Ministry’s Strategic Planning Department. He added that if the oil price was set at $80 a barrel when calculating the budget, the Russian economy would not notice any shocks when oil prices dropped1.
Finally, the fifth category of risk is sociopolitical. Polling and sociological research organizations, including the Levada Center, are not currently recording any shifts in public attitude that could provoke the government’s concern. However, sociologists note that the population sees the rise in prices as a major social issue. The effort to halt the rise in prices after the introduction of an embargo on products from the European Union and Norway proved impossible. The government keeps saying that this situation is only temporary, but Russians see a different picture in stores. The obvious weakening of the ruble has made things worse: the population’s profits and purchasing power are decreasing, while basic necessities are becoming more expensive.
Former Finance Minister Alexei Kudrin recently declared that the window of opportunity to introduce reforms and restore economic growth in Russia has closed under the pressure of Western sanctions and a new election cycle. The country is facing several years of stagnation on the brink of recession in the face of a lack of political will to generate change. However, stagnation is not the worst thing that the country might face if the current tendencies continue to develop. The inertia of Putin’s regime is becoming the main threat to its stability in the future, and if a social and economic crisis were to be provoked by the cumulative effect of the aforementioned risks, there exists no “vertical of power” that could prevent an internal explosion from happening.
The combination of lower oil prices, international sanctions and geopolitical risks will weigh heavily on the economy, which is expected to enter into a deep recession this year. However, participants in the FocusEconomics panel foresee that the incipient recovery in oil prices, if sustained, will mitigate an all-out economic collapse. Panelists expect the economy to contract 4.2% this year, which is up 0.1 percentage points from last month’s forecast. In 2016, the panel expects the economy to recover somewhat and grow a tepid 0.4%1.
Charter 3. Russian Finantional crisis 2014 – 2015.
The ongoing financial crisis in Russia and the associated shrinking of the Russian economy is the result of the collapse of the Russian ruble beginning in the second half of 2014. A decline in confidence in the Russian economy caused investors to sell off their Russian assets, which led to a decline in the value of the Russian ruble and sparked fears of a Russian financial crisis.
The lack of confidence in the Russian economy stemmed from at least two major sources. The first is the fall in the price of oil in 2014.Crude oil, a major export of Russia, declined in price by nearly 50% between its yearly high in June 2014 and 16 December 2014. The second is the result of international economic sanctions imposed on Russia following Russia's annexation of Crimea and the Russian military intervention in Ukraine.1
The crisis has affected the Russian economy, both consumers and companies, and regional financial markets, as well as Putin's ambitions regarding the Eurasian Economic Union. The Russian stock market in particular has experienced large declines, with a 30% drop in the RTS Index from the beginning of December through 16 December.
Any international aid to Russia is considered unlikely as a result of the 2014–15 Russian military intervention in Ukraine. Officials in the U.S. government have also said, despite the financial crisis, that the United States and the European Union will not ease economic sanctions imposed on Russia due to Russia's annexation of Crimea and Russian assistance to separatists militants fighting Ukraine in the War in Donbass.[7] The U.S. believes the sanctions have negatively affected the Russian economy so far and also expects the economic sanctions to lead to the further decline of the Russian economy.2
Economic sanctions have also contributed to the decline of the ruble since Russian companies have been prevented from rolling over debt, forcing companies to exchange their rubles for U.S. dollars or other foreign currencies on the open market to meet their interest payment obligations on their existing debt.3
Russia was already near a recession before the Crimean crisis, and Russia ranks low on the World Economic Forum's rankings of road quality, technological adaptation, and burden of government regulation.[46] Russia's already-weak economy left it less able to withstand the challenges imposed by low oil prices and international sanctions.[47] The Russian Central Bank's "erratic response" to the falling ruble has also been blamed for deepening the crisis.
CONCLUSION