RUSSIA

General

Russia, a vast Eurasian expanse of field, forest, desert, and tundra, has endured many ‘times of trouble’ - the Mongol rule of the 13th to 15th century; czarist reigns of terror; massive invasions by Swedes, French, and Germans; and the communist period (1917-1991) in which Russia dominated an immense Soviet Union. General Secretary Mikhail Gorbachev, in charge during 1985-1991, introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernise communism, but also inadvertently released forces that shattered the USSR into 15 independent republics in December 1991. Russia has struggled in its efforts to build a democratic political system and market economy to replace the strict social, political, and economic controls of the communist period. These reform efforts have resulted in contradictory and confusing economic and political regulations and practices. Industry, agriculture, the military, the central government, and the ruble have suffered, but Russia has successfully held one presidential, two legislative, and numerous regional elections since 1991.

Economy

Seven years after the collapse of the USSR, Russia is still struggling to establish a modern market economy and achieve strong economic growth. Russian GDP has contracted an estimated 43% since 1991, including a 5% drop in 1998, despite the country’s wealth of natural resources, its well-educated population, and its diverse - although increasingly dilapidated - industrial base. By the end of 1997, Russia had achieved some progress. Inflation had been brought under control, the ruble was stabilised, and an ambitious privatisation programme had transferred thousands of enterprises to private ownership. Some important market-oriented laws were also passed, including a commercial code governing business relations and an arbitration court for resolving economic disputes. But in 1998, the Asian financial crisis swept through the country, contributing to a sharp decline in Russia’s earnings from oil exports and resulting in an exodus of foreign investors. Matters came to a head in August 1998 when the government allowed the ruble to fall precipitously and stopped payment on $40 billion in ruble bonds. Ongoing problems include an undeveloped legal and financial system, poor progress on restructuring the military-industrial complex, and persistently large budget deficits, largely reflecting the inability of successive governments to collect sufficient taxes. Russia’s transition to a market economy has also been slowed by the growing prevalence of payment arrears and barter and by widespread corruption. The severity of Russia’s economic problems is dramatised by the large annual decline in population, estimated by some observers at 800,000 people, caused by environmental hazards, the decline in health care, and the unwillingness of people to have children.