Casey FishMatt Manning

Cory SchulthiesLauren Moss

Julie Vest

RUSSIA

Background

RUSSIA TIMELINE

1917 1991

Russian Empire

Russian Soviet Federated Socialist Republic

(RSFSR)

As member of the

Union of Soviet Socialist Republics

(USSR)

Russia Federation

Russian Empire

19141903 1905

Bolsheviks

Revolution of 1905

DumaWWI

1917

Revolution

Russian Empire Dissolves

Becomes RSFSR

Russian Soviet Federated

Socialist Republic (RSFSR)

1917 1991

1918 - 1920

Civil War

1922

• RSFSR unites with other republics to

form the USSR

• Vladimir Lenin

Russian Soviet Federated

Socialist Republic (RSFSR)

1917 1991

1918 - 1920

Civil War

1922

RSFSR unites with other republics to

form the USSR

Vladimir Lenin

Joseph Stalin

Late 1920s

Russian Soviet Federated

Socialist Republic (RSFSR)

1917 1991

1918 - 1920

Civil War

1922

RSFSR unites with other republics to

form the USSR

Vladimir Lenin

Joseph Stalin

Late 1920s 1953

Malenkov and Khrushchev

1964

Leonid Brezhnev

Russian Soviet Federated

Socialist Republic (RSFSR)

1982 1991

1985

Mikhail Gorbachev

Russian Soviet Federated

Socialist Republic (RSFSR)

1982

1985

Mikhail Gorbachev

1991

Enter Boris Yeltsin USSR Dissolved Commonwealth of Independent States

Russian Federation

1991

1993

Voters approve new constitution

1999

Vladimir Putin

Current Economic Situation

Assets: many of the world's most valued natural resources, especially those required to support a modern industrialized economy. It also has a well-educated labor force with substantial technical expertise. Liabilities: Soviet-era management practices, a decaying infrastructure, and inefficient supply systems hinder efficient utilization of those resources.

History: 1920’s-1980’s

• Centralized planning of Stalin before the breakup of the Soviet Union.

• Communist Party controlled all aspects of economic activity.

• State Planning Committee formulated countrywide output targets.

Government Price Controls in all industries

Perestroika:1987-1991

• Restructuring movement under the leadership of Mikhail Gorbachev.

• Soviet Joint Venture Law (1987)

• Law of Cooperatives (1988)

• Did Perestroika succeed?

No! It caused new production bottlenecks.

Post 1991

• Under Boris Yeltsin, made great strides toward developing a market economy by implanting basic tenets such as market-determined prices.

• Two goals: macroeconomic stabilization and economic restructuring.

• Crash of 1998

Recovery

• Government’s and the Russian central bank’s anti-crisis programme, assisted by the IMF

• Depreciation of the rouble

• Tighter budget discipline

• Restructuring of foreign debt

• Improved supervision of banks.

Current Situation

• In last 7 years, GDP has averaged growth of 6.7% per year.

• Repaid debt to IMF ahead of schedule.

• 2005, the Russian stock market ranked as the world’s best performer (up by 88%)

• May 2006, Moody’s granted ‘A’ class ratings to four Russian companies

ALL GROUPS OF PRODUCTS

1 Food Products and Agricultural Raw Materials

2 Mineral Goods (Gas, Oil, Petrol, Ores, Coal etc.)

3 Chemical Products and Rubber

4 Leather Raw Materials, Furs and their products

5 Wood, Timber, Pulp and Paper Goods

6 Textiles and Footwear

7 Precious Stones and Precious Metals

8 Ferrous and Non-Ferrous Metals and Products

9 Machinery, Equipment and Transport Equipment

10 Other goods (which are not mentioned above)

Distribution of Russia’s Exports

ALL GROUPS OF PRODUCTS

1 Food Products and Agricultural Raw Materials

2 Mineral Goods (Gas, Oil, Petrol, Ores, Coal etc.)

3 Chemical Products and Rubber

4 Leather Raw Materials, Furs and their products

5 Wood, Timber, Pulp and Paper Goods

6 Textiles and Footwear

7 Precious Stones and Precious Metals

8 Ferrous and Non-Ferrous Metals and Products

9 Machinery, Equipment and Transport Equipment

10 Other goods (which are not mentioned above)

Distribution of Russia’s Imports

CIS (СНГ) Содружество Независимых

Государств• Commonwealth of Independent States

– Created December 1991 (statistical standards)

– to "allow a civilized divorce“ between formerly soviet republics

– Became economic union September 1993

CIS Participating Countries

Made up of formerly Soviet countries: Russia Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova,, Tajikistan, Turkmenistan,  Uzbekistan and Ukraine.

█ member state

█ associate member

CIS

• Free movement of:GoodsServicesLabor Force Capital

• Coordinates monetary, tax, price, customs, external economic policy.

Russian Foreign Trade

Russia’s Stock Market

• RTS (Russian Trading System)

• Established,1995 in Moscow

Currency Exchange (MICEX)

• Moscow Interbank Currency Exchange• Established in 1992 to trade currency

Special Problems▪Insider Buyout

The "insider buyout" supposedly induced 'employee dominant ownership', inevitably leading to the tendency for the stockholders, who are managers or employees themselves, to vote for increased wages, reduced investments, and fewer layoffs, which all

disfavor the growth of market economy.

Special Problems

• Barter– During the early 1990s the

focus on macrostabilization led to interest rates from 20% to

250%. – Not able to pay wages,

upgrading and modernizing their facilities was out of the

question. – The high interest rates and

shortage of financial capital forced some industries to barter, leading to a new system of distorted prices

Special Problems

• Capital Flight– "Anyone smart enough to be a winner in the privatization

sweepstakes would be smart enough to put their money in the booming U.S. Stock Market, or into the safe haven of secretive offshore bank accounts. It was not even a close call; and not

surprisingly, billions poured out of the country." – Joseph Stiglitz (2001 Nobel Prize in economics)

• Brain Drain

Special Problems

• Law– Lack of legislation and, where there is legislation, lack of

effective law enforcement, in many areas of economic activity is

a pressing issue. – Government decisions affecting business have often been

arbitrary and inconsistent.

Unique Characteristics

• Natural Resources– Oil– Gas– Coal– Timber

• Fishing– Fourth-largest in the World

Unique Characteristics

• Agriculture– Russia comprises roughly three-quarters of the territory of the

former Soviet Union but has relatively little area suited for agriculture because of its arid climate and inconsistent rainfall

– Private farms and garden plots of individuals account for over one-half of all agricultural production

Double GDP by 2010

In 2003 Putin declared a plan to double GDP by the year 2010.

Economic growth rate must be 7.2%.

Projected growth rate for 2006 is 6.5%.

Dutch Disease

Large oil firms

Non-renewable resources

Small & medium sized-businesses

Control Inflation

Inflation in 2005 was 10.9%

Projected to be 8.9% in 2006

Goal for in inflation is 5-6%

Monetary Reserves/Stabilization Fund

Questions