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Russia (05/08)For the most current version of this Note, see Background Notes A-Z.
PROFILE OFFICIAL NAME: Geography People Government Economy PEOPLE Russia's educational system has produced nearly 100% literacy. About 7 million students attended Russia's 1,090 institutions of higher education in 2006, but continued reform is critical to producing students with skills to adapt to a market economy. Because great emphasis is placed on science and technology in education, Russian medical, mathematical, scientific, and space and aviation research is still generally of a high order. The number of doctors in relation to the population is high by American standards, although medical care in Russia, even in major cities, is generally far below Western standards. The unraveling of the Soviet state in its last decades and the physical and psychological traumas of transition during the 1990s resulted in a steady decline in the health of the Russian people. Currently Russia faces a demographic crisis as births lag far behind deaths. While its population is aging, skyrocketing deaths of working-age males due to cardiovascular disease is a major cause of Russia's demographic woes. A rapid increase in HIV/AIDS infections and tuberculosis compounds the problem. In 2007, life expectancy at birth was 59 for men and 73 for women. The large annual excess of deaths over births is expected to cut Russia's population by 30% over the next 50 years. The Russian labor force is undergoing tremendous changes. Although well educated and skilled, it is largely mismatched to the rapidly changing needs of the Russian economy. Official unemployment has dropped in recent years to 6.9%, and labor shortages have started to appear in some high-skilled job markets. Nonetheless, pockets of high unemployment remain and many Russian workers are underemployed. Unemployment is highest among women and young people. Following the 1991 collapse of the Soviet Union and the economic dislocation it engendered, the standard of living fell dramatically. However, real disposable incomes have doubled since 1999, and experts estimate that the middle class ranges from one-fifth to one-third of the population. By the end of the third quarter in 2007, 14.8% of the population lived below the subsistence level, in contrast to 38.1% in 1998. Moscow is Russia's capital and largest city. Moscow is also increasingly important as an economic and business center; it has become Russia's principal magnet for foreign investment and business presence. Its cultural tradition is rich, and there are many museums devoted to art, literature, music, dance, history, and science, as well as hundreds of churches and dozens of notable cathedrals. The second-largest city in Russia is St. Petersburg, which was established by Peter the Great in 1703 to be the capital of the Russian Empire as part of his Western-looking reforms. The city was called Petrograd during World War I and Leningrad after 1924. In 1991, as the result of a city referendum, it was renamed St. Petersburg. Under the tsars, the city was Russia's cultural, intellectual, commercial, financial, and industrial center. After Lenin moved the capital back to Moscow in 1918, the city's political significance declined, but it remained a cultural, scientific, and military-industrial center. The Hermitage, formerly the Winter Palace of the tsars, is one of the world's great fine arts museums. Russia has an area of about 17 million square kilometers (6.5 million sq. mi.); in geographic terms, this makes Russia the largest country in the world by more than 2.5 million square miles. But with a population density of about 22 persons per square mile (9 per sq. km.), it is sparsely populated, and most of its residents live in urban areas. HISTORY In the post-Mongol period, Muscovy gradually became the dominant principality and was able, through diplomacy and conquest, to establish suzerainty over European Russia. Ivan III (1462-1505) referred to his empire as "the Third Rome" and considered it heir to the Byzantine tradition. Ivan IV (the Terrible) (1530-1584) was the first Russian ruler to call himself tsar. He pushed Russian eastward with his conquests but his later reign was marked by the cruelty that earned him his familiar epithet. He was succeeded by Boris Godunov, whose reign commenced the so-called Time of Troubles. Relative stability was achieved when Michael Romanov established the dynasty that bore his name in 1613. During the reign of Peter the Great (1689-1725), modernization and European influences spread in Russia. Peter created Western-style military forces, subordinated the Russian Orthodox Church hierarchy to the tsar, reformed the entire governmental structure, and established the beginnings of a Western-style education system. He moved the capital westward from Moscow to St. Petersburg, his newly-established city on the Baltic. His introduction of European customs generated nationalistic resentments in society and spawned the philosophical rivalry between "Westernizers" and nationalistic "Slavophiles" that remains a key dynamic of current Russian social and political thought. Catherine the Great continued Peter's expansionist policies and established Russia as a European power. During her reign (1762-96), power was centralized in the monarchy, and administrative reforms concentrated great wealth and privilege in the hands of the Russian nobility. Catherine was also known as an enthusiastic patron of art, literature and education and for her correspondence with Voltaire and other Enlightenment figures. Catherine also engaged in a territorial resettlement of Jews into what became known as "The Pale of Settlement," where great numbers of Jews were concentrated and later subject to vicious attacks known as pogroms. Alexander I (1801-1825) began his reign as a reformer, but after defeating Napoleon's 1812 attempt to conquer Russia, he became much more conservative and rolled back many of his early reforms. During this era, Russia gained control of Georgia and much of the Caucasus. Throughout the 19th century, the Russian Government sought to suppress repeated attempts at reform and attempts at liberation by various national movements, particularly under the reign of Nicholas I (1825-1855). Its economy failed to compete with those of Western countries. Russian cities were growing without an industrial base to generate employment, although emancipation of the serfs in 1861 foreshadowed urbanization and rapid industrialization late in the century. At the same time, Russia expanded into the rest of the Caucasus, Central Asia and across Siberia. The port of Vladivostok was opened on the Pacific coast in 1860. The Trans-Siberian Railroad opened vast frontiers to development late in the century. In the 19th century, Russian culture flourished as Russian artists made significant contributions to world literature, visual arts, dance, and music. The names of Dostoyevsky, Tolstoy, Gogol, Repin, and Tchaikovsky became known to the world. Alexander II (1855-1881), a relatively liberal tsar, emancipated the serfs. His 1881 assassination, however, prompted the reactionary rule of Alexander III (1881-1894). At the turn of the century, imperial decline became evident. Russia was defeated in the unpopular Russo-Japanese war in 1905. The Russian Revolution of 1905 forced Tsar Nicholas II (1894-1917) to grant a constitution and introduce limited democratic reforms. The government suppressed opposition and manipulated popular anger into anti-Semitic pogroms. Attempts at economic change, such as land reform, were incomplete. 1917 Revolution and the U.S.S.R. First among its political figures was Lenin, leader of the Bolshevik Party and head of the first Soviet Government, who died in 1924. In the late 1920s, Josef Stalin emerged as General Secretary of the Communist Party of the Soviet Union (CPSU) amidst intra-party rivalries; he maintained complete control over Soviet domestic and international policy until his death in 1953. In the 1930s, Stalin oversaw the forced collectivization of tens of millions of its citizens in state agricultural and industrial enterprises. Millions died in the process. Millions more died in political purges, the vast penal and labor system, and in state-created famines. Initially allied to Nazi Germany, which resulted in significant territorial additions on its western border, the U.S.S.R. was attacked by the Axis on June 22, 1941. Twenty million Soviet citizens died during World War II in the successful effort to defeat the Axis, in addition to over two million Soviet Jews who perished in the Holocaust. After the war, the U.S.S.R. became one of the Permanent Members of the UN Security Council. In 1949, the U.S.S.R. developed its own nuclear arsenal. Stalin's successor, Nikita Khrushchev, served as Communist Party leader until he was ousted in 1964. Aleksey Kosygin became Chairman of the Council of Ministers, and Leonid Brezhnev was made First Secretary of the CPSU Central Committee in 1964. In 1971, Brezhnev rose to become "first among equals" in a collective leadership. Brezhnev died in 1982 and was succeeded by Yuriy Andropov (1982-84) and Konstantin Chernenko (1984-85). In 1985, Mikhail Gorbachev became the next (and last) General Secretary of the CPSU. Gorbachev introduced policies of perestroika (restructuring) and glasnost (openness). But his efforts to reform the creaky Communist system from within failed. The people of the Soviet Union were not content with half-freedoms granted by Moscow; they demanded more and the system collapsed. Boris Yeltsin was elected the first president of the Russian Federation in 1991. Russia, Ukraine and Belarus formed the Commonwealth of Independent States in December 1991. Gorbachev resigned as Soviet President on December 25, 1991. Eleven days later, the U.S.S.R. was formally dissolved. The Russian Federation In a dramatic speech in September 1993, President Yeltsin dissolved the Russian parliament and called for new national elections and a new constitution. The standoff between the executive branch and opponents in the legislature turned violent in October after supporters of the parliament tried to instigate an armed insurrection. Yeltsin ordered the army to respond with force to capture the parliament building and crush the insurrection. In December 1993, voters elected a new parliament and approved a new constitution that had been drafted by the Yeltsin government. Yeltsin remained the dominant political figure, although a broad array of parties, including ultra-nationalists, liberals, agrarians, and communists, had substantial representation in the parliament and competed actively in elections at all levels of government. In late 1994, the Russian security forces launched a brutal operation in the Republic of Chechnya against rebels who were intent on separation from Russia. Along with their opponents, Russian forces committed numerous violations of human rights. The protracted conflict, which received close scrutiny in the Russian media, raised serious human rights and humanitarian concerns abroad as well as within Russia. After numerous unsuccessful attempts to institute a cease-fire, in August 1996 the Russian and Chechen authorities negotiated a settlement that resulted in a complete withdrawal of Russian troops and the holding of elections in January 1997. A peace treaty was concluded in May 1997. Following a number of terrorist incidents blamed on Chechen separatists, the Russian government launched a new military campaign into Chechnya. By spring 2000, federal forces claimed control over Chechen territory, but fighting continues as rebel fighters regularly ambush Russian forces in the region. Throughout 2002 and 2003, the ability of Chechen separatists to battle the Russian forces waned but they claimed responsibility for numerous terrorist acts. In 2005 and 2006, key separatist leaders were killed by Russian forces. The situation stabilized after Ramzan Kadyrov was confirmed as Chechen President, although small-scale fighting continues between rebel forces and local law enforcement. On December 31, 1999 Boris Yeltsin resigned, and Vladimir Putin was named Acting President. In March 2000, he won election in his own right as Russia's second president with 53% of the vote. Putin moved quickly to reassert Moscow's control over the regions, whose governors had confidently ignored edicts from Boris Yeltsin. He sent his own "plenipotentiary representatives" (commonly called ‘polpred' in Russian) to ensure that Moscow's policies were followed in recalcitrant regions and republics. He won enactment of liberal economic reforms that rescued a faltering economy and stopped a spiral of hyperinflation. Putin achieved wide popularity by stabilizing the government, especially in marked contrast to what many Russians saw as the chaos of the latter Yeltsin years. The economy grew both because of rising oil prices and in part because Putin was able to achieve reforms in banking, labor, and private property. During this time, Russia also moved closer to the U.S., especially after the terrorist attacks of September 11, 2001. In 2002, the NATO-Russia Council was established, giving Russia a voice in NATO discussions. GOVERNMENT AND POLITICAL CONDITIONS Duma elections were held most recently on December 2, 2007, and presidential elections on March 2, 2008. The pro-government party, United Russia, won a constitutional majority (more than two-thirds) of the seats in the Duma. Of the three other parties that won seats in the Duma, two of them--Just Russia and the Liberal Democratic Party--are considered to have a pro-Kremlin orientation. The final party represented in the Duma--the Communist Party--is the only opposition party. The Organization for Security and Cooperation in Europe's (OSCE) Office of Democratic Institutions and Human Rights did not observe the Duma elections because of restrictions placed on the observer mission by the Government of Russia and delays in issuing visas. Parliamentarians of the OSCE and the Council of Europe who observed the elections concluded that they were "not fair and failed to meet many OSCE and Council of Europe commitments and standards for democratic elections." They noted that the elections took place in an atmosphere which seriously limited political competition. Frequent abuses of administrative resources, media coverage strongly in favor of United Russia, and the revised election code combined to hinder political pluralism. Dmitriy Medvedev, running as United Russia's candidate, was elected to a four-year term as President on March 2, 2008, with 70.28% of the vote. The Russian constitution does not allow presidents to serve more than two consecutive terms. Next elections for the Duma are scheduled to occur in December 2011 and for President in March 2012. Russia is a federation, but the precise distribution of powers between the central government and the regional and local authorities is still evolving. The Russian Federation consists of 84 administrative units, including two federal cities, Moscow and St. Petersburg. The constitution explicitly defines the federal government's exclusive powers, but it also describes most key regional issues as the joint responsibility of the federal government and the regional administrative units. In 2000, President Putin grouped the regions into seven federal districts, with presidential appointees established in Moscow and six provincial capitals. In March 2004, the Constitution was amended to permit the merger of some regional administrative units. A law enacted in December 2004 eliminated the direct election of the country's regional leaders. Governors are now nominated by the president and subject to confirmation by regional legislatures. Judicial System The Duma passed a Criminal Procedure Code and other judicial reforms during its 2001 session. These reforms help make the Russian judicial system more compatible with its Western counterparts and are seen by most as an accomplishment in human rights. The reforms have reintroduced jury trials in certain criminal cases and created a more adversarial system of criminal trials that protect the rights of defendants more adequately. Another significant advance in the new Code is the transfer from the Procuracy to the courts of the authority to issue search and arrest warrants. There are rising concerns, however, that prosecutors have selectively targeted individuals for political reasons, as in the prosecution of Yukos Oil CEO Mikhail Khodorkovskiy. In spite of the general tendency to increase judicial independence (for example, by recent considerable salary raise to judges), many judges still see their role not as of impartial and independent arbiters, but as of government officials protecting state interests. See below for more information on the commercial court/business law. Human Rights The judiciary is not independent, is often subject to manipulation by political authorities, and is plagued by large case backlogs and trial delays. Lengthy pretrial detention remains a serious problem. Russia has one of the highest prison population rates in the world, at 685 per 100,000. There are credible reports of beating and torture of inmates and detainees by law enforcement and correctional officials, and brutality perpetrated by the prisoners themselves, some of whom are informally granted authority to enforce order within the prisons. Prison conditions fall well below international standards and extreme overcrowding is common. In 2001, President Putin ordered a moratorium on the death penalty. There are reports that the Russian Government might still be violating promises they made upon entering the European Council, especially in terms of prison control and conditions. In Chechnya, there have been credible allegations of violations of international human rights and humanitarian law committed by Russian and pro-Moscow Chechen forces. Chechen rebels also have committed abuses and acts of terrorism. Although the number of kidnappings and disappearances committed by government and rebel forces markedly declined in Chechnya in 2007, similar incidents have been reported in neighboring Ingushetiya and Dagestan. Russian authorities have introduced some improvements, such as requiring the presence of civilian investigators during all large-scale military operations and targeted search and seizure operations. Human rights groups claim that most abuses remain uninvestigated and unpunished and have spread more broadly in the North Caucasus. The Russian constitution provides for freedom of religion, the equality of all religions before the law, and the separation of church and state. More than 70% of Russians identify themselves as Russian Orthodox. While Muslims, Jews, and other religious minorities continue to encounter prejudice and societal discrimination, they have not been inhibited by the government in the free practice of their religion. High-ranking federal officials have condemned anti-Semitic hate crimes, but law enforcement bodies have not always effectively prosecuted those responsible. The Federal Registration Service and some local officials continue to prevent some religious minorities from registering locally or from acquiring property. One legal requirement (namely that religious groups be established at least 15 years before being able to register as a religious organization) continues to prevent the Church of Scientology from registering outside of the city of Moscow. The constitution provides for freedom of speech and of the press; however, in practice government pressure on the media persists, resulting in numerous infringements of these rights. The government uses direct ownership or ownership by large private companies with links to the government to control or influence the major media outlets, especially television, through direct control and through self-censorship by editors and journalists. The government uses its controlling ownership in major national television and radio stations, as well as the majority of influential regional ones, to restrict access to information about issues deemed sensitive, including coverage of opposition political parties and movements. Unsolved murders of journalists, including the murder of respected investigative reporter Anna Politkovskaya in October 2006, have caused significant international concern and increased the reluctance of journalists to cover controversial subjects. The 2006 law on non-governmental organizations (NGOs) created a burdensome registration process for all NGOs with stricter requirements for foreign-funded NGOs and more relaxed requirements for religious organizations. The law and implementing regulations impose onerous paperwork reporting burdens on NGOs, which many medium and small NGOs have been unable to meet as evidenced by the fact that only 36% of local NGOs had met their reporting requirements by October 2007. This law was used to close an NGO for the first time in January 2007 on the basis of extremism charges. Most foreign NGOs have successfully re-registered. The constitution guarantees citizens the right to choose their place of residence and to travel abroad. Some big-city governments, however, have restricted this right through residential registration rules that closely resemble Soviet-era restrictions. These restrictions, though, are widely circumvented, as evidenced by the large number of undocumented foreign workers in these cities. The freedom to travel abroad and emigrate is respected although restrictions may apply to those who have had access to state secrets, or who have court orders against them for default on debts. Since 1994, the U.S. President has found Russia to be in full compliance with the provisions of the Jackson-Vanik Amendment. Principal Government Officials The Russian Federation maintains an embassy at 2650 Wisconsin Ave., NW, Washington, DC 20007 (tel. 202-298-5700) and a consular section at 2641 Tunlaw Road, Washington, DC (tel. 202-939-8907/8913/8918). Russian consulates also are located in Houston, New York, San Francisco, and Seattle. ECONOMY Still, Russia has weathered the crisis well. In the nine years following the financial crisis, GDP growth averaged 7% due to a devalued ruble, implementation of key economic reforms (tax, banking, labor and land codes), tight fiscal policy, and favorable commodities prices. Household consumption and fixed capital investments have both grown by about 10 percent per year since 1999 and have replaced net exports as the main drivers of demand growth. Inflation and exchange rates have stabilized due to a prudent fiscal policy (Russia has run a budget surplus since 2003). The government created a stabilization/rainy day fund ($156 billion at the end of 2007), and has the third-largest foreign exchange reserves in the world (close to $476 billion at the end of 2007) which should shelter it from commodity price shocks. Russia's balance of payments continues to show dynamic growth. The current account balance fell slightly, from $95.3 billion in 2006 to $78.3 billion in 2007, as imports increased rapidly. Large amounts of capital moved into Russia in 2007. The capital account balance was $84.3 billion, compared to $6.1 billion in 2006. In addition, net private capital flows continued to increase in 2007 to $81.2 billion from $40.9 billion in 2006. Foreign direct investment (FDI) flows continued to improve in 2007 to $52.5 billion compared to $32.4 billion in 2006. As of July 1, 2006, the ruble is convertible for both current and capital transactions. Russia prepaid its entire Soviet-era Paris Club debt of $22 billion in late 2006. Russia maintains relatively small amounts of sovereign debt. In 2007, total sovereign foreign debt was $36 billion, or about 3% of GDP, down from $45 billion at the end of 2006. Russia's total public and private foreign debt at the end of 2007 was $460 billion, or 34% of GDP. Russia currently has a sovereign investment-grade rating from Standard and Poor's of BBB+. Although the economy has begun to diversify, the government budget remains dependent on oil and gas revenues; consumption and investment are, however, contributing to an increasing share to GDP growth. While currently sheltered from external price shocks, the government realizes the need to intensify reforms that will promote new investment in aging infrastructure and continued productivity gains. The government believes it can do this by creating state-sponsored investment funds, special economic zones, and by exercising control of strategic enterprises (a law defining strategic sectors was passed by the Duma in March 2008). Although investors are returning to Russia, excessive bureaucracy, corruption, insufficient and insufficiently enforced legislation, selective interpretation of laws (particularly tax laws), unclear limits and conditions on foreign investment, obsolete infrastructure, and stalled economic reforms still remain a problem. In 2005, the government announced reform programs in four priority areas (health, education, housing, and agriculture), but further work is needed on them as well as in financial regulation, civil service reform, and reform of government monopolies, such as railroads, gas, and electricity. Gross Domestic Product Monetary Policy Government Spending/Taxation Population HIV/AIDS Commercial Law Natural Resources Industry Agriculture Investment/Banking Although still small by international standards, the Russian banking sector is growing fast and is becoming a larger source of investment funds. To meet a growing demand for loans, which they were unable to cover with domestic deposits, Russian banks borrowed heavily abroad in 2007, accounting for 57% of the private-sector capital inflows in that year. Ruble lending has increased since the October 1998 financial crisis, and in 2007 loans were 66% of total bank assets, with consumer loans posting the fastest growth at 57% that same year. Fewer Russians prefer to keep their money outside the banking sector, the recent appreciation of the ruble against the dollar has persuaded many Russians to keep their money in rubles or other currencies such as the euro, and retail deposits grew by 35% in 2007. Despite recent growth, the poorly developed banking system, along with contradictory regulations across banking, bond, and equity markets, still makes it difficult for entrepreneurs to raise capital as well as to permit capital transfer from a capital-rich sector such as energy to capital-poor sectors such as agriculture and manufacturing and to diversify risk. Banks still perceive small and medium commercial lending as risky, and some banks are inexperienced with assessing credit risk, though the situation is improving. In 2004, Russia enacted a deposit insurance law to protect deposits up to 100,000 rubles (about $3,700) per depositor. Subsequent amendments to the law increased the Deposit Insurance Agency's coverage for deposits up to 400,000 rubles. Trade Russia's overall trade surplus in 2007 was $132 billion, roughly equal to the $139 billion surplus in 2006. World prices continue to have a major effect on export performance, since commodities--particularly oil, natural gas, metals, and timber--comprise most of Russian exports. Russian GDP growth and the surplus/deficit in the Russian Federation state budget are closely linked to world oil prices. Russia is in the process of negotiating terms of accession to the World Trade Organization (WTO). The U.S. and Russia concluded a bilateral WTO accession agreement in late 2006, and negotiations continued in 2007 on meeting WTO requirements for accession. Russia reports that it has yet to conclude bilateral agreements with Saudi Arabia and Georgia. According to the 2005 U.S. Trade Representative's National Trade Estimate, Russia continues to maintain a number of barriers with respect to imports, including tariffs and tariff-rate quotas; discriminatory and prohibitive charges and fees; and discriminatory licensing, registration, and certification regimes. Discussions continue within the context of Russia's WTO accession to eliminate these measures or modify them to be consistent with internationally accepted trade policy practices. Non-tariff barriers are frequently used to restrict foreign access to the market and are also a significant topic in Russia's WTO negotiations. In addition, large losses to U.S. audiovisual and other companies in Russia owing to poor enforcement of intellectual property rights in Russia are an ongoing irritant in U.S.-Russia trade relations. Russia continues to work to bring its technical regulations, including those related to product and food safety, into conformity with international standards. DEFENSE Despite recent increases in the budget, however, defense spending is still unable to sustain Russia's oversized military. Current troop strength, estimated at 1.1 million, is large in comparison to Russia's GDP and military budget, which continues to make the process of transformation to a professional army difficult. This is the result of the Soviet legacy and military thinking that has changed little since the Cold War. Senior Russian leaders continue to emphasize a reliance on a large strategic nuclear force capable of deterring a massive nuclear attack. Russian military salaries are low. Theoretically, the army provides all necessities, but housing and food shortages continue to plague the armed forces. Problems with both discipline and brutal hazing are common as well. Such conditions continue to encourage draft evasion and efforts to delay military service. Moreover, military officials complain that new recruit cohorts are plagued by increasing incidences of poor education, communicable diseases, and criminality. HIV infection rates in the Russian army are estimated to be between two and five times higher than in the general population, and tuberculosis is a persistent problem. The Russian Government has stated a desire to convert to a professional army, but implementation has been progressing slowly. In an effort to make military service more attractive, the tour of duty for conscripts was reduced to one year (from 18 months) beginning in 2008, and the military is offering increased pay and benefits to raise the number of professional servicemen. Current plans envision a transition to a mixed force, in which professional soldiers fill approximately 70%, including in select units, and conscription fills 30%. There is also an effort to develop a non-commissioned officer (NCO) corps, but the military faces difficulties recruiting NCOs, and has done little to develop the mechanisms and capability to sustain such a force. FOREIGN RELATIONS Over the past several years Russia has increased its international profile, played an increasing role in regional issues, and been more assertive in dealing with its neighbors. The rise in energy prices has given it leverage over countries which are dependent on Russian sources. Russia continues to support separatist regimes in Georgia and Moldova. U.S.-RUSSIA RELATIONS U.S. Assistance to Russia Principal U.S. Embassy Officials See also the Key Officers List The U.S. Embassy is located in Russia at Bolshoy Devyatinskiy Pereulok, Number 8, 121099 Moscow (tel. [7](095) 728-5000; fax: [7](095) 728-5090). Consulates General In Moscow, the U.S. Commercial Office is located at Bolshaya Molchanovka 23/38 (tel. [7](095) 737-5030; fax: [7](095) 737-5033). |
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