Russia

K

Energy

Russia is the only large developed country in the world with adequate energy supplies. It is not only self-sufficient in the production of mineral fuels, but also able to export considerable quantities of them. Coal accounted for most of Russia’s energy production until 1955, after which a gradual shift to oil and natural gas took place. By the 1970s oil and natural gas had become the country’s primary energy sources, and the former USSR became the world’s largest producer of fossil fuels. In 1990, Russia produced most of the USSR’s energy output—90 per cent of all oil, 79 per cent of all natural gas, and 56 per cent of all coal. Energy output has declined significantly following the dissolution of the USSR, although natural-gas production increased slightly between 1990 and 1992.

Russia has more than 600 thermal plants accounting for about 65 per cent of total generating capacity (572 billion kWh, 2003).

Other important sources of energy in Russia are hydroelectric and nuclear power. Russia—especially Siberia—has vast water-power resources, and water-power accounted for about 13 per cent of the total yearly electrical production in the former USSR; it now accounts for 19 per cent of the Russian Federation’s electricity output. Important hydroelectric stations are located on the major rivers of European Russia, notably on the Volga and Don rivers. The largest hydroelectric installations, however, are on the great rivers of Siberia, particularly on the Yenisey and Angara. Russia’s 29 nuclear power plants account for about 16 per cent of total energy production in Russia, with most of the country’s nuclear-energy capacity located in European Russia, especially the north-west. The country’s two largest cities, Moscow and St Petersburg, depend on nuclear energy for about one fifth to one third of their electrical needs. The Chernobyl’ accident of 1986 prompted Soviet officials to abandon plans to greatly expand nuclear capacity, but in 1992 the Russian government announced plans to expand nuclear energy production in the country.

L

Transport

The Russian transport network is partly state-owned and nationally integrated. The overall transport network is much less dense, however, than those of most other developed nations. The Soviet government considered transport expenditures an unproductive but necessary part of the economy. Emphasis was therefore placed on the types of facilities that move the greatest amount of goods and people at the least cost, often sacrificing convenience to the consumer in order to maximize efficiency. The transport network is dominated by railways; motor traffic plays a minor role. A great network of oil and gas pipelines facilitated the rapid expansion of the oil and natural-gas industries, and maritime shipping has facilitated the growth of foreign trade.

Passenger transport is also dominated by railways, although in recent years buses have taken over much commuter traffic, and airlines, now privatized, account for a great deal of long-distance travel. The density of the railway network generally corresponds to the regional population density. The network is relatively dense in most of European Russia south of St Petersburg, but is sparse in Siberia and the far eastern region. Russian railway lines carry the heaviest freight traffic in the world. The densest traffic on a single line occurs on the western Siberian section of the Trans-Siberian Railway, where trains occasionally run as frequently as once every three minutes. To relieve some of the traffic, parallel lines were built in western Siberia and northern Kazakhstan. A new line, the Baikal-Amur Mainline (BAM), was built through Siberia and the far eastern region to the north of the present Trans-Siberian Railway.

The former Soviet government neglected motor transport because of the high costs of constructing and maintaining roads as well as the higher overall shipping costs. About half of the roads are surfaced with concrete or asphalt; the rest are gravel. Few of the country’s roads are more than two lanes wide. Like the railway network, the road network is most dense in the European part of the country. There were about 749,700 km (465,841 mi) of paved roads in 1995, principally in European Russia; the road network in Siberia and the Far East is sparse. In 1994 the World Bank granted Russia a loan of US$300 million to finance the construction of 10,000 km (6,213 mi) of roads to the west of the Urals. There are about 10.5 million cars in the federation, equal to a ratio of 14 people per vehicle.

In the late 1980s the merchant fleet of the former USSR ranked among the largest in the world, with more than 6,700 vessels and an aggregate displacement of 29.2 million deadweight tonnes. In 2007 it was only 3,481 vessels, totalling about 8 million deadweight tonnes. The principal civilian seaports in Russia include Novorossiysk on the Black Sea; St Petersburg and Kaliningrad on the Baltic Sea; Nakhodka, Vostochnyy, Vladivostok, and Vanino on the Pacific coast; and Murmansk and Arkhangelsk (Archangel) on the Arctic coast.

The Volga is the most important inland waterway in Russia. It carries more than half the river traffic of the country. Navigation on this system was enhanced by the construction of seven major dams as well as the Volga-Don Canal in the south and the Volga-Baltic Waterway in the north; the Volga-Don Canal provides a sea outlet through the Black Sea, the Volga-Baltic Waterway, through the Baltic Sea. Major ports along the Volga are Rybinsk, Nizhniy Novgorod, Samara, Volgograd, and Astrakhan. Another major port, Rostov, is on the Sea of Azov near the mouth of the Don River. The ports of Moscow are provided with connections to the Volga system through the Moscow Canal that runs north from Moscow to the Volga. In Siberia and the far eastern region, rivers are the only transport system in areas remote from the railway. Most Siberian rivers, including the Lena, Yenisey, and Ob’, flow north to the Arctic Ocean, thus limiting their importance in a region where eastern-western links are vital. The eastward-flowing Amur River is the chief navigable stream of the far eastern region.

M

Currency and Banking

The basic monetary unit of Russia is the rouble, consisting of 100 kopeks. For decades the former USSR did not allow the rouble to circulate in world markets, instead setting an arbitrary value relative to foreign currencies; the official conversion rate in 1991 was 0.57 rouble per US$1. Beginning in late 1991 the Russian government took decisive steps to liberalize rouble convertibility, after which the value of the rouble plummeted: in 1992 the rouble’s value fell to less than one hundredth of a US$1. Following currency reforms announced in August 1997, and implemented on January 1, 1998, the Russian Central Bank changed the denomination of the rouble. The existing rouble, which had become unwieldy with exchange rates of approximately 6,000 roubles to US$1, was divided by 1,000, and once more divided into 100 kopeks (24.54 roubles equalled US$1; early 2008).

The structure of banking in Russia has changed significantly since the mid-1980s. In the last years of the USSR, the subsidiary banks of Gosbank, the federal bank of the USSR, were converted into commercial banks and relicensed under the new State Bank of Russia (central bank). The five large Soviet sectoral banks (a general savings bank, the foreign trade bank, and banks for the social sector, agriculture, and construction and industry) were either converted to commercial banks or closed. The remaining sectoral banks are no longer assigned specialized functions or clientele by the government, although they have retained much of their former clientele through inertia. The converted sectoral banks are much larger than recently established commercial banks. Assets of the largest former sectoral bank exceeded 110 billion roubles in mid-1991, versus 1.5 billion roubles on average for the leading new commercial banks. The two types of banks also differ in the clientele they serve; former sectoral banks primarily serve state enterprises, while the new commercial banks generally serve private businesses. Foreign bank branches have been operating since November 1992. In November 1993 the Russian government issued regulations restricting the activities of foreign-owned banks.

Led by its chair, who opposed radical reform, the State Bank of Russia became politically involved in the early 1990s in the struggle between the government and the Supreme Soviet over economic reform. The bank, which was nominally subordinate to the Supreme Soviet, issued credits far in excess of government requests (up to 50 per cent over government guidelines according to some estimates), which hindered reform efforts by supporting inefficient enterprises and fuelling inflation. Under the 1993 constitution, the State Bank of Russia is independent of direct government or legislative control, although its chair will be appointed by the State Duma acting under the president’s recommendations.

N

Commerce and Trade

From the end of World War II in 1945 until the mid-1980s, political considerations dictated that the former USSR’s principal trading partners be socialist countries, notably those of Eastern Europe. Even before the political upheavals at the close of the 1980s, however, both the USSR and its socialist allies had found it necessary to import more advanced technology from the West. By 1987 members of the Council for Mutual Economic Assistance (COMECON or CMEA) accounted for 60 per cent of Soviet exports and 64 per cent of imports, while developed countries supplied 23 per cent of Soviet imports and purchased 21 per cent of exports. Among the socialist countries, the former East Germany was the USSR’s leading trade partner, followed by the former Czechoslovakia, Poland, Hungary, and Bulgaria. The USSR’s main trading partners outside the socialist bloc were the former West Germany, Italy, and Japan.

In recent years the pattern of Russia’s external trade has changed considerably. Developed Western countries now account for more than half of Russia’s trade activities outside of the former Soviet republics (60 per cent in 1994). Germany is Russia’s leading trading partner (excluding trade with the former Soviet republics), with 17 per cent of total trade in 1994. In contrast, former COMECON countries comprised only 18 per cent of total exports from Russia (excluding trade with the former Soviet republics), and less than 15 per cent of total imports to Russia. Developing countries accounted for roughly 11 per cent of Russia’s total trade outside the former USSR.

Another notable change in Russia’s external trade has been a sharp decline in trade volumes. In 1992 exports to areas outside of the former USSR were less than two thirds of the 1988 export level, while imports were less than half of the 1988 level. Foreign trade fell even further in 1993, due in part to the introduction of new import tariffs and additional controls on strategically sensitive exports. Attempts to determine Russia’s true trade balance, however, are complicated by the existence of barter trade and the illegal transfer of Russian assets abroad. Barter trade constituted an estimated 45 per cent of total exports and 30 per cent of total imports in 1994. Goods are bartered primarily with the former Soviet republics, most of whom still receive Russian fuel at subsidized prices. As to the illegal transfer of Russian assets, some estimates place the total amount of illegal capital outflow to date at US$30 billion or more.

O

Labour

The total workforce in Russia numbered about 73,528,949 in 2006. Although many people have continued to work in state-owned enterprises, the number has decreased steadily as a result of privatizations and closures; in 1993 about 41 per cent of the workforce was employed outside the state sector and the number has increased since. Industry, including mining and construction, is the country’s leading employment sector, with about 30 per cent of the total workforce. Agriculture, forestry, and fishing account for about 10 per cent of all employment, and the trade and transport sectors about 8 per cent each. About 25 per cent of all workers are employed in community, social, and personal services. About 8 per cent of the population was unemployed at the end of 1996 according to the International Labour Organization (ILO); the official unemployment figure was less than half this. However, the true unemployment rate is much higher than the ILO total; another 5 per cent was on short-time work or “administrative” leave.

Outside the educational and health sectors, where the workforce is overwhelmingly female, women have borne the brunt of employment uncertainties in Russia. They tend to be the first to be laid off by companies anxious to avoid payment of relatively generous child allowance payments and maternity leave. It is estimated, in fact, that almost 70 per cent of Russia’s unemployed are women; the figure also includes an increasing number of young people.

Even those in work are not necessarily well off. State wages in particular are very low, normally between 65 and 80 per cent of the average Russian wage, depending on the sector. As a result, many people are forced to take second jobs; in 1995 more than 8 million people admitted to having a second job. Overall, within Russia, income differentials have widened sharply. According to official statistics more than one third of the population has an income below the official minimum wage, which is itself only about 10 per cent of the average wage.

The organization of labour has changed little since the Soviet period. Trade unions are dominated by organizations that succeeded the official trade unions of the USSR with their leadership, property, and apparatus intact. Their parent organization is the Federation of Independent Trade Unions of Russia (the Russian acronym is FNPR), the successor to the Soviet-era All Union Central Council of Trade Unions, which claims 50 million members, or nearly 70 per cent of the total workforce. However, a number of independent trade unions have formed outside the FNPR, including those representing clock, railway, metallurgical, and air-traffic-control workers. Altogether, such unions have a total membership of about 3 million. However, they have played a significant political role, notably through the Independent Trade Union of Mineworkers, which played an important role in the collapse of the USSR by coordinating efforts to counter the influence of the conservative FNPR. More recent attempts by the government to reduce the FNPR’s powers prompted most member unions to express support for conservative parties.

The FNPR unions initially retained a number of powers from the Soviet period, including control over social-security funds, the ability to automatically deduct union fees from workers’ paypackets, and the right to veto proposals by management to fire workers. In 1993 the administration of the social security system was transferred outside the FNPR.