April 30, 2009

For the most current version of this Note, see Background Notes A-Z.

PROFILE

Geography
Area: 17 million sq. km. (6.5 million sq. mi.); about 1.8 times the size of the United States.
Cities: Capital--Moscow (pop. 10.4 million). Other cities--St. Petersburg (4.6 million), Novosibirsk (1.4 million), Nizhniy Novgorod (1.3 million).
Terrain: Broad plain with low hills west of Urals; vast coniferous forest and tundra in Siberia; uplands and mountains (Caucasus range) along southern borders.
Climate: Northern continental.

People
Nationality: Noun and adjective--Russian(s).
Population (January 2009): 141.9 million.
Annual growth rate (2009 est.): -0.467% (population declining).
Ethnic groups: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, other 14.4%.
Religion: Russian Orthodox, Islam, Judaism, Roman Catholicism, Protestant, Buddhist, other.
Language: Russian (official); more than 140 other languages and dialects.
Education (total pop.): Literacy--99.4%.
Health: Life expectancy (2007 est.)--67.5 average; 61.4 yrs. men, 73.9 yrs. women.
Work force (90.152 million, 2007 est.): Production and economic services--84%; government--16%.

Government
Type: Federation.
Independence: August 24, 1991.
Constitution: December 12, 1993.
Branches: Executive--president, prime minister (chairman of the government). Legislative--Federal Assembly (Federation Council, State Duma). Judicial--Constitutional Court, Supreme Court, Supreme Court of Arbitration, Office of Procurator General.
Political parties: After a shakeup in late 2008 dissolved and combined several parties, seven registered parties remain: United Russia, the Communist Party (KPRF), the Liberal Democratic Party (LDPR), Just Russia, Yabloko, Patriots of Russia, and the new Right Cause party. Yabloko, which favors liberal reforms, and Patriots of Russia failed to clear the 7% threshold in 2007 to enter the Duma.
Subdivisions: 21 autonomous republics, 47 oblasts, 2 federal cities (Moscow and St. Petersburg) and 14 autonomous territories and regions.
Suffrage: Universal at 18 years.

Economy
GDP (2008): $1.67 trillion.
Growth rate (2008): 5.6%.
Natural resources: Petroleum, natural gas, timber, furs, precious and nonferrous metals.
Agriculture: Products--Grain, sugar beets, sunflower seeds, meat, dairy products.
Industry: Types--Complete range of manufactures: automobiles, trucks, trains, agricultural equipment, advanced aircraft, aerospace, machine and equipment products; mining and extractive industry; medical and scientific instruments; construction equipment.
Trade (2008): Exports--$368 billion: petroleum and petroleum products, natural gas, woods and wood products, metals, chemicals. Major markets--EU, CIS, China, Japan. Imports--$256 billion: machinery and equipment, chemicals, consumer goods, medicines, meat, sugar, semi-finished metal products. Major partners--EU, NIS, Japan, China, U.S. U.S. exports--$9.3 billion. Principal U.S. exports (2008)--oil/gas equipment, autos/parts, meat, aircraft, electrical machinery, medical equipment, plastics, cosmetics, and chemicals. U.S. imports--$26.7 billion. Principal U.S. imports (2008)--oil (64%), chemicals, aluminum, iron/steel, precious stones, nickel, fish and crustaceans, copper, base metals, and wood.

PEOPLE
Russia’s 141.9 million citizens descend from more than 100 ethnic groups. Russian is the official language of Russia and is one of the six official languages of the United Nations. Russian is also the language of such giants of world literature as Pushkin, Tolstoy, Dostoevsky, Chekhov, Pasternak and Solzhenitsyn.

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 61.4 for men and 73.9 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 dropped to its lowest rate of 5.4% in May 2008, and labor shortages appeared in some high-skilled job markets. The economic crisis which began in late 2008, however, quickly reversed this trend and the ranks of unemployed swelled to an International Labor Organization (ILO) estimated 9.5% in the first quarter of 2009; 1.8 million Russian lost their jobs in the first quarter of 2009 alone. 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 constitutes approximately one-fourth of the population. The economic crisis, however, caused real disposable incomes to drop by 6.7% year-on-year in January 2009, and wages fell by 9.1% year-on-year in January 2009. Unpaid wages as a share of total enterprise turnover tripled to 0.12% in December 2008 compared to August 2008. The stock of wage arrears reached 8.7 billion rubles in April 2009, but still was not at levels seen in the 1990s. A World Bank study notes that poverty fell by 8.5% or 12.5 million people between 2002 and 2006, based on a poverty line of 1,056 rubles per capita per day in 2003. However, data collected between January and September 2008 indicates 13.5% of the population, approximately 19 million people, continue to live below the subsistence minimum of 4,630 rubles per month. About 25% of the population is highly vulnerable to poverty, as vulnerability to low levels of income remains high and a large number of people are concentrated around the poverty line, according to the World Bank.

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
Although human experience on the territory of present-day Russia dates back to Paleolithic times, the first lineal predecessor of the modern Russian state was founded in 862. The political entity known as Kievan Rus was established in Kiev in 962 and lasted until the 12th century. In the 10th century, Christianity became the state religion under Vladimir, who adopted Greek Orthodox rites. Consequently, Byzantine culture predominated, as is evident in much of Russia's architectural, musical, and artistic heritage. Over the next centuries, various invaders assaulted the Kievan state and, finally, Mongols under Batu Khan destroyed the main population centers except for Novgorod and Pskov in the 13th century and prevailed over the region until 1480. Some historians believe that the Mongol period had a lasting impact on Russian political culture.

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.
The ruinous effects of World War I, combined with internal pressures, sparked the March 1917 uprising that led Tsar Nicholas II to abdicate the throne. A provisional government came to power, headed by Aleksandr Kerenskiy. On November 7, 1917, the Bolshevik Party, led by Vladimir Lenin, seized control and established the Russian Soviet Federated Socialist Republic. Civil war broke out in 1918 between Lenin's "Red" army and various "White" forces and lasted until 1920, when, despite foreign interventions and a war with Poland, the Bolsheviks triumphed. After the Red army conquered Ukraine, Belarus, Azerbaijan, Georgia, and Armenia, a new nation, the Union of Soviet Socialist Republics (U.S.S.R.), was formed in 1922.

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
After the December 1991 dissolution of the Soviet Union, the Russian Federation became its successor state, inheriting its permanent seat on the UN Security Council, as well as the bulk of its foreign assets and debt. By the fall of 1993, politics in Russia reached a stalemate between President Yeltsin and the parliament. The parliament had succeeded in blocking, overturning, or ignoring the President's initiatives on drafting a new constitution, conducting new elections, and making further progress on democratic and economic reforms.

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. In April 2009, the Russian Government announced the end of counter-terrorism operations in Chechnya; however, 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. However, U.S.-Russian relations cooled over the ensuing years given concerns over domestic developments in Russia, including political freedoms and human rights, as well as over foreign policy differences. Dmitriy Medvedev was elected President In March 2008 and inaugurated in May. Relations during the first few months of his presidency were affected by the August 2008 Russia-Georgia war and subsequent decision by Russia to recognize the territories of South Ossetia and Abkhazia. As a result, U.S.-Russian contact decreased significantly and the NATO-Russia Council was suspended temporarily. With the change of U.S. administration in January 2009, U.S.-Russian relations have improved as both sides seek to change the tone of the relationship and to cooperate in areas of mutual interest.

GOVERNMENT AND POLITICAL CONDITIONS
In the political system established by the 1993 constitution, the president wields considerable executive power. There is no vice president, and the legislative branch is far weaker than the executive. The bicameral legislature consists of the lower house (State Duma) and the upper house (the Federation Council). The president nominates the highest state officials, including the prime minister, who must be approved by the Duma. The president can pass decrees without consent from the Duma. He also is head of the armed forces and of the Security Council.

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. A December 2008 law extended the terms of Duma deputies from four to five years and presidential terms from four to six years. The new terms take effect with the next elections, which 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 Russian judicial system consists of the Constitutional Court, courts of general jurisdiction, military courts, and arbitrage courts (which hear commercial disputes). The Constitutional Court of the Russian Federation is a court of limited subject matter jurisdiction. The 1993 constitution empowers the Constitutional Court to arbitrate disputes between the executive and legislative branches and between Moscow and the regional and local governments. The court also is authorized to rule on violations of constitutional rights, to examine appeals from various bodies, and to participate in impeachment proceedings against the president. The July 1994 Law on the Constitutional Court prohibits the court from examining cases on its own initiative and limits the scope of issues the court can hear. The system of general jurisdiction courts includes the Supreme Court of the Russian Federation, regional level courts, district level courts and justices of the peace.

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
Russia's human rights record remains uneven and poor in some areas. Despite significant improvements in conditions following the end of the Soviet Union, problem areas remain. In particular, the Russian Government's policy in the North Caucasus has been a cause for international concern. Although the government has recognized the legitimacy of international human rights standards, the institutionalization of procedures to safeguard these rights has lagged. There are, however, some indications that the law is becoming an increasingly important tool for those seeking to protect 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 632 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 the North Caucasus, there have been credible allegations of violations of international human rights and humanitarian law committed by Russian and pro-Moscow Chechen forces. 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 and 2008, 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. Most foreign NGOs have successfully re-registered. Authorities also have used a separate law against extremism as a pretext for closing opposition NGOs and media entities, doing so for the first time in January 2007.

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
President--Dmitriy Medvedev
Prime Minister--Vladimir Putin

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
The Russian economy underwent tremendous stress in the 1990s as it moved from a centrally planned economy to a free market system. Difficulties in implementing fiscal reforms aimed at raising government revenues and a dependence on short-term borrowing to finance budget deficits led to a serious financial crisis in 1998. Lower prices for Russia's major export earners (oil and minerals) and a loss of investor confidence due to the Asian financial crisis exacerbated financial problems. The result was a rapid and steep decline (60%) in the value of the ruble, flight of foreign investment, delayed payments on sovereign and private debts, a breakdown of commercial transactions through the banking system, and the threat of runaway inflation.

The Russian economy bounced back quickly from the 1998 crisis and enjoyed over nine years of sustained growth averaging about 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 both grew by about 10% per year during this period and replaced net exports as the main drivers of demand. Inflation and exchange rates stabilized due to a prudent fiscal policy (Russia ran a budget surplus from 2001-2008). Foreign exchange reserves grew to close to $600 billion by mid-2008, the third-largest in the world, of which more than $200 billion were classified as stabilization funds designed to shelter the budget from commodity price shocks. The balance of payments experienced twin surpluses until mid-2008 in the current and capital accounts, which accounted for the phenomenal growth of reserves. As of July 1, 2006, the ruble became convertible for both current and capital transactions. Russia prepaid its entire Soviet-era Paris Club debt of $22 billion in late 2006, but by October 2008 foreign external debt totaled $540 billion, of which $500 billion was short-term debt owed by private sector banks and corporations.

The global economic crisis hit Russia hard, starting with heavy capital flight in September 2008, which caused a crisis in its stock market. Several high-profile business disputes earlier in 2008 such as TNK-BP and Mechel, as well as the Georgian war helped drive capital out of Russia. By mid-September, Russia’s stock market had collapsed, as businesses sold shares to raise collateral for margin calls required by international lending institutions. As the global financial crisis gathered steam in the fall of 2008, the accompanying steep fall in global demand, commodity prices, and tightening of credit served to almost grind Russia’s economic growth to a halt in the fourth quarter of 2008, to 1.1% down from 9.5% during the same period in 2007. The Central Bank of Russia responded by pumping liquidity into Russian banks, which helped avert a banking crisis. At the same time, the government attempted a managed devaluation, which successfully avoided a run on the ruble and bank deposits but at the cost of a steep decline in foreign exchange reserves to $387 billion by mid-February 2009. This in turn prompted S&P and Fitch rating agencies to downgrade Russia’s sovereign debt to the lowest investment-grade. With the exchange rate in line with global oil prices by end-January 2009, according to preliminary data from the Central Bank, the balance of payments stabilized, with a current account surplus of $11.1 billion in the first quarter of 2009. Capital outflows slowed to $38.8 billion from $130.5 billion in the fourth quarter of 2008.

Gross Domestic Product
Tighter credit, collapsing global demand, global uncertainty, and rising unemployment have hurt investment and consumption in Russia (which have been the main drivers of GDP growth in recent years). GDP growth and industrial production for 2008 were 5.6% and 2.1%, respectively, compared to 8.1% and 6.3% in 2007, according to the World Bank. However, GDP growth in the first seven months of 2008 was 7.7% on average before collapsing in the fourth quarter. GDP in the first quarter of 2009 contracted by over 7% and growth estimates for the year range from the Russian Government’s -2.2 % to the IMF’s -6%. GDP growth is currently derived from non-tradable sectors, but investment remains concentrated in tradables (oil and gas). Over the course of 2008, tradables, including manufacturing, showed lower growth rates than non-tradables, such as retail and construction. Manufacturing was hit severely in the last two months of 2008, contracting by 10.3% in November and 24.1% in January 2009, compared to the prior year, due to tight credit and free fall of demand. By January 2009, construction experienced an 18% year-on-year decline. Real disposable incomes, which grew by 10.4% in 2007, dropped 6.7% in January 2009, which led to negative 2.4% retail trade growth in February.

Monetary Policy
For most of the past decade, Russia experienced persistent inflation, gradually declining from 85% in late 1998 to 9% by end-2006. However, a combination of surging international food and energy prices and looser monetary and fiscal policy pushed the Consumer Price Index (CPI) to 11.9% by the end of 2007, and up to 15% in early 2008. The Central Bank of Russia (CBR) monetary policy tended to be limited to managing the ruble’s exchange rate against a bi-currency basket of dollars and euros. The CBR intervened to keep the ruble stable during times of volatile international commodity prices and to manage inflation. In years of record high oil prices, the Central Bank typically purchased dollars to prevent real appreciation of the ruble. These interventions initially had limited effect on inflation, as they were mostly sterilized by budget surpluses and demand for rubles grew in a robust era of economic growth. By 2007, fiscal policy and the balance of payments were the actual drivers of monetary policy, particularly as large capital inflows due to increased borrowing by Russian banks and corporations caused the money supply to swell and added to inflationary pressures. Inflationary pressures eased in late 2008 as energy and commodity prices collapsed and international credit flows virtually stopped, causing money supply growth to halt. Estimates for inflation in 2009 according to the World Bank are 11%-13%, with rising import prices and loose fiscal policy expected to contribute to inflationary pressures, while lower demand, a continuing credit crunch, and large capital outflows will likely moderate it.

Government Spending/Taxation
The Russian federal budget ran growing surpluses from 2001-2007, as the government taxed and saved much of the rapidly increasing oil revenues. The government overhauled its tax system for both corporations and individuals in 2000-2001, introducing a 13% flat tax for individuals and a unified tax for corporations, which improved overall collection. Responding to demands from the oil sector, the government reduced the tax burden on oil production and exports, but only marginally. Tax enforcement of disputes continues to be uneven and unpredictable. In 2007 the federal budget surplus was 5.5% of GDP, and in 2008 the government ended the year with a surplus of 4.1% of GDP. However, the 2009 budget was revised with an oil price assumption of $41 per barrel Urals, and the government expects a 7.5% deficit, which will be financed from the Reserve Fund, the larger of the government’s two stabilization funds. The government’s anti-crisis package in 2008 and 2009 are worth about 6.7% of GDP, according to World Bank estimates. Measures focus on supporting the financial sector and enterprises, through liquidity injections to banks and tax cuts/fiscal support to enterprises, entities that were hit first by the crisis, with modest support for households, small and medium enterprises (SMEs), and increased unemployment benefits. More expenditures will be likely if the crisis deepens or is prolonged.

Population
Russia's population was 141.91 million as of January 2009, a very slight decrease from the previous year according to the government statistics service and the Ministry of Public Health. The birth rate in 2008 was the highest recorded in the last 15 years. The improvements may in part be attributed to the implementation of a National Priority Health Project and financial incentives to mothers having two or more children. Life expectancy remains low compared to developed countries, but rose to 61.4 years for men and 73.9 for women in 2007. Cardiovascular diseases, cancer, traffic accidents, and violence continue to be major causes of death among working age men. Many premature deaths are attributed to excessive alcohol consumption and smoking. A truly healthy Russia will require serious improvements in the health sector and some major changes in current cultural norms. To combat the looming demographic crisis, in October 2007 then-President Putin approved the concept of demographic policy for the years 2008-2025. The program aims to increase life expectancy, reduce mortality, increase the birth rate, improve the population's health, and develop a sound migration policy. The government instituted the National Priority Health Project and "mother's capital" in order to slow the population decline. These programs had short-term success; Russia's population declined by 0.25% in 2008, compared to 0.4% in 2007. It is unknown if such programs offer a long-term solution. In April 2008, the government approved joining the World Health Organization's Framework Convention on Tobacco Control, which is expected eventually to reduce extremely high smoking rates, and the government put significant amounts of money into prevention of smoking and alcohol abuse in the 2009-2011 budget. The economic crisis, however, raises doubts about the future of such spending.

HIV/AIDS
As of the end of 2008, there were 461,754 HIV cases officially registered in Russia, though experts believe the actual number may be as many as 1 million HIV cases. According to the chief medical officer of Russia, 50,670 new HIV cases were registered in 2008, an increase of 18.9% compared to 2007. Prevalence of HIV cases was 300 per 100,000 people in 2008, higher than the 2007 indicator of 270.1 per 100,000. The chief form of transmission continued to be intravenous drug use, which accounted for 65% of new HIV cases in 2008. More than 44% of new HIV cases are identified in females, and transmission through heterosexual sex has grown rapidly. The Government of Russia implements HIV treatment and prevention programs through its National Priority Health Project, Federal Targeted Program, and Global Fund Grants. The government currently spends over $250 million per year on HIV/AIDS treatment programs and has allocated over $42 million for the period of 2007-2010 to support HIV/AIDS vaccine research. Approximately 52,000 patients are receiving antiretroviral therapy, with the government paying for 41,000 patients and 11,000 through the Global Fund grants. At the September 2003 Camp David Summit, and again at the Bratislava meeting in February 2005, then-Presidents Bush and Putin pledged to deepen ongoing cooperation between the two countries to fight HIV/AIDS.

Commercial Law
Russia has a body of conflicting, overlapping and rapidly changing laws, decrees and regulations, which has resulted in an ad hoc and unpredictable approach to doing business. In this environment, negotiations and contracts from commercial transactions are complex and protracted. Uneven implementation of laws creates further complications. Regional and local courts are often subject to political pressure, and corruption is widespread. However, more and more small and medium businesses in recent years have reported fewer difficulties in this regard, especially in the Moscow region. In addition, Russian businesses are increasingly turning to the courts to resolve disputes. Russia's World Trade Organization (WTO) accession process is also helping to bring the country's legal and regulatory regime in line with internationally accepted practices.

Natural Resources
The mineral-packed Ural Mountains and the vast oil, gas, coal, and timber reserves of Siberia and the Russian Far East make Russia rich in natural resources. However, most such resources are located in remote and climatically unfavorable areas that are difficult to develop and far from Russian ports. Nevertheless, Russia is a leading producer and exporter of minerals, gold, and all major fuels. Natural resources, especially energy, dominate Russian exports. Ninety percent of Russian exports to the United States are minerals or other raw materials.

Industry
Russia is one of the most industrialized of the former Soviet republics. However, years of very low investment have left much of Russian industry antiquated and highly inefficient. Besides its resource-based industries, it has developed large manufacturing capacities, notably in metals, food products, and transport equipment. Russia is now the world's third-largest exporter of steel and primary aluminum. Russia inherited most of the defense industrial base of the Soviet Union, so armaments remain an important export category for Russia. Efforts have been made with varying success over the past few years to convert defense industries to civilian use, and the Russian Government is engaged in an ongoing process to privatize many of the state-owned enterprises.

Agriculture
Russia has relatively little area for agriculture, but given its massive expanses, the country still accounts for about 9% of the world's arable land. Grain production for export is concentrated in the south of European Russia, with additional grain for domestic consumption grown throughout the rest of non-Arctic Russia west of the Urals as well as western Siberia. Livestock production was in decline from 1990 to 2006, when new government support policies were instituted to stimulate cattle and hog raising. Poultry production has rebounded and is rising at 17% per year. Small plots averaging one acre in size, urban and suburban gardens, and gardening cooperatives produce over half of Russia's food output. Former state and collective farms have been largely privatized, but management quality is uneven and profitability is highly dependent on proximity to major urban markets. Foreigners are not allowed to own farmland, although long-term leases are permitted.

Investment/Banking
Russia attracted $58.7 billion in foreign direct investment (FDI) in 2008 (4.1% of GDP), up from $47.1 billion in FDI in 2007. Although much of the FDI in recent years was Russian capital “returning home,” from havens like Cyprus and Gibraltar, these flows have now reversed in the wake of the economic crisis. Moreover, although the annual flow of FDI into Russia was in line with those of China, India, and Brazil, Russia's per capita cumulative FDI lagged far behind such countries as Hungary, Poland, and the Czech Republic. Investment in manufacturing sectors accounted for 22% of the total. Real estate, extraction of raw materials, and trade were also high FDI growth sectors, accounting for 18%, 17%, and 15% of the new FDI, respectively. With the weakening global investment climate, Russian political risk (challenging business climate, lack of transparency, and weak rule of law/corruption) is now a significant consideration for investors’ allocation of scarce capital, even though the country’s markets remain largely untapped.

Although still small by international standards, the Russian banking sector before the crisis was growing fast and 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 2007-2008, accounting for 57% of the private-sector capital inflows in 2007. 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. In 2004, Russia enacted a deposit insurance law to protect deposits up to 100,000 rubles (about $3,700) per depositor. Amendments to the law in the fall of 2008 increased the Deposit Insurance Agency's 100%-coverage for deposits up to 700,000 rubles. The vast majority of Russians keep their money in the banking sector. The combination of liberalized capital controls and ruble appreciation against the dollar in 2005-2008 persuaded many Russians to keep their money in ruble- or other currency-denominated bank deposits. In 2007, total retail deposits grew by 35%, with foreign currency deposits accounting for 13% of the total. In 2008, despite the onset of the crisis, deposits rose more than 14%, with foreign currency deposits exceeding 26% of the total.

Despite the banking sector’s recent growth, financial intermediation in the overall economy remains underdeveloped. Contradictory regulations across the banking and securities markets have hindered efforts to transfer resources from capital-rich sectors, such as energy, to capital-poor sectors, such as agriculture and manufacturing. The sector is dominated by large state banks, and concentrated geographically in Moscow and the Moscow region. Thus financial service providers face little competition for resources and charge relatively high interest rates for favored, large corporate borrowers.

This state of affairs makes it difficult for entrepreneurs to raise capital, and banks generally perceive small and medium commercial lending as risky. Most of the country’s financial institutions are inexperienced with assessing credit risk, though the situation is improving. The low level of trust, both between the general public and banks as well as among banks, makes the system highly susceptible to crises. As of early 2009, the sector had not emerged from its current crisis and the outcome was uncertain. Although the banking sector was not exposed to excessive leverage and structured products like in the West, a potentially serious problem of non-performing loans could cause future bank failures, especially those banks with concentrated lending to one adversely affected sector/client. Banks had repaid much of their short-term foreign debt obligations as of end-March 2009.

Trade
The U.S. exported $9.3 billion in goods to Russia in 2008, a 25% increase from the previous year. Corresponding U.S. imports from Russia were $26.7 billion, up a significant 38% (in 2007 imports were down by 2%). Russia is currently the 28th-largest export market for U.S. goods. Russian exports to the U.S. were fuel oil, inorganic chemicals, aluminum, and precious stones. U.S. exports to Russia were machinery, vehicles, meat (mostly poultry), aircraft, electrical equipment, and high-tech products.

Russia's overall trade surplus in 2008 was approximately $180 billion, a significant rise from a $129 billion surplus in 2007. However, the overvalued exchange rate and collapse in global demand in the last quarter of 2008 quickly turned the trade surplus into deficit. Given a readjustment of the exchange rate, the outlook for 2009 is better with a projected surplus of $80 billion, given slower growth in exports and severe contraction of imports. World prices continue to have a major effect on export performance, since commodities--particularly oil, natural gas, metals, and timber--comprise nearly 90% 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 continue on meeting WTO requirements for accession. Russia reports that it has yet to conclude a bilateral agreement with Georgia.

According to the 2008 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
Russia's efforts to transform its Soviet-legacy military into a smaller, lighter, and more mobile force continue to be hampered by an ossified military leadership, discipline problems and human rights violations, limited funding, and demographics. Recent steps by the Government of Russia suggest a desire to reform, and the August 2008 conflict with Georgia further highlighted the need for Russia to modernize its armed forces. There has been an increased emphasis on practical training, and the government is introducing bills to improve the organization of the military.

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
In the years after the dissolution of the Soviet Union, Russia took important steps to become a full partner in the world's principal political groupings. On December 27, 1991, Russia assumed the permanent UN Security Council seat formerly held by the Soviet Union. Russia also is a member of the Organization for Security and Cooperation in Europe (OSCE) and the Euro-Atlantic Partnership Council (EAPC). Russia and the European Union (EU) signed a Partnership and Cooperation Agreement. It signed the North Atlantic Treaty Organization (NATO) Partnership for Peace initiative in 1994. The NATO-Russia Founding Act established the Permanent Joint Council (PJC) in 1997, with the NATO-Russia Council superseding the PJC in 2002. Russia, despite misgivings, did not actively oppose enlargement of NATO by members of the former Warsaw Pact and the Baltic states, which had been forcibly integrated into the Soviet Union. However, Russia has recently stressed its strong opposition to the membership aspirations of Ukraine and Georgia.

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. In recent years, Russia has not shied from using its significant oil and gas exports as leverage over countries dependent on Russian sources. Russia continues to support separatist regimes in Georgia and Moldova. The August 2008 conflict between Russia and Georgia marked a new low point in relations between the two countries, with Russia unilaterally recognizing the Georgian breakaway regions of Abkhazia and South Ossetia as independent countries.

U.S.-RUSSIA RELATIONS
The United States and Russia share common interests on a broad range of issues, including counterterrorism and the drastic reduction of our strategic arsenals. Russia shares our basic goal of stemming the proliferation of weapons of mass destruction and the means to deliver them. The Cooperative Threat Reduction (CTR) program, launched in 1992 to facilitate dismantlement of weapons of mass destruction in the former Soviet Union, was renewed in 2006 until 2013. At the 2006 G8 Summit in St. Petersburg, the U.S. and Russia announced the Global Initiative to Combat Nuclear Terrorism to keep terrorists from acquiring nuclear materials. We are working with Russia to bring Iran's nuclear programs into compliance with International Atomic Energy Agency (IAEA) rules and United Nations Security Council Resolutions 1737, 1747, and 1803. On North Korea, Russia is a participant in the Six-Party Talks aimed at the verifiable denuclearization of the Korean Peninsula. Russia also takes part in the Middle East Peace Process "Quartet" (along with the UN and the EU). Russia now interacts with NATO members as an equal through the NATO-Russia Council but without veto power over NATO decisions. During the past several years, Russia has intensified its efforts to combat trafficking in persons. We are cooperating in the fight against HIV/AIDS. Despite this cooperation, there remain areas in which the U.S. and Russia disagree, including over Moscow’s recognition of the independence of South Ossetia and Abkhazia and assertion of “privileged interests” in Eurasia. The Obama administration is seeking ways to improve our bilateral relations and enhance cooperation by focusing on areas of mutual interest, while managing areas of disagreement.

U.S. Assistance to Russia
For more detailed information on U.S. Government assistance to Russia, please see the annual reports to Congress on U.S. Government Assistance to and Cooperative Activities with Eurasia, which are available in the Bureau of European and Eurasian Affairs section on the State Department's website. A fact sheet on U.S. assistance to Russia can be found at http://www.state.gov/p/eur/rls/fs/103515.htm.

Principal U.S. Embassy Officials
Ambassador--John Beyrle
Deputy Chief of Mission--Eric S. Rubin
Counselor for Political Affairs--Alice Wells
Counselor for Economic Affairs--Eric Schultz
Counselor for Commercial Affairs--Beryl Blecher
Counselor for Consular Affairs--Kurt E. Amend
Counselor for Management Affairs--Elizabeth J. Agnew
Counselor for Public Affairs--James J. Kenney
Counselor for Science and Technology--Deborah Klepp
Director, U.S. Agency for International Development--Leon Waskin
Legal Attaché--Bryan Earl
DHS/Citizenship and Immigration Services (CIS)--Suzanne Sinclair-Smith
Department of Energy--Christine Buzzard
National Aeronautics and Space Administration (NASA)--Dennis McSweeney

See also the Key Officers List

The U.S. Embassy is located in Russia at Bolshoy Devyatinskiy Pereulok, Number 8, 121099 Moscow (tel. [7](495) 728-5000; fax: [7](495) 728-5090).

Consulates General
Consulate General, St. Petersburg--Furshtadskaya Ulitsa 15, St. Petersburg 191028 Russia; tel. [7] (812) 331-2600; Sheila Gwaltney, Consul General
Consulate General, Vladivostok--32 Pushkinskaya Ulitsa, Vladivostok 690001 Russia; tel. [7] (4232) 30-00-70; Thomas H. Armbruster, Consul General
Consulate General, Yekaterinburg--Ulitsa Gogolya 15A, 4th floor, Yekaterinburg 620151, Russia; tel. [7] (343) 379-30-01; Timothy Sandusky, Consul General

In Moscow, the U.S. Commercial Office is located at Bolshoy Devyatinskiy Pereulok, Number 8, 121099 Moscow (tel. [7](495) 728-5580; fax: [7](495) 728-5585).
In St. Petersburg, the U.S. Commercial Office is located at Nevskiy Prospekt 25, St. Petersburg 191186 Russia (tel. [7](812) 326-2560; fax: [7](812) 326-2561).
In Vladivostok, the U.S. Commercial Office is located at 32 Pushkinskaya Ulitsa, Vladivostok 690001 Russia (tel. [7] (4232) 30-00-93; fax: [7](4232) 30-00-92).
In Yekaterinburg, the U.S. Commercial Office is located at Ulitsa Gogolya 15A, 4th floor, Yekaterinburg 620151, Russia (tel. [7](343) 379-3001).

[This is a mobile copy of Russia (04/30/09)]