Russia

Politics:

• Analysis

  Russia politics: Quick View - Russia's ban on adoptions by US citizens

  Event

  The president, Vladimir Putin, has stated that he intends to sign a bill that bans adoptions of Russian children by US citizens.

  Analysis

  The bill represents retaliation for a new US law sanctioning Russians accused of human rights violations. The US president, Barack Obama, recently signed into law the Magnitsky Act, which imposes visa restrictions and an asset freeze on Russian officials allegedly linked to the death of an anti-corruption lawyer, Sergei Magnitsky, and other human rights abuses.

  About 1,000 Russian children were adopted in 2011 by parents from the US, which leads in foreign adoptions in Russia, and more than 45,000 Russian children have been adopted by American parents since 1999.

  The adoption ban would effectively undo a bilateral US-Russian agreement on international adoptions that was ratified this year and that took effect on November 1st. That agreement called for heightened oversight in response to several high-profile cases of abuse and deaths of adopted Russian children in the US. It is unclear when the ban would take effect. Some Russian officials have said that the bilateral agreement on adoptions with the US would become void in the first week of January, even though Mr Putin at his annual news conference on December 20th said that changes to the agreement required one year's notice by either side.

  This latest development is another blow to US-Russian relations, which have become strained by disagreements over a number of issues, including the state of Russian democracy, missile defence and the conflict in Syria. However, Russia and the US still have a mutual interest in co-operating on various issues, including arms control, North Korea, and Iran's nuclear weapons programme.

  December 28, 2012

• Background

  Russia: Political forces at a glance

  Political outlook: Political forces at a glance

  Current government: The president enjoys sweeping executive powers by virtue of the 1993 constitution and a concerted drive by Vladimir Putin to strengthen his position. The president still enjoys a preponderance of political powers, including command of the armed forces and the right to appoint most of the important posts in the executive, the judiciary and in regional administrations.

  Presidential election, Mar 2012
  	% of vote
  Vladimir Putin	63.6
  Gennady Zyuganov	17.1
  Mikhail Prokhorov	7.9
  Vladimir Zhirinovsky	6.2
  Sergei Mironov	3.9
  Note. Figures do not sum to 100, owing to spoiled ballots.
  Source: Central Electoral Commission.

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  Parliamentary forces: The election to the State Duma (the lower house of parliament) on December 4th 2011 resulted in an embarrassing setback for United Russia, the party of power. Its share of the vote fell to just below 50%, compared with 64.3% in 2007, and its total number of seats contracted from a supermajority of 315 in the 450-seat chamber to a bare majority of 238. The three opposition parties increased their share of the vote and their seats in the lower chamber. The principal beneficiary was the Communist Party of the Russian Federation (CPRF), which took more than 19% of the vote and secured 92 seats. The importance of the Federation Council (the upper house) has been reduced.

  Next elections: December 2016 for the Duma; March 2018 for the presidency.

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  July 27, 2012

• Structure

  Russia: Political structure

  Official name

  The Russian Federation

  Form of state

  Federal state, with republican form of government. A new constitution was adopted after a national vote on December 12th 1993

  Electoral system

  Two-chamber legislature: the lower house, the State Duma, has 450 deputies; the upper house, the Federation Council, has 178 deputies, two from each of the 89 republics and regions

  National elections

  Most recent: December 4th 2011 (parliamentary), March 4th 2012 (presidential); next elections due in December 2016 (parliamentary) and 2018 (presidential)

  Head of state

  Vladimir Putin was elected for a six-year term as president on March 4th 2012 and took office on May 7th

  National government

  The government is appointed by the prime minister, who is appointed by the president

  Main political parties

  The most important parties are: United Russia; the Communist Party of the Russian Federation (CPRF); Just Russia and the Liberal Democratic Party of Russia (LDPR)

  Leading members of the government

  Prime minister: Dmitry Medvedev

  First deputy prime ministers: Viktor Zubkov

  Igor Shuvalov

  Deputy prime ministers: Dmitry Kozak

  Dmitry Rogozin

  Arkady Dvorkovich

  Vladislav Surkov

  Aleksandr Khloponin

  Olga Golodets

  Key ministers

  Agriculture: Nikolai Fyodorov

  Communications & press: Nikolai Nikiforov

  Culture: Vladimir Medinsky

  Defence: Sergei Shoigu

  Economic development: Andrei Belousov

  Education & science: Dmitry Livanov

  Emergency situations: Vladimir Puchkov

  Energy: Aleksandr Novak

  Far East development: Viktor Ishayev

  Finance: Anton Siluanov

  Foreign affairs: Sergei Lavrov

  Health: Veronika Skortsova

  Industry & trade: Denis Manturov

  Internal affairs: Vladimir Kolokoltsev

  Justice: Aleksandr Konovalov

  Labour & social development: Maksim Topilin

  Natural resources: Sergei Donskoi

  Regional development: Oleg Govorun

  Sports, tourism & youth: Vitaly Mutko

  Telecommunications: Igor Shchegolev

  Transport: Maksim Sokolov

  Central Bank governor

  Sergei Ignatiev

  December 12, 2012

• Outlook

  Russia: Key developments

  Outlook for 2013-17

  • Despite Vladimir Putin's success in the presidential election in March 2012, the aura that used to surround his rule is gone. In time discontent could spread from the middle classes and Moscow to other segments of society.
  • The Russian establishment welcomed with relief the re-election in November of the US president, Barack Obama.
  • Nevertheless, tensions between the US and Russia will persist over issues including the conflict in Syria, Iran's nuclear programme and Russia's crackdown on domestic opposition.
  • A Putin presidency will mean that efforts to improve the investment climate and privatisation will be pursued with little vigour.
  • Real GDP growth is estimated to have decelerated to 3.7% in 2012 from 4.3% in 2011. There are downside risks, owing to the continuing threat that the European debt crisis could spark a global financial market crisis.
  • Annual average growth of under 4% is forecast for 2013-17. Impediments to faster medium-term growth include dependence on natural resources and weak institutions.
  • Annual average inflation will decline gradually, to about 5% by the end of the forecast period.
  • A resumption in the underlying trend of currency appreciation, at a more gradual pace than in the past, can be expected, unless the global downturn results in a significant decline in oil prices.
  • The current account will remain in surplus, albeit a declining one, in 2013-15, supported by high oil prices.

  Review

  • The trend in public opinion surveys suggests that Mr Putin's popular standing is weakening, although there is no imminent threat to his rule.
  • Support for popular protests seems to be weakening. In December 2011, 44% of those surveyed in a Levada poll either strongly or moderately supported protests. However, in October 2012, only 30% felt the same way.
  • Industrial output growth declined to 1.8% in October from 2% in September. The transportation sector stagnated in October after growth of 4.2% in September.
  • Agriculture continued to decline, by 13.3% in October, following drops of 7.7% in September and 3.8% in August.
  • Annual consumer price inflation remained unchanged in November, at 6.5%.

  December 12, 2012

Economy:

• Background

  Russia: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	143.0	Population growth	0.1
  GDP (US$ bn; market exchange rate)	1,857.8	Real GDP growth	2.8
  GDP (US$ bn; purchasing power parity)	2,386	Real domestic demand growth	4.5
  GDP per head (US$; market exchange rate)	12,990	Inflation	10.0
  GDP per head (US$; purchasing power parity)	16,681	Current-account balance (% of GDP)	5.3
  Exchange rate (av) Rb:US$	29.4	FDI inflows (% of GDP)	3.5
  a Actual.

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  Background: Like the Soviet Union before it, Russia is a collection of diverse territories at different stages of development. In his previous time as president, Vladimir Putin worked to bring the regions under central control, and to this end he abolished direct elections for regional governors.

  Political structure: Boris Yeltsin won the first democratic presidential election in June 1991 and was re-elected in July 1996. Repeated confrontations with the legislature culminated in the dissolution of parliament in September 1993 and a violent showdown the following month. The powers of the executive were greatly increased by a new constitution, adopted in 1993. Parliamentary elections in 1999 and 2003 increased the influence of pro-government forces, easing the passage of reform legislation. Mr Putin was elected in March 2000 and re-elected to a second term in March 2004. Mr Putin's second term in office was characterised by increasing centralisation of the state and a discernible trend towards authoritarianism. A loyal ally, Dmitry Medvedev, won the presidential election in March 2008 and took over in May of that year. Mr Putin secured another presidential term in office (to last six years) in an election in March 2012.

  Policy issues: Liberalisation in some areas, such as the extensive reforms of the electricity sector, coexists with tight government control elsewhere. Dealing with the after-effects of the economic crisis of 2009 remains the main near-term policy challenge. Diversifying the economy away from commodity dependence remains a crucial policy goal.

  Taxation: Reforms since 2000 have aimed to rationalise the tax system, and to cut the number of taxes and the corporate tax burden. Changes to the tax regime in January 2001 included the introduction of a flat rate of personal income tax of 13% and a simplification of the administration of social security contributions. At the start of 2004 the basic rate of value-added tax (VAT) was reduced from 20% to 18%, and a regional 5% sales tax was abolished. The corporate tax rate was cut from 24% to 20% at the beginning of 2009.

  Foreign trade: Mainly because of high international oil prices, export revenue has soared since 2000. Import growth picked up over the same period, as a result of rising real incomes and real rouble appreciation. The current-account surplus has been sizeable in recent years, peaking at US$103.7bn (6.2% of GDP) in 2008. The structure of exports is heavily dominated by fuel and raw materials. Exports and imports fell during the recession of 2009, but have since recovered.

  Main exports 2010	% of total	Main imports 2010	% of total
  Oil, fuel & gas	69.8	Machinery & equipment	45.6
  Metals	11.0	Chemicals	14.1
  Chemicals	6.0	Food & agricultural products	13.2
  Machinery & equipment	4.5	Metals	6.8
  Major markets 2010	% of total	Major suppliers 2010	% of total
  Netherlands	12.1	China	15.8
  China	6.8	Germany	12.3
  Germany	6.6	Ukraine	6.6
  Italy	6.3	Italy	4.4

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  December 12, 2012

• Structure

  Russia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 12, 2012

• Outlook

  Russia: Country outlook

  Russia: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The underlying trend in public opinion surveys suggests that the popular standing of the president, Vladimir Putin, and of the prime minister, Dmitry Medvedev, is weakening, although there is no imminent threat to their rule. The approval ratings of both politicians have fallen over the past seven months. Mr Putin's approval rating is down from 69% in May to 63% in November, and Mr Medvedev's down from 64% to 54% over the same period, according to the Levada Centre.

  ELECTION WATCH: Candidates from the pro-government United Russia won nearly all of the municipal and regional elections held across the country in early October. United Russia incumbents won all five gubernatorial elections. The party was relieved by the results, which came after a long decline in United Russia's popularity and a rise in popular protests against the government. The results had much to do with voter apathy and low turnout (only 25% in most areas).

  INTERNATIONAL RELATIONS: The Russian establishment welcomed with relief the re-election in November of the US president, Barack Obama. Nevertheless, tensions between the US and Russia have been rising over a range of issues, including the conflict in Syria, Iran's nuclear programme and Russia's crackdown on domestic opposition. The Magnitsky Act, recently passed by the US Congress, lifts Cold War-era trade restrictions, but also imposes sanctions on Russian citizens believed to have been involved in the prosecution and death in custody of Sergei Magnitsky, a lawyer, and other human rights violations. This has irritated the Russian authorities and will further strain relations, even though the Obama administration is likely to be cautious in applying the law.

  POLICY TRENDS: Russia joined the World Trade Organisation (WTO) in August 2012, 19 years after it initially applied. Membership will have little immediate impact, and is not expected to attract a surge of foreign investment into manufacturing. Tariff cuts to be applied by Russia are not large, and several will be phased in over the rest of the 2010s. In sharp contrast to China, Russia will not experience a surge in exports once in the WTO. This is mainly because most states apply no tariff or only a low tariff on Russia's main exports: oil, gas, timber and some metals. The average tariff ceiling will fall to 10.8%, compared with 13.2% before accession, and the average ceiling for manufactured goods will be 7.3%, compared with 9.5% before accession. One-third of the agreed rate reductions have been introduced immediately, with another one-quarter coming into force after three years. The most sensitive tariff cuts--on pork, passenger cars and aircraft--will not come into force until 2019-20.

  ECONOMIC GROWTH: Growth prospects will remain dependent on international commodity prices. The Economist Intelligence Unit's oil price forecast is favourable for Russia. The average price for dated Brent Blend crude is estimated at US$111.9/barrel for 2012 and is forecast to ease only slightly in 2013, to US$103.8/b. Average prices are set to remain high in 2014-17.

  INFLATION: Consumer price inflation eased to 6.5% in October from 6.6% in September, slowing for the first time in six months. It remained unchanged at 6.5% in November. Annual inflation had slowed to a post-Soviet low of 3.6% in April and May 2012 after the government delayed increases in utility tariffs. The Russian Central Bank (RCB) is targeting inflation of 5-6% for 2013, and 4-5% in 2014 and 2015. Disinflation in 2013-17 is likely to be slow, as a result of increased demand and further adjustments in regulated prices. Strong nominal wage growth resulted in double-digit increases in annual average real wages during the past decade. Following a crisis-induced decline in 2009, real wage growth has resumed and will continue, albeit at much lower rates than before 2009.

  EXCHANGE RATES: In early 2012 high oil prices underpinned a resumption in the underlying trend of real appreciation. The real effective exchange rate (REER) appreciated by around 4% in the first quarter. However, Russia, like other emerging economies, experienced a weakening of its currency in the second quarter in reaction to the uncertain global outlook and flight from risk, as well as decline in oil prices. The REER fell by more than 6% in the second quarter, before stabilising in the third quarter.

  EXTERNAL SECTOR: Balance-of-payments figures from the RCB show that the current-account surplus for the first three quarters of 2012 was slightly smaller than in the same period in earlier years. Nonetheless, the current-account surplus in January-September was still more than 5% of GDP. The goods trade surplus was equal to more than 10% of GDP. The current account will remain in surplus until 2016.

  December 07, 2012

• Forecast

  Russia: Country forecast summary

  Country forecast overview: Highlights

  • Despite Vladimir Putin's success in the presidential election in March 2012, the aura that previously surrounded his rule is gone, and it may be only a matter of time before discontent spreads from the middle classes and Moscow to other segments of society.
  • The Russian establishment welcomed with relief the re-election in November of the US president, Barack Obama. Nevertheless, tensions between the US and Russia have been rising over a range of issues, including the conflict in Syria, Iran's nuclear program and Russia's crackdown on domestic opposition.
  • A Putin presidency will mean that efforts to improve the investment climate and privatisation will be pursued with little vigour.
  • The basis of monetary policy over the next three years will shift to inflation-targeting. The Russian Central Bank (RCB) will abandon the band within which it keeps the rouble's exchange rate by means of interventions.
  • High oil prices will keep the budget deficit small, although the non-oil deficit will remain large. Additional expenditure on defence, public-sector workers' pay and pensions means that Russia would require an oil price of about US$120/barrel to balance its budget, up from only US$55/b in 2007.
  • Real GDP growth is estimated at 3.7% in 2012, and will remain below pre-2009 rates in 2013-17. There are downside risks, owing to the continuing threat that the European debt crisis could spark a global financial market crisis.
  • Impediments to faster medium-term growth include dependence on natural resources and weak institutions. Energy output growth will remain sluggish, with oil firms struggling to raise production as existing fields are depleted and recovery becomes harder.
  • Annual average inflation will decline gradually, to around 5% by the end of the forecast period. A resumption in the underlying trend of currency appreciation, at a more gradual pace than in the past, can be expected, unless the global downturn results in a significant decline in oil prices.
  • The current account will remain in surplus until 2016. Foreign direct investment (FDI) inflows will rise during the forecast period. Nevertheless, even by 2017 the stock of inward FDI will only amount to about 30% of GDP.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	3.7	3.7	3.9	4.0	4.0	4.1
  Consumer price inflation (av; %)	5.1	6.5	6.6	5.7	5.1	5.0
  Budget balance (% of GDP)	0.1	-0.3	-0.4	-0.5	-0.6	-0.5
  Current-account balance (% of GDP)	4.5	2.3	1.5	0.5	-0.7	-1.1
  Central bank refinancing rate (end-period; %)	8.3	7.8	7.5	7.0	6.5	6.2
  Exchange rate Rb:US$ (av)	30.9	31.3	32.0	32.4	32.2	32.0
  Exchange rate Rb:€ (av)	39.6	39.5	40.1	40.1	40.6	40.3

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  December 12, 2012

View detailed map

Country Briefing

Land area

17,075,400 sq km

Population

141.7m (mid-2010 estimate)

Main towns

Population ('000; RosStat census, October 2002)

Moscow (capital): 10,102

St Petersburg: 4,669

Novosibirsk: 1,426

Nizhny Novgorod: 1,311

Yekaterinburg: 1,293

Weather in Moscow (altitude 156 metres)

Hottest month, July, 13-23°C (average daily minimum and maximum); coldest month, January, -16°C to -9°C; driest month, March, 36 mm average rainfall; wettest month, July, 88 mm average rainfall

Languages

Russian and local languages

Weights and measures

Metric system since 1927 (Western calendar since 1917)

Currency

Rouble (Rb); 1 rouble (Rb) = 100 kopeks. The rouble was redenominated on January 1st 1998 at 1 new rouble = 1,000 old roubles

Time

Three hours ahead of GMT in Moscow and St Petersburg; ten hours ahead of GMT in Vladivostok

Fiscal year

Calendar year

Public holidays

January 1st-4th (New Year); January 7th (Orthodox Christmas); February 23rd (Day of the Defenders of the Motherland); March 8th (International Women's Day); May 1st-2nd (Labour Day); May 9th (Victory Day); June 12th (Independence Day); November 4th (Day of National Unity); December 12th (Constitution Day)

March 20, 2012