Russia

Politics:

• Analysis

  Russia politics: Quick View - A new crackdown on NGOs

  Event

  The Russian authorities have begun a new wave of inspections of non-governmental organisations (NGOs).

  Analysis

  Government agencies have inspected at least 30 NGOs in the past two weeks in Moscow, and many more in 13 other regions of Russia. This is part of a broader crackdown on civil society that began last year. The inspections are to determine whether groups are complying with a raft of regulatory laws. The laws include one that requires any group that accepts foreign funding and engages in "political activity" to register as a "foreign agent".

  The president, Vladimir Putin, appeared recently to give a green light for the new crackdown. At a meeting with the Federal Security Service on February 14th, he said: "We have a set of rules and regulations for NGOs in Russia, including rules and regulations about foreign funding. These laws, naturally, should be enforced. Any direct or indirect interference in our internal affairs, any form of pressure on Russia, on our allies and partners is inadmissible."

  EU officials have voiced their disquiet as checks by Russian prosecutors and tax inspectors on foreign-funded NGOs proliferate. The Moscow offices of Human Rights Watch and Transparency International were among those recently searched. In other examples, two German political NGOs were searched earlier in Moscow and St Petersburg. EU foreign policy chief Catherine Ashton has expressed concern at "the ongoing actions of the authorities against the NGO community".

  March 27, 2013

• 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

  March 20, 2013

• 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.
  • 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 means that efforts to improve the investment climate and privatisation will be pursued with little vigour.
  • Real GDP growth is estimated to have decelerated to 3.4% in 2012 from 4.3% in 2011. There are downside risks, owing to an uncertain global outlook.
  • 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.
  • 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.
  • In a bizarre development, the Russian authorities have decided to conduct a posthumous trial of Sergei Magnitsky, a lawyer, on charges of tax evasion.
  • Mr Putin has nominated Elvira Nabiullina, his aide and former economy minister, as the next governor of the Russian Central Bank (RCB).
  • There is some concern that the RCB will become less independent under Ms Nabiullina than under Sergei Ignatiev, or if his successor had been the candidate favoured by many, the first deputy chairman, Aleksei Ulyukayev.
  • Growth has slowed since the second half of 2012 owing to base effects, drought over the summer and weaker global activity.
  • Annual inflation, which accelerated to 7.3% in February from 7.1% in January and 6.6% in December 2012, is likely to remain above the central bank's target range of 5-6% in the first half of 2013.

  March 20, 2013

Economy:

• Background

  Russia: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	142.8	Population growth	0.1
  GDP (US$ bn; market exchange rate)	2,022.0	Real GDP growth	1.8
  GDP (US$ bn; purchasing power parity)	2,519	Real domestic demand growth	2.9
  GDP per head (US$; market exchange rate)	14,157	Inflation	9.2
  GDP per head (US$; purchasing power parity)	17,639	Current-account balance (% of GDP)	4.8
  Exchange rate (av) Rb:US$	30.8	FDI inflows (% of GDP)	3.1
  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 2011	% of total	Main imports 2011	% of total
  Oil, fuel & gas	69.8	Machinery & equipment	48.1
  Metals	11.0	Chemicals	14.8
  Chemicals	6.0	Food & agricultural products	13.9
  Machinery & equipment	4.5	Metals	7.1
  Major markets 2011	% of total	Major suppliers 2011	% 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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  March 20, 2013

• Structure

  Russia: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 20, 2013

• 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. Mr Putin's grip on power is unlikely to face a serious challenge while economic indices remain positive, and opposition parties are yet to turn dissatisfaction with Mr Putin into widespread support for their leaders and programmes.

  ELECTION WATCH: Candidates from the pro-government United Russia won nearly all of the municipal and regional elections held across the country in October 2012. United Russia incumbents won all five gubernatorial elections. The party was relieved by the results, which came after a long decline in its popularity and a rise in public 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 2012 of the US president, Barack Obama. Nevertheless, tension between the US and Russia has been rising over a range of issues, including the conflict in Syria, Iran's nuclear programme and Russia's crackdown on domestic opposition.

  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 see a surge in exports, mainly as most states apply no tariff or only a low tariff on its main exports: oil, gas, timber and some metals. The average tariff ceiling will fall to 10.8%, compared with 13.2% before accession, and that for manufactured goods to 7.3% (from 9.5%). One-third of the rate reductions were introduced straight away, and a further one-quarter come into force after three years. The most sensitive ones--on pork, passenger cars and aircraft--only take effect in 2019-20.

  ECONOMIC GROWTH: Growth prospects will remain dependent on international commodity prices. Our oil price forecast is favourable for Russia. The average price for dated Brent Blend crude is estimated to have been US$112/barrel in 2012 and is forecast to ease only slightly in 2013, to US$104.5/b. Prices are set to remain high in 2014-17.

  INFLATION: Annual inflation accelerated to 7.3% in February from 7.1% in January and 6.6% in December 2012. Prices rose 0.6% from the previous month. Food prices rose by 8.7% in February from a year earlier and alcohol prices rose by 17.6%. Inflation also increased after the government raised administered prices for items such as transport. Price growth is likely to remain above the central bank's target range of 5-6% in the first half of 2013.

  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 more than 5% in the first quarter. However, like other emerging economies, Russia experienced some weakening of its currency in the second quarter of 2012 in response to the uncertain global outlook and flight from risk, as well as the decline in oil prices. The REER was then broadly stable in the second half of 2012.

  EXTERNAL SECTOR: The current-account surplus totalled US$81.3bn in 2012, or 4% of GDP. The trade surplus amounted to US$195.2bn, down slightly from US$198.2bn in 2011. The net capital outflow in 2012 was US$56.8bn, less than in 2011 but the fourth-highest annual figure since the fall of the Soviet Union. In 2012 capital inflows were boosted by a sharp increase in borrowing by Russian banks, which recorded net inflows of US$23.6bn for the year. This compares with a US$24.2bn outflow in 2011. In the non-financial sector, however, there was a net outflow of US$80.4bn, the highest on record and well up on the US$56.4bn recorded in 2011. The biggest outflow in the non-financial sector was in the fourth quarter, undermining hopes that the investment climate is improving.

  March 25, 2013

• 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.
  • 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 means that efforts to improve the investment climate and privatisation will be pursued with little vigour.
  • The basis of monetary policy will gradually shift to inflation targeting. The appointment of a new central bank governor in June 2013 is unlikely to result in a significant shift in monetary policy.
  • High oil prices will keep the budget deficit small, although the non-oil deficit will remain large. Additional expenditure on defence, public-sector pay and pensions means that Russia would require an oil price of well above US$100/barrel to balance its budget, up from only US$55/b in 2007.
  • Real GDP growth fell to 3.4% in 2012 and will remain below pre-2009 rates in 2013-17. 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. Currency appreciation can be expected, unless the global downturn results in a significant decline in oil prices.
  • The current account will remain in surplus until 2015. Foreign direct investment (FDI) inflows will rise during the forecast period. Nevertheless, even by 2017 the stock of inward FDI will still amount to less than 30% of GDP.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	3.4	3.3	3.7	4.1	4.1	4.0
  Consumer price inflation (av; %)	5.1	6.3	6.2	5.7	5.1	5.0
  Budget balance (% of GDP)	-0.1	-0.5	-0.4	-0.4	-0.4	-0.3
  Current-account balance (% of GDP)	4.0	1.9	0.7	0.3	-0.6	-0.7
  Central bank refinancing rate (end-period; %)	8.3	8.0	7.5	7.0	6.5	6.2
  Exchange rate Rb:US$ (av)	30.8	30.9	31.1	31.4	31.0	30.8
  Exchange rate Rb:€ (av)	39.6	41.1	40.8	39.9	39.1	38.8

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  March 20, 2013

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)

January 11, 2013