Russia Economic Environment

Introduction

Russia is the world's largest country with a total population of 141,850,000. and an important partner in global issues. They are a strategic partner in the World Bank and are becoming a major provider of development assistance for low income countries in the region. Development is also a domestic focus in Russia as there are significant contrasts between the 86 regions.

Russia is emerging from the global recession with lower-than-expected unemployment. The current high oil prices will help Russia's export and fiscal revenues. In 2010, Russia experienced growth of 4% and real output is expected to grow 4.4% in 2011, increasingly driven by domestic demand. (The Federation of International Trade Associations) The economic recovery, the government and legal system, and the changing social culture are critical for foreign companies to understand prior to seeking to expand into Russia.

Economic Environment

The history of the Russian economy has been riddled with crisis and recovery. Throughout the country's modern economic tribulations Russia has been able to maintain its position as a world power. Fueled by the fervor of Marxist socialism, in 1917 the Russian people led by Aleksandr Kerenskiy overthrew the government of Czar Nicholas II to become a socialist state. The government took control of all industry and seized all land in the name of communism. A civil war ensued from 1918 until 1920 between the newly formed government and the Bolshevik Party lead by Vladimir Stalin. The Russian Soviet Federated Socialist Republic was formed. In 1922 when Stalin conquered Ukraine, Belarus, Azerbaijan, Georgia, and Armenia, the new republic became known as the Union of Soviet Socialist Republics (U.S.S.R) (Bureau of European and Eurasian Affairs).

The isolationism of the U.S.S.R. and ensuing poor economic, political, and social condition came to a close in 1991. The U.S.S.R. was dissolved and the Russian Federation came to be. The philosophy behind the Russian economy turned 180 degrees from a centralized socialist system to a free market system with less government intervention. However, the concept of including moral and ethical principles into the policies regarding economic fairness is still very much a part of the Russian psyche. While it may sound socialist, the people of Russia continue to regard economic reforms in terms of fairness for the sake of social acceptance and not solely for the sake of social progress (D. Sorokin).

Russian Free Market

During the reign of the U.S.S.R., the government owned the vast majority of property and means of production. As the owner, the government was actively involved in price setting. Any re-selling of goods produced by the state was considered speculation and either criminal or civil charges could be brought upon such activities. When the Soviet Union