The Russian Federation inherited a Marxist-Leninist command economy from the Union of Soviet Socialist Republics (USSR). Chief among the characteristics of the economy was an almost total absence of private productive capital. All enterprises were owned by the state, with each person receiving a salary for his or her efforts. Farmland was also almost entirely state-owned: 95% of all farmland was either state-owned or collectivized. All economic planning was done by government officials based in Moscow. Market forces played no part in their decision-making. The workforce was estimated at about 70 million persons in 1989.
During the Gorbachev era many of the basic elements of the Soviet command economy were weakened. The policies of glasnost and perestroika loosened social controls. Limited private ownership of businesses and land was granted, and prices were allowed to rise in accordance with market forces.
Following the failed August Coup and independence, the assets of the Communist party were seized and a new era of a market-based economy was proclaimed. Companies were given permission to become private entities, except for those enterprises employing over 10,000 workers or providing gas, oil, or pharmaceuticals. In 1991, Russia joined with other countries of the Commonwealth of Independent States (CIS) in a loose affiliation aimed in part at establishing a coordinated economic policy. The rapid change from a severely controlled system to the beginnings of a market economy created chaotic conditions; some Russians profited greatly, but most suffered economic hardship as privatization and other economic reforms progressed. By late 1997, inflation appeared to have been brought under control and industrial production had begun to slowly increase.
The country was once again plunged into economic upheaval, however, when the ruble plummeted in May, 1998, following a crisis in Asian financial markets. Unable to pay its foreign debts, Russia struggled to restructure loans and keep its new financial services sector from collapsing. By 2001, however, the Russian economy recovered and benefited from economic reforms and a rise in oil prices, and raw material exports, especially, oil and natural gas, have become more important economically since then. In July, 2003, a law permitting the sale of farmland was passed by the parliament; foreigners are banned from purchasing agricultural land but may lease it. Privatization of state-owned companies has continued, but more slowly, and under President Putin the government intervened more freely in economic affairs, for example, to solidify state ownership of Russia's energy industry. Because of this, foreign investment in the economy has remained relatively low. In 2006 the ruble became fully convertible when the government ended restrictions on currency transactions, and oil revenues enabled the government to pay off some $23 billion in foreign debt ahead of schedule.
The Russian Federation possesses a well-developed road and rail network in its European third, a more limited network in Siberia, and still fewer roads and rail lines in the Russian Far East. Barges on the vast network of inland waterways can carry a huge amount of traffic. In E Siberia, ships carry virtually all heavy freight. Most of Russia's cities and towns are connected by air. Exports are dominated by natural resources, particularly oil, natural gas, nickel, and timber; chemicals and military manufactures are also important exports. Imports include machinery and equipment, consumer goods, medicines, meat, sugar, and metal products. The main trading partners are Germany, Ukraine, China, and Italy.
Physioeconomically, the Russian Federation may be conveniently divided into 9 major regions: the Central European Region, the North and Northwest European Region, the Volga Region, the North Caucasus, the Ural Region, Western Siberia, Eastern Siberia, Northern and Northwestern Siberia, and the Russian Far East.
This flat, rolling country, with Moscow as its center, forms a major industrial region. Besides Moscow, major cities include Nizhniy Novgorod (formerly Gorky), Smolensk, Yaroslavl, Vladimir, Tula, Dzerzhinsk, and Rybinsk. Trucks, ships, railway rolling stock, machine tools, electronic equipment, cotton and woolen textiles, and chemicals are the principal industrial products. The Volga and Oka rivers are the major water routes, and the Moscow-Volga and Don-Volga canals link Moscow with the Caspian and Baltic seas. Many rail lines serve the area.
St. Petersburg (formerly Leningrad), the industrial center of this area, has industries producing machine tools, electronic equipment, chemicals, ships, and precision instruments. Other cities include Pskov, Tver (formerly Kalinin), Murmansk, Arkhangelsk, and Vologda. The hills, marshy plains, lakes, and desolate plateaus contain rich deposits of coal (Pechora Basin), oil (Ukhta), iron ore, and bauxite, and the area is a prime source of lumber. The chief water routes are the Baltic-Belomor Canal and the Volga-Baltic Waterway.
This area, stretching along the greatest river of European Russia, has highly developed hydroelectric power installations, including major dams at Volgograd, Kazan, Samara (formerly Kuybyshev), and Balakovo. Farm machinery, ships, chemicals, and textiles are manufactured, and extensive oil and gas fields are worked. Agricultural products include wheat, vegetables, cotton, hemp, oilseeds, and fruit. Livestock raising and fishing are also important.
In this area, descending northward from the principal chain of the Caucasus Mts. to a level plain, are found rich deposits of oil, natural gas, and coal. The major cities are Rostov-na-Donu, Krasnodar, Grozny, Vladikavkaz, and Novorossiysk. Sochi is a popular resort. Farm machinery, coal, petroleum, and natural gas are the chief products. The Kuban River region, a fertile black-earth area, is one of the chief granaries of Russia. Wheat, sugar beets, tobacco, rice, and sunflower seeds are grown, and cattle are raised. Other rivers include the Don, the Kuma, and the Terek, and the Volga-Don Canal is a major transportation route.
The southern half of the Ural region has been a major center of Russian iron and steel production. A substantial share of Soviet petroleum was produced there, mainly in Bashkortostan. Deposits of iron ore, manganese, and aluminum ore are mined. The major industrial centers are Magnitogorsk, Yekaterinburg (formerly Sverdlovsk), Chelyabinsk, Nizhni Tagil, and Perm. Several trunk railroads serve the area, and rivers include the Kama and Belaya in the west and the Ural in the south.
This vast plain—marshy and thinly populated in the north, hilly in the south—is of growing economic importance. At Novosibirsk and Kamen-na-Obi are large hydroelectric stations. Other principal cities include Kemerovo and Novokuznetsk. The Kuznetsk Basin in the southwest is a center of coal mining, oil refining, and the production of iron, steel, machinery, and chemicals. The Ob-Irtysh drainage system crosses this area, which is also served by the Trans-Siberian and South Siberian rail lines. Barnaul is a major rail junction. Agricultural products include wheat, rice, oats, and sugar beets, and livestock is raised.
In this area of plateaus, mountains, and river basins, the major cities—Krasnoyarsk, Irkutsk, Ulan-Ude, and Chita—are located along the Trans-Siberian RR. A branch line links Ulan-Ude with Mongolia and Beijing, China. There are hydroelectric stations at Bratsk, Krasnoyarsk, and Irkutsk. Coal, gold, graphite, iron ore, aluminum ore, zinc, and lead are mined in the area, and livestock is raised.
Covering nearly half of Russian territory, this is the least populated and least developed area. The Ob, Yenisei, and Lena rivers flow to the Arctic. Through the use of atomic-powered icebreakers, the Northern Sea Route has gained increasing economic importance. The Kolyma gold fields are the principal source of Russian gold, and industrial diamonds are mined in the Sakha Republic, notably at Mirny. Fur trapping and hunting are the chief activities in the taiga and tundra regions.
Bordering on the Pacific Ocean, the region has Komsomolsk, Khabarovsk, Yakutsk, and Vladivostok as its chief cities. Machinery is produced, and lumbering, fishing, hunting, and fur trapping are important. The Trans-Siberian RR follows the Amur and Ussuri rivers and terminates at the port of Vladivostok.