The Constitution of the Russian Federation dates from December 1993. Article 1 states that Russia shall be a democratic, federal state based on the rule-of-law, with a republican form of government. The Federal Assembly is Russia's highest representative and legislative body. It consists of two chambers, the Federation Council and the State Duma.
Presidential elections take place at intervals of not more than 5 years and are based on universal suffrage. If no candidate secures more than 50% of the vote, then the contest enters a second round of voting between the two strongest candidates. Parliamentary elections are also based on universal suffrage. There are 450 seats in the State Duma: 225 from single-mandate constituencies and 225 from federal constituencies (based on a proportional representation system).
The constitutional position of the President is very strong. The President has extensive executive powers. He determines the main directions of domestic and foreign policy and represents the country in its foreign relations. He may veto legislation submitted to him by the legislature and initiate legislation through presidential decree. He has the right to dismiss and nominate the Prime Minister.
Following the election of President Putin, on March 26, 2000 the new Government adopted in July 2000 an ambitious program of socio-economic reforms. The main focal points are the reform of the social, health and education sectors, and the improvement of the business and investment climate. The program foresees, for instance, a profound re-organization of the social safety net and a radical simplification of the taxation and customs systems.
The Putin administration has also been active in redefining relations between the federal level and the regional authorities. The creation of seven federal districts headed by presidential representatives has aimed at ensuring the compliance of regional legislation with federal law and - more generally - strengthening federal authorities' control over the regions.
The Kremlin enjoys solid support within the Duma. This is important in the context of the comprehensive legislative reform process under way. By the end of 2001, the Duma had intended to pass legislation on-: judicial reform; further deregulation of business activities; tax reform; pension system reform and a modernized Labour Code. There has already been substantial progress in areas such as customs duties reform, anti-money laundering and the approval of a new Land Code.
Freedom of the media is one of the main principles of political reform in Russia. However, a series of legal problems encountered by private media outlets, most notably those affecting nation-wide TV (NTV, and, more recently, TV6) enterprises, as well as a number of violent attacks on journalists, have given rise to concern about the future of the independent media in Russia.
The situation in Chechnya continues to attract close domestic attention in Russia and concern from outside. The EU remains concerned about the dramatic humanitarian situation. It is the largest donor of emergency aid (see below under "other main assistance instruments"). It has been concentrating its efforts on securing access and improving conditions for EU funded NGOs providing humanitarian assistance to Chechnya and on inviting the Russian authorities to provide maximum support to the office of Mr Kalamanov, Russia's own representative for human rights, in Chechnya, in order to bring human rights violations to justice.
Basic data
Head of state President Vladimir Putin
Capital city Moscow
Territory 17075.4 thousand Km2
Population 145.2 million (in 2001)
Density 8.5 inhab/Km2
Life expectancy 67 years
National currency Russian rouble (©?1 = 32.09 roubles)
GDP ©? 272 billion (2000 estimate)
GDP per capita ©? 1871
Economic situation
Russia has made considerable progress in achieving macro-economic stabilization and is currently pursuing a successful transition to a market economy. In the period between the fall of the Soviet Union and the severe 1998 financial crisis, GDP and standards of living declined dramatically, social security worsened, while poverty levels rose markedly (the share of population earning less than subsistence income peaked in 1999 at 39.1%). After the financial crisis, however, the devaluation of the rouble, which boosted demand for local production, successful macro-economic stabilization policies and unexpectedly high world energy prices, brought about a recovery. GDP rebounded in 1999, increasing by 5.4% and accelerated to an 8.3% annual rate in 2000, as the economy benefited from a further sharp increase in oil prices. Growth decelerated to around 5% in 2001 in a context of a worsening world economy and lower oil prices.
Foreign Investment
(total in $ million)
1994 1.05
1995 2.80
1996 6.51
1997 12.30
1998 11.77
1999 9.5
2000 11.96
2001 14.12
1st half
2002 8.29
(Source: The Russian State Statistics Committee)
Russia has so far not been able to attract foreign direct investment (FDI) on a scale consistent with her massive investment needs. Actually, capital outflows continue on a large scale ($1 to $2 billion per month), even though since the August 1998 crisis, there has been more caution in economic policy. Hence, boosting FDI is a key priority of the Russian Government. On its part, the EU has been stressing the need for Russia to provide a stable and reliable legal and institutional framework, which would encourage foreign investor confidence in the Russian market. Russia's ratification of the Energy Charter Treaty, WTO accession, and, in perspective, the establishment of a Common European Economic Space with the EU would also contribute prominently to boost FDI inflows.
According to the State Statistics Committee, foreign investments in Russia totaled $8,368 million in the first half of 2002. FDI totalled 1,872 million, portfolio investments $199 million and others $6,297 million. Main foreign investors in Russia are the following: Germany (18.8% of the total investment), USA (14%), Cyprus (12.6%), United Kingdom (11%), France (8.8%), Netherlands (6.9%) and Italy (4.2%).
In the year 2001 total foreign investments amounted to $14,258 million.
The level of FDI in Russia has remained quite stable over the last three years. According to the State Statistics Committee, total FDI in Russia amounted to $3.980 in 2001 ($4.429 billion - in 2000). However, the level of FDI per capita remains quite low compared to other countries with transitional economy. Since 1994, Russia has received around $165 of FDI per capita, compared with $2,238 in the Czech Republic or $889 in Poland.
In 2001, the biggest FDI were in retail trade ($757 million), transport ($689 million), food processing ($528 million), oil extraction ($423 million) and machine building ($316 million). Foreign investors are also showing interest in financial services, construction, construction materials and agriculture.
Foreign Direct Investment from the EU
(©¤ million)
1995 314
1996 576
1997 1699
1998 254
1999 1128
2000 1761
2001 587
(Source: Eurostat, NewCronos)
External debt amounted to approximately USD $ 154 billion in 2001 and the forecast for 2002 is USD $ 151 billion. Following negotiations with the IMF, the World Bank and the Paris club, Russia is now meeting its obligations to foreign creditors.
The Russian government has successfully consolidated public finances. In 2001, according to preliminary estimates, the federal budget recorded a surplus of 2.4% of GDP. The draft 2002 budget also foresees a surplus of 1.2%, even though the budgetary assumptions utilized are based on an optimistic appreciation of oil prices. Nevertheless, if oil prices remain close to current levels, debt service, though onerous (in particular in 2003 when it will peak at $ 19 billion), should be sustainable even in the medium term.
Budget deficit/surplus
(% of GDP)
1992 -3.4
1993 -4.6
1994 -10.7
1995 -3.2
1996 -4.4
1997 -5.1
1998 -3.6
1999 -1.5
2000 + 2.5
Authorities report on economic situation
The Russian Economy Ministry has published a report on Russia’s economic situation. According to the report, Russia’s GDP grew 8 percent in January- April 2004.
Andrey Klepach, head of the Economy Ministry’s Macroeconomic Forecasting Department, said inflation in Russia was expected to be 0.6 percent in May 2004. On the whole, inflation is slowing down. In particular, consumer prices were rising slower in May, and monetary policy was tightened.
According to Mr. Klepach, a 10 percent annual inflation is a high rate for Russia. In January-April 2003, inflation was 4.6 percent, against 6.2 percent in the same period last year. In May 2003, inflation was 0.8 percent.
Mr. Klepach said the ruble had strengthened against the dollar by 5.3 percent in real terms in January-April 2004, and the ruble’s real exchange rate against the euro was up 8.3 percent. The ruble strengthened by 5.6 percent against the basket of currencies of Russia’s main trade partners. The ruble is expected to strengthen 6 percent against the basket of currencies in January-May 2004.
The ruble’s real exchange rate against the dollar rose 5.2 percent in the first quarter of 2004, and the ruble strengthened against the dollar by 6 percent in real terms. The ruble’s real effective exchange rate was up 4.7 percent.
According to Mr. Klepach, Russia’s trade surplus was $24bn in January-April 2004, and exports amounted to $51bn, up 23 percent compared with January-April 2003, while imports increased 21 percent to $27bn.
He said the Macroeconomic Forecasting Department was going to revise its industrial production forecast for 2004 from 5.9 percent to 6.1 percent. According to Mr. Klepach, industrial production was up 7.4 percent in January-April 2004 compared to the same period a year earlier. In April, manufacturing growth was 6.7 percent. |
