The Russian Economy in the Post-Soviet Era

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"Everyone's focusing on the fact that there are more billionaires in Moscow than there are in London, but what we're actually also seeing is that the disposable income of skilled people in Russia is going up. You see a lot of infrastructure, a lot of housing, shopping malls. The commodity boom is now percolating beyond Moscow"¹

- Mark Spelman, Accenture Energy Analyst, in July, 2007.

"The catastrophe has run its course. The economic policy of Yeltsin's and Chernomyrdin's aides has made a small section of the former communist nomenklatura and of the "new Russians" unbelievably rich, plunged most of the nation's industry into paralysis, and reduced the majority of the population to poverty. As far as property ownership is concerned, the gap between the rich and poor is much deeper now than that which led to the [1917] October [Bolshevik] Revolution."²

- A statement issued by a group of prominent Russian intellectuals in the late 1990s.

Introduction

In early 2007, the Gross Domestic Product (GDP) (in terms of market exchange rate) of the Russian Federation (Russia) crossed the $ 1 trillion mark3 on the back of economic growth and a strong ruble4. In the early to mid 2000s, Russia's economic growth had been rapid, contributed in a significant measure by the growth in the domestic energy industry. Prior to 1991, Russia was the largest republic (Russian Soviet Federative Socialist Republic or RSFSR) in the Soviet Union or Union of Soviet Socialist Republics (USSR).5 In 1990-91, the Soviet economy was reeling under supply shortages and high inflation. Between 1990 and 1991, the GDP declined by 17 percent and retail prices increased by 140 percent.

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1] Jorn Madslien, "Russia's Economic Might: Spooky or Soothing?" http://news.bbc.co.uk, July 04, 2007.

2] Daniel W. Michaels, "Capitalism in the New Russia," http://ihr.org.

3] As of 2007 end, the Russian GDP (nominal) was $ 1.36 trillion.

4] The ruble (RUB) is the official currency of Russia. One ruble is divided into 100 kopeks (or copecks). As of early 2008, 1 ruble was equal to 0.04 US dollar (or 1 US$ = 24.23 RUB).

5] Members of the former USSR were Russia, Belarus, Ukraine, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. After the Second World War, Estonia, Latvia, Lithuania and Moldova also became part of the USSR.