Economy Overview:

    Russia, a vast country (the Largest on the earth)  with a wealth of natural  
    resources, a well- educated population, and a diverse industrial base, continues   
    to   experience  formidable difficulties in moving from its old centrally planned   
    economy to  a modern market economy. President Yeltsin's government has made
    substantial strides in converting to a market economy since launching its
    economic reform program in January 1992 by freeing nearly all prices,
    slashing defense spending, eliminating the old centralized distribution
    system, completing an ambitious voucher privatization program, establishing
    private financial institutions, and decentralizing foreign trade. Russia,
    however, has made little progress in a number of key areas that are needed
    to provide a solid foundation for the transition to a market economy.

    Financial stabilization has remained elusive, with wide swings in monthly
    inflation rates. Only limited restructuring of industry has occurred so far
    because of a scarcity of investment funds and the failure of enterprise
    managers to make hard cost-cutting decisions. In addition, Moscow has yet to
    develop a social safety net that would allow faster restructuring by
    relieving enterprises of the burden of providing social benefits for their
    workers and has been slow to develop the legal framework necessary to fully
    support a market economy and to encourage foreign investment. As a result,
    output has continued to fall.

    According to Russian official data, which
    probably overstate the fall, GDP declined by 15% in 1994 compared with a 12%
    decline in 1993. Industrial output in 1994 fell 21% with all major sectors
    taking a hit. Agricultural production in 1994 was down 9%. The grain harvest
    totaled 81 million tons, some 15 million tons less than in 1993.
    Unemployment climbed to an estimated 6.6 million or about 7% of the work
    force by yearend 1994. Floundering Russian firms have already had to put
    another 4.8 million workers on involuntary, unpaid leave or shortened
    workweeks. Government fears of large-scale unemployment continued to hamper
    industrial restructuring efforts. 

    According to official Russian data, real
    per capita income was up nearly 18% in 1994 compared with 1993, in part
    because many Russians are working second jobs. Most Russians perceive that
    they are worse off now because of growing crime and health problems and
    mounting wage arrears. Russia has made significant headway in privatizing
    state assets, completing its voucher privatization program at midyear 1994.
    At least a portion of about 110,000 state enterprises were transferred to
    private hands by the end of 1994. Including partially privatized firms, the
    private sector accounted for roughly half of GDP in 1994. Financial
    stabilization continued to remain a challenge for the government. Moscow
    tightened financial policies in late 1993 and early 1994, including
    postponing planned budget spending, and succeeded in reducing monthly
    inflation from 18% in January to about 5% in July and August. At midyear,
    however, the government relaxed austerity measures in the face of mounting
    pressure from industry and agriculture, sparking a new round of inflation;
    the monthly inflation rate jumped to roughly 15% per month during the fourth
    quarter. In response, Moscow announced a fairly tight government budget for
    1995 designed to bring monthly inflation down to around 1% by the end of
    1995. According to official statistics, Russia's 1994 trade with nations
    outside the former Soviet Union produced a $12.3 billion surplus, up from
    $11.3 billion in 1993. 

     Foreign sales - comprised largely of oil, natural
    gas, and other raw materials - grew more than 8%. Imports also were up 8% as
    demand for food and other consumer goods surged. Russian trade with other
    former Soviet republics continued to decline. At the same time, Russia paid
    only a fraction of the roughly $20 billion in debt that came due in 1994,
    and by the end of the year, Russia's hard currency foreign debt had risen to
    nearly $100 billion. Moscow reached agreement to restructure debts with
    Paris Club official creditors in mid-1994 and concluded a preliminary deal
    with its commercial bank creditors late in the year to reschedule debts owed
    them in early 1995. Capital flight continued to be a serious problem in
    1994, with billions of additional dollars in assets being moved abroad,


    primarily to bank accounts in Europe. Russia's physical plant continues to
    deteriorate because of insufficient maintenance and new construction. Plant
    and equipment on average are twice the age of the West's. Many years will
    pass before Russia can take full advantage of its natural resources and its
    human assets.


National product:
    GDP - purchasing power parity - $721.2 billion (1994 estimate as
    extrapolated from World Bank estimate for 1992)
National product real growth rate:
    -15% (1994 est.)
National product per capita:
    $4,820 (1994 est.)
Inflation rate (consumer prices):
    10% per month (average 1994)
Unemployment rate:
    7.1% (December 1994) with considerable additional underemployment



Industrial production:

    growth rate -21% (1994)
Electricity:
  capacity:
    213,100,000 KW
  production:
    876 billion kWh
  consumption per capita:
    5,800 kWh (1994)


Economic Activity

Industries:


    complete range of mining and extractive industries producing coal, oil, gas,
    chemicals, and metals; all forms of machine building from rolling mills to
    high-performance aircraft and space vehicles; ship- building; road and rail
    transportation equipment; communications equipment; agricultural machinery,
    tractors, and construction equipment; electric power generating and
    transmitting equipment; medical and scientific instruments; consumer
    durables
Agriculture:
    grain, sugar beets, sunflower seeds, meat, milk, vegetables, fruits; because
    of its northern location does not grow citrus, cotton, tea, and other warm
    climate products

Exports:

    $48 billion (f.o.b., 1994)
  Commodities:
    petroleum and petroleum products, natural gas, wood and wood products,
    metals, chemicals, and a wide variety of civilian and military manufactures
   Major Trade Partners::
    Europe, North America, Japan, Third World countries, Cuba


Imports:

    $35.7 billion (f.o.b., 1994)
  Commodities:
    machinery and equipment, consumer goods, medicines, meat, grain, sugar,
    semifinished metal products
   Major Trade Partners::
    Europe, North America, Japan, Third World countries, Cuba
External debt:
    $95 billion-$100 billion (yearend 1994)