Russia country overview

The economy of Russia

Geography, People, Culture, and Economic Profile

Russia information index

The Industry of Russia

Manufacturing | Machine building

The Russian Federation’s industrial sector comprehensively meets the nation’s requirements, encompassing the production of essential machinery such as steam boilers, turbines, electric generators, agricultural machinery like grain combines, various vehicles including automobiles and electric locomotives. Furthermore, the industry substantially satisfies domestic needs for shipbuilding, the generation and transmission of electric power, consumer appliances, machine tools, precision instruments, and components for automation systems.

Additionally, Russia is a significant manufacturer of defense equipment, with a product line that encompasses tanks, jet fighters, and rockets. These armaments are not only pivotal for national defense but also represent a vital segment of Russia’s exports, enhancing the country’s foreign trade earnings.

The automotive industry, in particular, has historical roots with older manufacturing facilities situated in Moscow and Nizhny Novgorod. Among the most prominent of these plants are located in Tolyatti, adjacent to Samara, and in Naberezhnye Chelny within the Republic of Tatarstan, known for its heavy truck production. Moreover, there are smaller-scale manufacturers that contribute to the diversity of road vehicles, operating in cities like Miass, Ulyanovsk, and Izhevsk.

Manufacturing | Chemicals

Due to the intricate evolution of chemical industry practices and the extensive range of raw materials utilized, the production of chemicals is notably decentralized. Historically, the industry has leveraged a diverse array of raw materials, including mineral salts, gases from coke ovens and smelters, timber, and agricultural products, predominantly potatoes. Consequently, synthetic rubber manufacturing facilities were established in the Central Black Earth and Central regions, which are known for their substantial potato cultivation. Additionally, sulfuric acid production was concentrated in the Urals and the North Caucasus, regions synonymous with nonferrous metallurgy, while the construction of potassium and phosphatic fertilizer facilities was strategically placed near reserves of potassium salts and phosphorites across various locales.

With the surge in oil and gas availability during the latter half of the 20th century, the chemical industry experienced a shift, leading to the erection of new plants, especially in the Volga, Ural, and North Caucasus regions, as well as other areas with pipeline infrastructure. This development has somewhat diminished reliance on the traditional raw materials. Industries that demand substantial amounts of electricity, such as those processing cellulose, have become particularly prominent in Siberia, where there is an abundance of both timber and power resources.

Despite these advancements, it is important to note that the scale and variety of Russia’s chemical industry do not yet match those of leading global players such as the United States, Canada, China, and the nations within the European Union.

Manufacturing | Light industry

The textile sector is notably concentrated within European Russia, particularly in its Central region, which is responsible for a significant portion of the nation’s production of garments and footwear. The industry is predominantly focused on cotton textiles, with the majority of the raw cotton being sourced from countries in Central Asia. In the geographical area extending between the Volga and Oka rivers, to the east of Moscow, one can find a cluster of towns renowned for their cotton-textile production. Among these, Ivanovo, Kostroma, and Yaroslavl stand out as the most prominent. Additionally, the manufacture of long-lasting consumer products such as refrigerators, washing machines, radios, and television sets is typically concentrated in regions with a longstanding heritage of technical expertise, with the areas in the vicinity of Moscow and St. Petersburg being particularly noteworthy in this regard.


The Russian Federation’s official currency is the ruble, which has achieved the status of being fully convertible. This represents a significant shift from the previous era of the Soviet Union, where the currency was subject to artificially maintained exchange rates and stringent controls. The regulatory framework for the nation’s monetary policy falls under the purview of the Russian Central Bank (RCB), an institution that succeeded the Soviet-era Gosbank. The RCB’s mandate is to ensure the stability and protection of the ruble, primarily through its management of foreign exchange reserves.

Following the adoption of the 1993 constitution, the Russian Central Bank was endowed with increased independence from the federal government, surpassing the autonomy that Gosbank had. Nevertheless, the appointment of the bank’s governor is made by the president and requires confirmation by the State Duma. In 1995, the RCB’s authority was expanded to encompass the supervision of all banking activities, the determination of exchange rate policies, the issuance of banking licenses, and the management of the nation’s debt obligations. To bolster its foreign currency reserves, the RCB mandates that exporters convert 50% of their hard currency revenues into rubles. Additionally, the mid-1990s saw the RCB implement a rigorous system for the oversight and examination of the country’s commercial banking sector.

The Russian financial system experienced considerable turmoil during the 1990s, with the proliferation of new banks post-communism leading to widespread insolvency, especially during the economic downturn at the decade’s end. Despite efforts to consolidate the banking sector, the early 2000s saw the presence of over a thousand Russian commercial banks, many of which were either state-controlled or provided limited financing options for small to medium-sized enterprises. Furthermore, the Russian banking landscape includes a substantial number of foreign banks.

State-run commercial banks in Russia, like Vneshtorgbank and Sberbank, emulate the RCB in both their operational philosophy and their commitment to financial stability. The banking sector has faced criticism for perceived cronyism, with allegations of favoritism towards a select group, including former members of the communist regime. Prior to the banking crisis in the late 1990s, there was a surge in private commercial banks, which predominantly served as financial intermediaries for Soviet-era enterprises. By the dawn of the 21st century, two primary banking groups had emerged: one serving the oil and gas sector, including institutions like the National Reserve Bank and Gazprombank, and another serving the Moscow government, composed of the Bank of Moscow and several other key banks.


During the era of the Soviet Union, the Russian Federation engaged in substantial trade with its fellow Soviet republics. It imported an array of goods that were not produced domestically in adequate volumes. Notably, it sourced cotton from Central Asia, various high-value agricultural products, grain predominantly from Kazakhstan, and an assortment of minerals. Conversely, Russia provided oil and gas to energy-deficient republics such as Belorussia (presently Belarus) and the Baltic nations, while also distributing its advanced engineering products and consumer goods across the majority of its trade partners.

Post-Soviet trade dynamics altered significantly by the late 1990s, as the former union republics ceased to trade systematically, largely due to the inability to agree on pricing for goods that were previously exchanged at subsidized rates. Nevertheless, Russia has typically maintained a favorable trade balance with the erstwhile Soviet republics.

In the Soviet period, international trade was relatively restricted until the 1960s, predominantly conducted through bilateral and multilateral agreements within the framework of the Council for Mutual Economic Assistance (Comecon), an economic organization led by the Soviet Union comprising communist Eastern European nations. As the Soviet Union’s economic growth decelerated in the 1970s and 1980s, it became evident that progress necessitated substantial volumes of advanced technology from Western nations. To fund these imports, the Soviet Union required an increase in hard currency, which was primarily acquired through escalated exports to Western countries, thus making Russia increasingly dependent on oil and gas exports for its foreign currency reserves. Following the dissolution of Comecon and the Soviet Union, the individual republics began establishing their own trade relations globally. Russia, with its vast oil, gas, and mineral reserves, appeared well-positioned to sustain the type of trade relations with Western nations that had been developed during the Soviet era.

In 1994, Russia fortified its economic connections with the European Union through a formal agreement and subsequently engaged in economic dialogues with the Group of Seven (G-7), which encompassed the world’s most developed economies. In 1997, Russia was accepted into the Group of Eight (G-8), although its membership was indefinitely suspended after the annexation of Crimea in 2014. Russia’s protracted bid to join the World Trade Organization materialized in 2012. In January 2015, Russia was a founding member of the Eurasian Economic Union, a trade bloc also including Armenia, Belarus, Kazakhstan, and Kyrgyzstan, envisioned as a counterbalance to the European Union’s political and economic expansion into the former Soviet realm.

Foreign trade is of paramount significance to Russia’s economy, which has consistently experienced a trade surplus since the Soviet Union’s dissolution. Russia’s primary exports encompass oil, metals, machinery, chemicals, and forestry products, while its chief imports include machinery and foodstuffs. Among Russia’s principal trading partners are Germany, the United States, Belarus, Ukraine, and China.


In the era of the Soviet Union, the service industry experienced significant deficiencies. The monopolistic, state-run service entities lacked the motivation to cater to consumer preferences and were beset by an overbearing bureaucratic structure. Following the dissolution of the Soviet Union, the emergence of the private sector within the service industry marked a considerable expansion, effectively addressing and mitigating many of the scarcities prevalent in the prior period. By the onset of the 21st century, the service sector contributed to over half of the Gross Domestic Product (GDP).

Despite these advancements, the public sector’s delivery of services continues to face criticism, with particular focus on the domains of law enforcement, educational institutions, and medical facilities. Fiscal constraints have resulted in inadequate funding for these public services, which has led to challenges in maintaining a workforce with the necessary expertise.

The travel and tourism sector in Russia is a significant employment generator, providing jobs to several million individuals. Annually, Russia welcomes approximately 20 million international visitors, a number that includes seasonal laborers from countries that were once part of the Soviet Union. Russian citizens, now unrestrained by the limitations of the Soviet regime, have shown an increased propensity for international travel.

Labour and taxation

Prior to the dissolution of the Soviet Union, the workforce was ostensibly represented by the All-Union Central Council of Trade Unions, though this body was under the control of the Communist Party in power. During the 1980s, there was a notable increase in labor disputes, particularly among miners, leading to an extension of worker rights. Following the end of the communist regime, labor relations have experienced continuous transformation, with several labor codes being enacted. The 2001 trade union reforms granted the Federation of Independent Trade Unions of the Russian Federation, which encompasses approximately 50 million workers across diverse sectors, a near-exclusive right to conduct union activities. This reform made it challenging for alternative trade unions to function unless they could claim representation of at least half the workforce within an enterprise.

In terms of employment distribution, a significant segment of the labor force remains in the primary sector, with an eighth engaged in agriculture and a fifth in mining and manufacturing. Nevertheless, the service sector, which includes banking, insurance, and other financial services, has expanded significantly and now employs around 60% of the Russian workforce.

Tax legislation has seen substantial changes since the Soviet Union’s dissolution. The government initially struggled to collect its rightful share of revenue due to high tax rates, widespread undeclared earnings, particularly those associated with organized crime, and prevalent fraud. In response, the early 21st century saw the government streamline the tax framework and lessen the tax burden, especially for businesses, in an effort to deter fraud and stimulate investment. This included a reduction of corporate taxes by approximately one-third, the introduction of a flat income tax rate, and a decrease in the value-added tax on goods sales. Additionally, a consolidated tax on natural resource extraction was implemented to replace three previous taxes. Despite these changes, the value-added tax remains a significant source of government revenue.

Transportation and telecommunications

Russia’s expansive geography and the considerable distances between its sources of raw materials and consumer markets exert significant pressure on its transportation infrastructure. Consequently, railways maintain a predominant role in the nation’s logistics, handling approximately 90% of freight turnover—60% when including pipeline traffic—and 50% of passenger travel. However, the distribution of the rail network is uneven, with the highest density in the Northwest, Central, and Central Black Earth regions, and the lowest in East and West Siberia and the Far East. Approximately two-thirds of the railway network aligns with the primary settlement belt. The rail density in European Russia is nearly seven times greater than in the Asian part of the country, where the term “network” is somewhat misleading due to the limited number of major routes, such as the Trans-Siberian Railroad and the Baikal-Amur Mainline, supplemented by branches to economically significant locations. Russian railways, which are predominantly state-controlled through a joint-stock company, are global leaders in freight transport, notably the line from the Kuznetsk Basin to the Urals, despite a significant portion of the rolling stock being outdated.

The road network, aside from the main highways connecting European Russia’s major cities, is relatively underdeveloped and accounts for a minimal share of freight transport. The ownership of private automobiles, a post-Soviet symbol of middle-class status, remains relatively low. In contrast, inland waterways, particularly the Volga system, handle a more substantial volume of freight and are crucial in regions lacking railway access. Maritime transportation is also key, not only for international trade but for connecting Russia’s various regions, especially those along the Arctic coast, although navigation is restricted to seasonal periods.

Air transportation is becoming increasingly critical, especially for transporting high-value goods to and from Siberia’s most isolated areas, where it may be the sole option. Airlines contribute to nearly 20% of passenger travel, with Aeroflot-Russian Airlines, the successor to the Soviet state airline and still majorly owned by the Russian government, being the largest operator. The nation’s primary airports are Sheremetyevo and Domodedovo in Moscow, and Pulkovo in St. Petersburg, with Sheremetyevo losing some traffic to the newer Domodedovo. Most significant cities offer flights to international or domestic destinations.

In comparison to other industrialized nations, Russia’s telecommunications sector has been less developed. In the early 1990s, only about one-third of Russian households had a telephone. Nonetheless, foreign investment has substantially enhanced the telecommunications infrastructure. The State Committee on Communications and Informatics, established from the merger of the Ministry of Communications and the State Committee on Information Technology in 1997, has been instrumental in regulating the sector, promoting liberalization, and fostering competition. By the early 21st century, over a thousand telecommunications companies were in operation, although a few large firms, such as Svyazinvest and Rostelkom, dominate the industry. Internet usage in Russia, initially slow to expand in the 1990s and mainly concentrated in urban centers, has since experienced more consistent growth.

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