Russia Country Analysis

Introduction 

Russia is the world’s largest country by total surface area and extends over much of northern Eurasia (BBC, 2018). It comprises much of northern Asia and Eastern Europe with the capital located in Moscow. With a total area of 17 million square kilometers, the country boasts an eighth of the inhabited land area of the Earth with a population of 142.7 million people. The dominant and national language in the country is Russian. Due to its extended size, Russia exhibits both diversity and monotony. Its soils, vegetation, and climates span great distances. The west side of the country is clad with tundra, coniferous forest, mixed forest, and semi-desert in a sequential manner from north to south (BBC, 2018). 

The vastness is advantageous to the country as it enjoys the greatest reserves of natural resources than any other country. Russia is the most abundant nation in terms of fuel which is topped by oil and natural gas. Also, it boasts of half of the world’s coal reserves. Most of these minerals are however located in remote areas with extreme climatic conditions, making mining expensive. Despite this, income from exportation of oil has kept Russia afloat and helped it overcome the economic collapse of 1998. It has coped with dual shocks sanctions and slump in oil prices (BBC, 2018). Apart from oil, the other major exports include ferrous and non-ferrous oil, minerals, and rolled steel. Also, a greater part of this share includes exports from ornaments, machinery and equipment, fertilizers, and timber. 

Vladimir Putin is the main political figure in the country and has let it since 2000. He served two terms as president, four years as the prime minister, then made it back to presidency in 2012 where he leads till date after winning the 2018 elections. Putin’s regime seeks to be different from the Soviet that was an antibusiness regulatory regime which exhibited poorly implemented reforms ( Laurinavičius, 2016) . 

Strategy  

Vision 

Russia came from the Soviet Union after suffering extended periods of problems with the other global forces like the United States. This era was marked with isolationism as the Union was independent on its own endeavors. Its vision to ensure it remains integrated as a country and cooperative with other international communities to help in the development (Liik, 2017). However, this cooperation cannot be at the expense of its sovereignty and powerful attributes, its political reputation in the world, its territorial vastness, and human and material capabilities. 

Goal 

What Russia stands and work for is largely dependent on who makes the view. According to Western perspectives, Moscow wants to either restore the old Soviet Union, unify the countries that speak Russian, and establish a control sphere around its neighborhood ( Tsygankov, 2005) . This goal is largely attributed to the fact that the country is a challenger to the Western ideologies and in constant tension with the United States. However, the line of though is sometimes problematic and inconsiderate given the policies that Russia has put in place to foster relationship with the West (Liik, 2017). Kremlin has cooperated with the West by sharing intelligence, joint energy projects, and allowance for the Western military to expand into the former region of Soviet Union. The commentaries that suggest Kremlin is trying to challenge the West are based on the notion that Russia is engaging in corruption with its (West) elites. 

Policies 

Fiscal 

Russia faces a shift of problems that makes it review its fiscal policy that came to effect in 2013. The rule was aimed at limiting government expenditure on historical oil. Instead it required the government to divert windfall oil revenues to rainy-day funds. The policy also limits the expenditure to non-oil revenues, oil revenues whose calculations are based on long-term historical oil, while maintaining a deficit that is not more than 1.0 percent of the GDP (CBR, n.d.). The falling oil prices made Russia to shelve the policy temporarily because its implementation would make reference higher prices than the ones focused in the following year. This was a move that many viewed as making Russia move away from dependence on oil exports. In addition to the shelving, the government shifted from a three-year budget to a one-year budget. 

Monetary 

Monetary policy is a critical part of the Russian state policy. The rules are implemented by the Central Bank of Russian Federation in a framework that aims at targeting the inflation and maintain price stability (CBR, 2015). CBR targets to keep inflation at 4 percent while the recent times have seen it ease up to record low of 2.2 percent. Interest rates are the primary factors of the economy and the main parameter is the CBR’s key rate. The Bank’s decisions are primarily based on the outlook of the economy and risk assessment to achieve the target of inflation over the mid-term horizon. The Central Bank of Russian federation keeps an open communication on the decisions it makes pertaining monetary policy as it considers public awareness an measure of effectiveness. 

Trade 

Russia joined the World Trade Organization in 2012 after the dissolution of the Soviet Union in 1991 (WTO, 2016). The Russian Federation was keen to transform the centrally-planned economy to the one that is market-oriented ( Ryabova, 2014) . Trade in Russia is largely controlled by the state, with state-owned enterprises (SOEs) accounting for almost half of the country’s GDP. The SOEs enjoy almost a monopoly in energy, transport, and banking sectors (WTO, 2016). Through WTO, Russia made a commitment to enhance market access for goods and services. However, several parties have complained that the country has not met the commitment hence taking part in trade disputes. The outstanding complaints are the excessive duty on imports. 

Exchange rates 

Russia employs the policy of floating exchange rate, meaning the ruble and the foreign currency trade based on the market. In other words, the trade depends on the ratio between the demand for foreign currency and its market supply. The exchange rate is not set by the central bank or the government, and it is not fixed. 

Industrial Policy 

Russia signed a new industrial policy law which became functional in 2015. The law seeks to move the country from import of industrial products in most sectors. The policy classed a transition from export-based economy to innovative type ( Podmolodina, Voronin, & Konovalova, 2015) . 

Social policy 

Regardless of the low unemployment rate in the country, stratification based on income is conspicuous making the country to be virtually divided into two. On the one hand, there is a rich majority that comprises of the elites of economy and politics ( Sundstrom & Henry, 2016) . On the other hand, there is the impoverished majority and the separation is clear. This makes the country be face on with poverty, population ages, unemployment, and income distribution issues. 

Context 

Russia is vast country that boasts the greatest natural reserves. This is a key characteristic of the country that makes it a force worth reckoning in global business. Any company would thus like to have a share of the vast spread of the natural resources. However, this is not the case with Russia as it continues to fall in ranking of countries favorable to do business. 

The key players in the economy are the government and the political elites ( Ryabova, 2014) . The situation in the country has seen the control and concentration of financial resources in the hands of the Federal Government and Kremlin. Big businesses have been kept away from influencing the political functions. 

While Russia is displayed as a vertical structure of governance, it is far from the reality as it comprises a conglomerate of clans of elites who compete for power and resources ( Yakovlev, 2014) . This means that the president makes decisions based on the interests of some players and not necessarily the society. This means that a foreign company has to play within tight rules to make it and its entry in the market in the first place is not guaranteed ( Laurinavičius, 2016) . 

Performance 

Economic 

As stated earlier, Russia has managed to withstand two price shocks due to their massive exports. This makes their economic performance high with a GDP of 1.28 trillion dollars by 2016. From 2000 to 2012, Russian income more than doubled due to the rising fuel prices and this has made them have a restricted access to the financial markets ( Ryabova, 2014) . A moderate growth rate is expected for the country after the improved investor confidence as the country is on a recovery mode from the global depression. However, there is hitch in shifting the economy from a centrally planned to a market-oriented system. 

Political 

Russian politics is difficult to understand based on its relationship with the West. Measuring its performance is therefore filled with biases based on the perspectives of the analyst. Overall, people in Russia are confident in the Putin-led government as compared to the previous regimes. This is because he has come with strategies that beat his predecessors and thus bringing Russia back to its feet after dissolution of the Soviet Union. However, there are evidence of rampant corruption and unequal enforcement of the law. 

Social 

This is the area that needs adjustment as there is a great disparity in the social makeup. The rift between the wealthy and the impoverished is huge and this is highly attributed to the unfair control and allocation of resources ( Sundstrom & Henry, 2016) . Unemployment rate is at 5.7 percent with the labor market and process different from the usual ones found in market economies. 

Company industry recommendation 

The above factors make it difficult for a foreign company to thrive in the Russian economy but there are opportunities and threats. 

Opportunity 

The vast landmass with more than 142 million people (consumers), sharp infrastructure needs, and an extensive base of natural resources provides opportunities for foreign companies to provide the services. It also forms a strong base for the thriving of exports from foreign countries. 

Threats 

The competition from the government and the elites makes it an unfair competitive environment as the government makes the policies that favor them and deal with the competition. The climatic conditions of the country render some parts inaccessible and thus the extraction of the natural resources become problematic. 

References 

BBC. (2018, March 20). Russia country profile. Retrieved April 13, 2018, from http://www.bbc.com/news/world-europe-17839672 

Central Bank of Russia (2015). Guidelines for the Single State Monetary Policy in 2016 and for 2017 and 2018. CBR online information. Retrieved April 14, 2018 from http://www.cbr.ru/eng/publ/ondkp/on_16-eng.pdf 

Central Bank of Russia. (n.d.) Fiscal Policy. Retrieved April 14, 2018 from https://www.cbr.ru/eng/dkp/ 

Laurinavičius, M. (2016). Putin’s Russia: The Nature and Contradictions of the Regime.  Lithuanian Annual Strategic Review ,  14 (1), 119-138. 

Liik, K. (2017). What does Russia want? The nature of the 'Russia challenge' – and how to address it. European Council on Foreign Relations. Retrieved April 14, 2018 from http://www.ecfr.eu/article/commentary_what_does_russia_want_7297 

Podmolodina, I. M., Voronin, V. P., & Konovalova, E. M. (2015). Main directions and mechanisms of industrial policy of Russia.  Asian Social Science ,  11 (20), 170. 

Ryabova, E. L. (2014). Russian Economy: pair cosmopolitan and national problems.  M.: International Publishing Center Etnosotsium ,  67 (1), 9. 

Sundstrom, L. M., & Henry, L. A. (2016). Russian Civil Society.  Russian Civil Society: A Critical Assessment: A Critical Assessment , 305. 

Tsygankov, A. P. (2005). Vladimir Putin's vision of Russia as a normal great power.  Post-Soviet Affairs ,  21 (2), 132-158. 

World Trade Organization. (2016). TRADE POLICY REVIEW: REPORT BY THE SECRETARIAT. RUSSIAN FEDERATION. Retrieved April 14, 2018 from https://www.wto.org/english/tratop_e/tpr_e/s345_e.pdf 

Yakovlev, A. (2014). Russian modernization: Between the need for new players and the fear of losing control of rent sources.  Journal of Eurasian Studies ,  5 (1), 10-20.