Russia - Economic analysis of government policies, investment climate and political risk.






RUSSIA: Economic Policy Analysis

This site presents four analyses of the Russian government's economic policies compared to a revised list of 34 economic policies as prepared by Irina Khakimova, Kristina Zeltser, Alex Shkurko and Zula Hadaeva with the McKeever Institute of Economic Policy Analysis (MIEPA) in Fall 2011. To read the analyses scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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The studies are by Irina Khakimova, Kristina Zeltser, Alex Shkurko and Zula Hadaeva, four Russian natives who currently [December 2011] live in San Francisco; these studies present the Russian government's economic policies as compared to the MIEPA list of policies as outlined above. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2011. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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Comparison of Russia's economic policies to MIEPA criteria as prepared by a native student of Russia Irina Khakimova studying in the US in December 2011.



        1               3.0           9.0             15.0        60 %

        2               2.0           6.0             15.0        40

        3               1.0           3.0             15.0        20

        4               3.0           9.0             15.0        60

        5               2.5           7.5             15.0        50

        6               4.0          12.0             15.0        80

        7               2.0           6.0             15.0        40

        8               4.5          13.5             15.0        90

        9               2.5           7.5             15.0        50

        10              5.0          15.0             15.0       100

        11              1.0           3.0             15.0        20

        12              3.0           6.0             10.0        60

        13              3.0           6.0             10.0        60

        14              4.0           8.0             10.0        80

        15              3.5           7.0             10.0        70

        16              1.0           2.0             10.0        20

        17              3.5           7.0             10.0        70

        18              0.0           0.0             10.0        00

        19              2.0           4.0             10.0        40

        20              2.0           4.0             10.0        40

        21              3.5           7.0             10.0        70

        22              2.0           4.0             10.0        40

        23              1.0           2.0             10.0        20

        24              2.5           5.0             10.0        50

        25              1.0           2.0             10.0        20        

        26              1.0           2.0             10.0        20

        27              3.0           6.0             10.0        60

        28              3.5           7.0             10.0        70

        29              3.0           3.0              5.0        60 

        30              3.0           3.0              5.0        60

        31              2.5           2.5              5.0        50

        32              3.0           3.0              5.0        60

        33              2.0           2.0              5.0        40

        34              2.0           2.0              5.0        40

   TOTAL               85.5         186.0            365.0        51.0%
                      =====        ======            =====        =====

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Country Study: Russia

1. Freedom from internal control: 3.0

People in Russia are free to move, travel, and change the place of permanent living according to the article 27 in the Constitution of Russian Federation. It states, “1. Everyone who is lawfully in the territory of the Russian Federation has the right to freely move and choose a place of stay or living. 2. Everyone may freely exit the territory of the Russian Federation. [Every] citizen of the Russian Federation may return onto the territory of the Russian Federation without hindrance." However, the freedom from internal control is still has gray areas. A permit of residence, known as Propiska had been adopted by USSR in 1922 with a purpose to control the national migration. It had been essential part of a living for a soviet people, even after the liberalization of passport system in 1974 when all USSR citizens received passports. Propiska was abandoned in 1993 after acceptance of Article 27; however, it was replaced by Registration of a place of living. The differences between these terms are minor: such as conditions of acquiring and procedures. The main difference of registration is its notifying character; a person, living in a place more than 90 days must register for permanent or temporary registration. In case of permanent record, the stamp is made in the passport. It is against the law for a Russian citizen to dismiss the registration and it is against the law for employer to hire a person without registration.

It is relatively easy to register in all areas of Russia, except Moscow. It is impossible to find a legal job without acquiring Moscow registration first. There are several ways to get Moscow registration: such as purchase of a property (condominium, apartment, etc), make investments in a future real estate project, receive registration in a place of living of any relative living in Moscow, and get married to a Moscow registered person. Many of these conditions are unrealizable; therefore, a great deal of illegal activities exists in the methods of acquiring the registration. One of them is the companies, holding an ownership on a property, sell registrations. It means that they assign many people to the same unit for the greater profit. These practices are illegal and reinforce corruption.

Source: 1. Personal Experience ; 2.

2. Freedom of Speech: 2.0

Freedom of speech in Russia is relatively new conception. It is obviously did not exist on practice during Soviet Union, but after Perestroika took place (1985-1991) the notion of the freedom of speech has emerged. Up to date, the freedom of speech is still greatly filtered by the government. In the example from the most recent news, on September 25th, 2011 Aleksey Kudrin, the Minister of Finance in Russia, in the conference of International Monetary Fund in Washington, in a response to a journalist’s question stated his personal disagreement with President Medvedev’ politic in regards to the dependence of Russian budget on oil prices. In return, on September 26th, 2011 Medvedev proposes Kudrin to resign. The assaults on journalists who criticized government’s actions were widely discussed in a press and world politics. As in the case of outspoken Russian journalist Anna Politkovskaya, well known for her criticisms of Russia's actions in Chechnya and “the pro-Russia Chechen government, was shot in the lobby of her apartment building in 2006”.

Source: 1) Personal 2) Novaya Gazeta (Russian Newspaper)

3. Effective Fair Police Force: 1.0

Police in Russia is not as effective as in other developed countries. Many crime cases pile up for years and never get investigated and brought to justice. Therefore, criminal gangs have more chances to be formed as there is no effective police. The big problem in Russian police is its corruption. For example, many drunk drivers create accidents or kill people, but not always get punished because in many cases the police let them go after taking the bribe. In another case, drunk driver would get a very limited punishment such as insufficient fine. Another problem is that Russian police can be violent. Police violence is not new in Russia, but a recent wave of publicity is. A simple explanation is that police lawlessness has exhausted people’s patience and that pent-up anger has finally burst into newspapers, websites and even state television. The internet makes it harder to hush things up. Earlier this month a Moscow motorist posted a video online alleging that he and several other drivers were used as human shields by traffic police trying to catch an armed criminal.

Dmitry Medvedev has been quick to respond. He has fired Moscow’s police chief, ordered an overhaul of Russia’s arcane gulag system and called for reform of the interior ministry. Yet this reform involves cutting police numbers by 20% and centralising control over regional police. The problems seem so deeply integrated that it is hard for citizens to believe in fairness of justice and the protection of police.

Source: 1) The Economist. Cops for hire. Reforming Russia’s violent and corrupt police will not be easy (2010). ; 2) Personal

4. Private Property: 3.0

To register the property (privatize) in Russia, a person needs to go through the established beurocracy in order to obtain all documentation. There are three elements of privatization, and they are conducted by different agencies. Therefore, the government is discussing the way to unify the process into one agency, so privatization would be less time consuming. It is planned to realize by 2013.

According to Igor Shuvalov, the country's powerful first deputy prime minister that in charge of anti-crisis management, Russia needs to improve private property protection. Respect for property rights, although it has improved somewhat, has remained a key concern for foreign investors in Russia, along with a complex legal system, corruption, rule of law and corporate governance.

Source: Ria Novosti – National News (

5. Commercial Banks: 2.5

One of the ways to obtain a capital for business development (majorly small businesses) for companies in Russia is to receive a credit from commercial banks. Only 10-15 % companies would obtain credit from the bank. Banks experience profit from lending money to enterprises, so the question is why companies do not borrow the money from banks? Here, 5 reasons that were reported by businessmen: the interest rates are really high, short terms of credit repayments, lack of starting capital in a business, lack of credit offers, difficulties (bureaucracy) and the long period of time that it takes to obtain credit.

Source: Support of Russia (Russian Business Society)

6. Communication Systems: 4.0

Overall, Russia has a well developed system of communication. With integration of the new technologies, cable TV, Internet and phone are available almost in every urban area. Russia's telecommunications system is in the midst of the global telecommunications revolution. The country's phone system has undergone significant changes since the breakup of the state phone monopoly in 1990. By 2000, there were over 1,000 companies licensed to offer communication services. During this period access to digital lines has improved, particularly in urban centers. Internet and e-mail services are now widespread and rapidly improving. In a few short years, Russia made significant progress toward building the telecommunications infrastructure necessary for a market economy. Three undersea fiber-optic cables connect Russia to the international phone system. In 2012 government plans to provide the post office “Post of Russia” in every populated area, including “difficult of access” regions.

Source: 1) Encyclopedia of the Nations ( ; 2) Personal

7. Transportation: 2.0

Transportation is a troublesome issue for Russia. It is majorly outdated, because many kinds of transportation such as streetcars, buses, trains and airplanes were inherited from Soviet Union and still in use. Transportation also greatly varies depending on the region, its distance from the “Center” and climate. There is 11 regions in the country that are considered “difficult of access”, primarily parts of Siberia, North-East of the country. At winter time in small populated areas no roads are available for any ground transportation, so the delivery of good (groceries mainly) are conducted through the air.

Transportation in the urban areas is outdated and breaks down very often. There is no system of navigation in Russia, such as it exists in many European countries and USA, where you can see from the computer, cell-phone or at the bus stop the time for the next arriving vehicle. In fact, navigating system has been recently installed in Khabarovsk, this is the first city that has this luxury that is for other foreign countries is simply a common thing and necessity.

Source: Personal

8. Education: 4.5

Education plays a crucial role in determining social status in Russia. People who leave school after eight years generally can find only unskilled jobs. Even those who complete secondary education may rise no higher than skilled labor or low-level white-collar work. A college or university education is necessary for most professional and bureaucratic positions and appears to be highly desirable for a position of political power.

Ususally, elementary, secondary and high schools in Russia are united in the same building, so kids go to the same school till the graduation date. The school education is very good, it installs a good basis for University education. Schools are free, even majority of gymnasiums (better and more demanding schools) and specialized (for example, school with language bias) are also free. The problems begin in Universities, where corruption is vey common. In order to get into prestigious University, student’s family should have connections and pay the bribes to member of a selective committee or other responsible individual. Of course, not everywhere the corruption exists. Therefore, almost every University offers budgetary (free) study. There is two ways to enter the University: students who pay for education (payers) and students who study for free (budgetary students). And this considers the same school and the same curriculum. So, the entering exams are harder for students who apply for free education.

Source: Personal

9. Social mobility: 2.5

The most efficient way to increase earning capacity in Russia is, unfortunately, to steal. Of course, this is not always the case, and there is a lawful way to success, however, many barriers come on the way. Firstly, it’s hard (sometimes impossible) to get a good job without connections. Especially, top positions in the company come through the people of special interest. The principle “elite is for elite” is widespread in Russia, so it makes it really hard for people from deprived (poor, disabled, orphans, etc) background to become wealthy. As opposed to American ideology “everybody can make it”, Russian ideology would be “You can try. How many connections you have?”

Source: Personal

10. Freedom from outside control: 5.0

Russians are subjects only to the Russian Common laws and the Constitution of Russian Federation.

Source: Personal

11. Protection of domestic enterprises: 1.0

During Soviet Union, protectionist politic strictly controlled the import of the country. The accent was on domestic production as the major source for the country. After the collapse, the situation changed and the gates became open for foreign goods. While import dramatically increased, country’s production power experienced stagnation. In 2009 Russian government actively used methods of customs tarrif. Reseccion in 2008 made the government change its focus from providing regular and fiscal function to “anti-crisis methods of economics and support of domestic enterprises”. Overal, tariffs on more than 350 goods were increased. This increased the prices of goods. The cost of Russian industry is very high compare to foreign competitors, and particular industries, for example cars, have a very low quality, therefore only by investing, reforming, and creating new industries, it is possible to have adequate system of domestic enterprises’ protection.

Source: 1) Personal ; 2) Russian Business.

12. Foreign Currency Transaction: 3.0

The Civil Code provides that the Russian ruble is the national currency of the Russian Federation.

Although agreements may refer to the ruble value equivalent to foreign currency, all transactions conducted in Russia should be made in rubles, but the use of other currencies is also possible in practice. The Russian ruble is fully convertible within Russia and the Commonwealth of Independent States. Russia has accepted the International Monetary Fund rules for the full convertibility of the ruble for international transactions, but there are still some restrictions in place for the time being. However, not all transactions in the country are conducted with roubles.


13. Border Control: 3.0

The Border Service of Russia, also called the Border Force of Russia is a branch of Federal Security Service of Russia tasked with patrol of the Russian border. Following the collapse of the Soviet Union, Federal Border Guard Service of Russia was created on December 30, 1993 and given a status of separate ministry. On March 11, 2003 Russian president Vladimir Putin changed the status of Border Guard Service from a separate ministry into a branch of Russian Federal Security Service.

Every day on the protection of national borders more than 11 thousands of frontier squads take over, tens of crews of the boundary ships, boats, planes and helicopters. Extent of borders of Russia - more than 61 thousands kilometers. From them about 14.5 thousands - an overland site.

Even though Russian borders are highly protected by guards and all goods have to go through the customs control on the way in and on the way out, the smuggling is very common. Among goods that are subjects to smuggling that are going out of country are: energy resources, strategic stocks, the non-ferrous metal, weapons and the ammunition of Russian manufacture, antiques, seafood, medical supplies, etc. Among good that are subjects to smuggling that are going into the country are: alcohol, tobacco, cars, guns, high explosive ammunition, drugs, etc. Some of the reasons of smuggling in Russia is the size of the country. Russia is so big that from the entire 61 thousands kilometers of its national borders, 14 thousands kilometers are not registered in accordance with international principles of law and not equipped in accordance with proper engineering methods. The other reason is that a difficult socio-economic and political condition in frontier areas compels people to smuggle goods across a border.

Source: 1) Komsomolskaya Pravda (Komsomol Truth – National Newspaper) From the interview with the Head of the Border Guard Service, general-colonel Vladimir Pronichev ;. 2) Gerasimov I. Smuggling As a Danger to National Safety. “Self-Government” (magazine).

14. Currency: 4.0

Russian National Currency is Rouble. It was used during Soviet Union also. However, after the collapse of Soviet Union, the discussion about implementation of a new singular currency for all ex- soviet republics, now independent countries has been articulated in press and politics many times. Now, the implementation of the new currency for Russia, Belorussia and Kazakhstan (Customs Union) is discussed widely and even has chances to begin practice in near future. One of the biggest incentives of the new currency will be in elimination of huge losses when the settling between countries of Customs Union are conducted in dollars through American and Western-European Banks where the commissions from the transactions stay, and it also takes few days to complete transactions. Losses on the side of the countries of the Customs Union are spectacular. The question is whether the new unified currency will be rouble or absolutely new currency is still open.

Source: Kira Ginzburg. Single Currency for Customs Union. Radio “The Voice of Russia”. 2010.

15. Cultural, language homogeneity: 3.5

Russia is a multinational country. On its territory live 160 nationalities, majority from which are located on particular small regions. Only seven nationalities have population more than 1 million: Russians, Tatars, Ukrainians, Bashkirs, Chuvashs, Chechens and Armenians. Russians, of course, are mostly represented - 80%, other percentages are spread between Tatars – 3.8 %, Ukrainians – 3 %, Chuvashs – 1.2 %, Belarusians – 0.8 %, Mordvins – 0.7 %, Germans and Chechens – 0.6 % each, Avars, Jewish – 0.4 % each and many others represented in small numbers. All these nationalities have their own language and cultural traditions. Racism in Russia is pretty new thing. It appeared after the collapse of Soviet Union in 90s. Extremist criminal groups (for example Skinheads), whose motto is “Russia for Russians” attack national minority groups, especially victims become people of not Slavic appearance, originated majorly in Transcaucasia, Africa, Asia and Arabian world. Impunity towards these crimes is common in Russia

Among other national scandals, in 2008 Georgia filed an action to International Court of Justice against Russia, accusing Russia in discrimination of Georgians under ethnic condition in Abkhazia and South Ossetia. In 2011 International Court of Justice denied the claim. Georgia claims that Abkhazia and South Ossetia as a part of Georgia, occupied by Russia.

Source: Wikipedia ; Personal

16. Political Effectiveness: 1.0

Research organization Legatum Institute publishes every year a list of 101 countries in the world by the degree of prosperity. Of course, the top five positions in 2010 hold (as usual) Norway, Denmark, Finland, Australia and New Zeeland. Russia holds 63rd place, but among the indicator “effectiveness of the government” is placed on shameful 101 place. The list proved the old truth: it’s hard to prosper in the big country. From the countries with big population, only USA could enter the top ten. Political effectiveness is simply zero in Russia. The factors such as the huge size of the country, neglecting of political duties from officials, pursuing own interests, corruption are the key words in the system of Russian problem solving. Moreover, Russian rural areas, as godforsaken places, experience political chaos: while in urban areas (especially at the centre of the region) things could be done after a long time, it is almost impossible in rural areas. For example, the Russian law states that stores can not sell alcohol and cigarettes to people under 18 years old, and the age should be confirmed by identification document. However, in reality, in the rural areas this law is greatly abused because of the lack of control.

Source: 1) The list of countries by prosperity by Legatum Institute ( ; 2) Personal

17. Institutional Stability: 3.5

After the collapse of Soviet Union with its communism ideology, Russian Federation followed the road of democracy. The political regime is called now “Authoritarian Liberalism” which is due to the duality of modern political governance: combination of authoritarian and democratic forms. Therefore, it is hard to reach stability in political system. However, now Russian Central Government is much more stable compare to the XX century. It is almost impossible to imagine independent activization of regional political powers that is going against the “Central” government. Regional political elite perfectly understands that any attempts of conducting own policies are fraught with serious consequences for them.

Source: “Social-Political Stability of Russia” (from the archive of Saint Petersburg State University)

18. Honest Government: 0.0

Corruption in Russia is like a national tradition: deeply integrated in all sectors of the government, business and social spheres and ineradicable. As I am writing this, today on December 3, 2011 was the national elections to the State Duma (Russian Parliament); people vote for parties among of 7 political parties in the country. Results of the elections at the end of the day: Edinaya Rossiya (Nationalist Party represented by Dmitry Medvedev and Vladimir Putin) – 50.5%; the second place scored Communist Party – 19.8 %, followed by the party “Spravedlivaya Rossiya (Fair Russia) – 12.8 %. General election attendance was 60.2 %. Of course the elections were rigged. Firstly, the attendance is much lower in reality because people are tired of this circus (this is actually how elections are called among citizens) and everybody knows that their personal vote would not matter at the end because forged votes will make Putin’s party to win anyways (there is a joke about this election’s electoral attendance in Russia: “Electoral attendance was 73% on the Far East of Russia. Voted: prisons, mental hospitals and cemeteries”). As shocking as it is, there are many videos, video reports in the internet available about violations (which are crimes by the Constitution), and forging of the elections. Such as, for example, in electoral district # 2501 in Moscow, when Returning Officers (Electoral Committee) arrived at the morning they found out that ballot boxes were already 1/3 full with votes. After calling the police that didn’t know what to do, and people were waiting to vote but could not do it because of the violation, the decision was made to confiscate one ballot box for investigation and leave the rest (already 1/3 full with illegal votes for Nationalists party) for people to drop their personal ballots: all mixed in together and counted. At the other Electoral district, member of electoral committee was seen and videotaped when he was quietly marking a pile of ballots. Corruption is a long topic for Russia that is spread out through the every matter.

Source: Personal (and results of the elections on December 3, 2011)

19. Common Laws: 2.0

The Russian judicial system consists of the Constitutional Court, courts of general jurisdiction, military courts, and arbitrage courts (which hear commercial disputes). The Constitutional Court of the Russian Federation is a court of limited subject matter jurisdiction. The system of general jurisdiction courts includes the Supreme Court of the Russian Federation, regional level courts, district level courts and justices of the peace. In spite of some efforts to increase judicial independence (for example, through a considerable salary increase for judges several years ago), many judges still see their role not as impartial and independent arbiters, but as government officials protecting state interests.

The Russian legal system is widely seen as one in which judges act under direct government orders, setting aside legal rules for political ends. The Yukos bankruptcy case is a classic example, and by no means exceptional. Moscow’s willingness to use tax law to bludgeon businesses into making payments to the authorities — whether legally due or not — is widespread. Thus it is not surprising that foreign investors think long and hard before investing in Russia. Nor is it surprising that opinion polls indicate that Russians have little faith in their courts.

Source: 1) U.S. Department of State. Bureau of Public Affairs ( ; 2) The New York Times. Russia’s Courts of Last Resort by Alan Riley (a professor of law at City Law School, City University, Grays Inn, London).

20. Central Bank: 2.0

Central Bank of Russia has lost some of its independence since Putin came to power. As soon as Putin got elected, he immediately placed Central Bank under the thumb of the Ministry of Finance by nominating Deputy Finance Minister Sergei Ignatiev (to replace Gerashchenko). Ignatiev is politically beholden to both Putin and Finance Minister Aleksei Kudrin, which means that Central Bank is majorly controlled by government. Since then, several other Ministry of Finance Officials moved to the top positions at Central Bank. Unfortunately now, Central Bank basically lost control over its monetary policy. For example, CB adopted a “anti-rouble” policy by understating the course of the rouble (in reality, the relation of rouble to US dollar should be 15:1). This is actually violation of the Constitution of Russian Federation by the article # 75 that one of the major duties of Central Bank is protection and providing stability of rouble. Unfortunately, monetary politic of Central Bank is aimed now on the support of largest oil and other natural resources corporations. For them it is more profitable with this working policy to receive income in dollars and cover expenses in roubles.

Source: 1) “Does Central Bank independence matter in Russia?” ( ; 2) New Region (Russian online newspaper)

21. Management of domestic budget: 3.5

Key macroeconomics indicators for domestic budget of Russia for 2011 are: income is 8.8 trillion roubles (17.6 % of GDP), expenses – 10.6 trillion roubles. Thus, deficit is 1.8 trillion roubles (3.6 % of GDP) that below level of previous year. This is the second decrease in the country’s budget deficit in 2011, which was caused by a rise in oil prices. The government plans to cover the deficit mainly at the cost of state loans in the internal financial market and money from privatization of the federal property. Besides, government plans to issue bonds of the Russian Federation in the international financial markets in the sum of 7 billion dollars annually within three years. In projection for 2014 Vladimir Putin said that budget will not have a deficit.

Source: The Voice of Russia (

22. Government Debt: 2.0

According to the Central Bank of Russia, the government debt by April 1st, 2011 was 504 billions of dollars, which is 30% from GDP of the country. The debt is growing with accelerated speed. The growth of the debt is due to the foreign investments; seem like a good thing from the first sight, but in reality, 90% of these investments are short-term debts. Some investment produce negative effect on country’s economic, such as investments in national industry (power, manufacturing, etc). For example, in this way were destroyed Russian manufactures of auto parts.

Source: Svobodnaya Pressa (Online Newspaper)

23. Economic Statistic: 1.0

Federal Agency of National Statistic (Rosstat), the agency under the authority of Ministry of Economic Development of Russian Federation provides information on social, economic, demographic and ecological position of the country and also provides supervision in a field of statistical activity in Russian Federation. In general, for the past few years, the economic statistics looks favorable. However, as a coincidence, just in time when I researched on this topic, Russian web sites were booming with a new scandal. The former head of Scientific Research Institute of statistics Vasily Simchera with words: «Tired to lie! » has presented the real data. He published own table of “real” data and followed comments on the pages of “Soviet Russia” magazine. The data is quite shocking. Some of the data from Simchera’s table:

Percentage of investments in gross national product %. Officially: 18.5 %. Actually: 12.2 %. Overestimation of investments into economy creates a picture of false well-being. Actually, in the country the economy works by a principle "bought-sold-stolen".

Average inflation for a year. Officially: 6-8 %. Actually: 18.27 %. For a long time it is known, Simchera comments that the rise in prices for essential commodities in Russia occurs much faster, than on the average on all goods and services. Therefore inflation for poor (social inflation) is much higher than for rich. The poorer a family, faster growth of prices. He also explains that therefore it is not surprising, what even the government recognizes the disparity of growth between poor and rich.

The table “Dual estimations of the indicators of development of the Russian economy in 2001-2010» provides other indicators that majorly question the accuracy of Rosstat’s data. The question is “Where is the truth?”

Source: 1) ; 2) Personal

24. Protection of public health and safety: 2.5

Russian system of public health and safety need serious modernization. Vladimir Putin addressed the problems of public health in the conference of regional programs of public health modernization. Firstly, according to the survey, 65% of population in Russia is not satisfied with a quality of hospitals and clinics, primarily in rural areas where there is not enough medical equipment, or it is seriously outdated, or there are not enough doctors. Moreover, the qualifications of medical stuff, the methods of diagnosis and treatments are majorly outdated as well. 41% of building of clinics and hospitals need reconstructions and capital repairs. Shocking statistic is that 8.5% of medical institutions in the country do not have water supply system; 32.5% - do not have hot water supply, 10% - do not have central heating and 6.7% even do not have a phone cable.

The national project “Health” was launched in 2005 in Russia with 590 billions roubles of invested capital. Positive changes were achieved after 5 years of the project: life expectance has been increased on 3.7 years and now it became 69 years; infant mortality has been decreased on 26%. In the next two years the government is planning to finance the project for 460 billions roubles. According to UN standards on improved drinking water coverage Russia is given 96%, even though the percentage seems high, the disparity between rural and urban areas are very significant. The analysis of the tests on the quality of the drinking water shows that about 25-30% of water has hazardous qualities to health because it does not correspond to the sanitary code of the country.

Source: 1) The conference with Vladimir Putin in Ivanovo on modernization of public health - November 2010 ( ;. 2) United Nations Statistics Division (

25. High Wage Policies: 1.0

The wages in Russia are incredibly low, especially in comparison with prices. The avarege monthly salary for an University graduate with more than 5 years of experience in a big city is 15,000-20,000 roubles (excluding Moscow, North-Western and Far East of Russia where the highest salaries are). In a smaller towns or villages the salaries are even lower, approaching the minimum wage that is 4,611 roubles. This is the poverty level salary for the counrty; the earnings of western Europians seems highrocking in comparison. The salaries in Russia are very uneven throughout the county, generally bigger the city, higher the wages.

Source: Personal

26. Environmental Protection: 1.0

The environmental protection is one of the big problems in Russia. The problem carries more than just a poor financial sponsorship and lack of regulations character, but negligent attitude of citizens towards environment. In my own experience, I encountered many situations where people are responsible for the harm. In the interview with a President Dmitry Medvedev on a national radio “The Voice of Russia”, Medvedev identified the major problems in environment. The ecological situation in the country is not satisfactory. There are many enterprises that do not comply with state environmental regulations. According to President, more than 30 billion tons of dangerous waste exists in the country at present time. The majority of them are industrial waste. Recycling of this waste requires big government and private investments. It is important for Russia to take prompt action in increasing the safety of Atomic Power Stations. After Chernobyl disaster it is necessary to improve not only national standard measures of safety of atomic stations, but also to create new international conventions. Another problem is the luck of proper system of punishment for violation of norms of safety environment. Most commonly, the insufficient fines and fees are charged for violations and in many situations the fines even do not exist. Therefore, the system of state regulations of environmental protection needs to be updated the seriously changed.

Source: From the interview with Dmitry Medvedev on the “Voice of Russia” Radio in June, 2011.

27. Strong Army: 3.0

Russian Army is one of the largest armed forces in the world. More than 1 million people serving in the army. Russia has the largest arsenal of weapons of mass distraction in the world including nuclear weapons and well developed system of its delivery. Financing of the national arm forces is provided by The Federal Budget. In 2011 the budget of the national army was 1520.62 billion roubles, that makes 14.3 % of all expenses of the country. Just in comparison, on the financing of the army Russia spends three times more than it spends on education and four times more that it spends on healthcare. It is important to notice that the service in Russian Army is mandated for every young man, starting from the age of 18 years old. Among the problems in the Russian Army is its outdated equipment.

The army's decline became evident in the mid-1990s with its battering by separatist rebels in Chechnya. The land, air and naval forces Mr. Putin inherited when he became president in 2000 were a pale shadow of the Red Army, five million strong at the time of the Soviet Union's breakup in 1991. They stand at one-fifth that size today. Therefore, Russian army is not strong enough to repel a powerful invasion, versus when it could do it during Soviet Union time.

Source: 1) Book Facts ;2) Personal ; 3) The Wall Street Journal. Russia's Fading Army Fights Losing Battle to Reform Itself (April 2011).

28. Foreign Trade Impact: 3.5

Total imports in 2010 were 247.7 billion dollars. Total exports in 2010 were 429.4 billion dollars. GDP in 2010 was 2.223 trillion dollars. Therefore, foreign trade accounts for 30.5 % of GDP (total amount of imports and exports: 677.1 billion dollars divided by GDP 2.223 trillion dollars). Russia exports basically hydro carbonic raw materials (oil and oil products, gas, coal), metallurgical and chemical produce, cars and the equipment, arms and food. The largest importer of the goods from Russia is the Netherlands.

Source: Office of The United States Trade Representatives (

29. Management of foreign currency budget: 3.0

Russia reported a trade surplus equivalent to 16.3 Billion USD for the month of September of 2011. Metals and energy make up more than 80 percent of Russia's exports. The country is the world’s largest oil producer and the biggest exporter of natural gas, nickel and palladium. Russia imports mostly vehicles, machinery and equipment, plastics, medicines, iron and steel, consumer goods, meat, fruits and semi finished metal products. Its main trading partners are: European Union (Germany, Italy, France), China and Ukraine.

Source: Trading Economics

30. Layers of collective action: 3.0

The current Constitution of the Russian Federation came into force on 12 December 1993, following its approval by nationwide referendum. It declares that the Russian Federation is a democratic, federal, multi-ethnic republic, based on the rule of law (Article 1). State power is divided between three separate but equal branches of government - the legislature, the executive and the judiciary (Article 10). The Russian Federation is a federal State consisting of 21 autonomous republics and 68 autonomous territories and regions, including two federal cities, Moscow and St. Petersburg (89 constituents). Under the 1993 constitution, the republics, territories, oblasts, autonomous oblast, autonomous regions, and cities of federal designation are held to be "equal in their relations with the federal agencies of state power". Even though there are few political parties that represent the country (Communist Party, Liberal Democratic Party of Russia, etc), the real power holds the United Russia (National Party), the party of Vladimir Putin and Dmitry Medvedev. It helds an overwhelming majority of the seats in Duma and regional parlaments. The party of power is often seen as operating with a main goal of keeping its leaders in power.

Source: 1) International Labour Organization ( ; 2) Personal

31. Pro business climate: 2.5

Russian public organization of small and medium business "Support of Russia" conducted research on the business climate in Russia. According to this research, “Support of Russia” came to conclusion that business climate in the Russian regions doesn't correspond to the requirements of small and medium business. Degree of such discrepancy strongly differs between regions, that is reflected in a rating of the Russian regions on quality of conditions for development of small/medium business.

One of the main problems is inaccessibility of financial resources. 42 % of small/medium business owners that participated in research have declared complications of receiving the credit for the term of one year, meaning that longer terms such as over three years are almost inaccessible to half of respondents. Among other problems is a difficulty to every third company to find the land and industrial facilities. The electric power costs are very high as well. Administrative barriers for the business aren’t considered by the majority of the companies as obstacles — they are perceived them as the «feature of environment to which it is possible to adapt», is told in research. The similar attitude to corruption: costs on additional payments don't really influence the competitiveness of the company in home market, authors mark. Only 13 % of respondents named “corruption” as the main barrier. "We got used to it", — stated small/medium business owners.

Source: (From the official research of the “Support of Russia”)

32. Government Enterprises: 3.0

In the beginning of 1990s the privatization took place in Russia. In USSR almost all enterprises belonged to the government, consequence of communism. Then when the USSR broke down in 1991, the privatization of government own enterprises began. Many people relate privatization with the origin of oligarchy in Russia. Privatization has been criticized because of its criminal character; large amount of property was distributed on unfair basis as a result of bribery. Consequently, privatization caused government to form in 1991 “Rosimushchestvo” – The Federal Agency for State Property Management that is the part of Russian Ministry of Economic Development and Trade. This agency controls all enterprises that are owned by the government. However, activity of some heads of Rosimushchestvo falls under the acts qualified by articles of the Criminal code as criminal activity. Results of the recent investigation conducted by the Prosecutor General's Office testify it also. Detected violations created possibilities for corruption. Among them are an ineffective use of budgetary funds and unreasonable use of state property.

The largest companies in Russia that are primarily controlled by government are Gazprom (50.1% of State Share), Rosneft (84.6 of State Share) and Sberbank (60.6 % of State Share). Among State Ownership Enterprises, there is a concentration in fuel and energy and the military-industrial complex.

Source: 1) ; 2) Agency of Political News (online-newspaper in Russia)

33. International Security Agreement: 2.0

In 1994 has entered in the NATO’s program “The Partnership for Peace”, but cannot become a member for many reasons, including historical. NATO is a product and the tool of "cold" war of the West against Soviet Union. After the breakdown of USSR, Russia declared itself the legal successor of the USSR with all implied from here rights and duties. In addition Russia kept inherited by USSR the rocket-nuclear potential. First NATO Secretary General, Lord Ismay defined the purpose of NATO: “keep USA in [Europe], keep Germany [under control] and keep Russia out of [Europe]”. No Secretary General after him disavowed this idea in public. Therefore, Russia’s entry to NATO seems impossible. Russia faces many security problems within its borders, and its armed forces are still rusty.

Source: NATO and Russia: 1) War Games (Economist) 2) “The Russian Newspaper”

34. Protection of domestic enterprises from government mandated costs: 2.0

The standard rate of VAT in Russia is 18%. Some supplies of basic foodstuffs and children's clothing and footwear are taxed at a reduced rate of 10%. Some imported medicines, medical equipment and scientific research are exempt from VAT. Other exemptions include cultural and educational services, as well as services rendered by lawyers. The tax period for VAT is per quarter.

In the rank of the starting of business, Russia is placed on 108 (out of 183 economies). The most challenging part of opening a new business in Russia is the obtaining of the starting capital. In industrial development countries the small business owner can obtain grant on the business development, but in Russia it is relatively new procedure. The grant distribution in support of the new business has started only in 2009 and the procedure practices in several regions only. The second big problem for small businesses is the high rent prices and their constant growth. Subsidized buyout of production facilities by business owners practically has stopped. On the one hand, it is because of the high interest rates on credit. On the other, the local authorities block the process, converting premises in the municipal fund. Privatization of municipal property is controlled by local authorities; therefore it is hard to control by government. In addition to that measures on tax supports of small business don't work in all regions. No more than ten regions have lowered the factors for the companies adopting the simplified method of taxation.

Source: From the published interview with the director of department of state regulation in economy of the Ministry of economic development Andrei Sharov (The Russian Newspaper)


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Comparison of Russia's economic policies to MIEPA criteria as prepared by Kristina Zeltser, studying in the US in December 2011.



        1               3.0           9.0             15.0        60 %

        2               3.0           9.0             15.0        60

        3               3.0           9.0             15.0        60

        4               3.0           9.0             15.0        60

        5               4.0          12.0             15.0        80

        6               4.0          12.0             15.0        80

        7               3.0           9.0             15.0        60

        8               4.0          12.0             15.0        80

        9               2.0           6.0             15.0        40

        10              5.0          15.0             15.0       100

        11              3.0           9.0             15.0        60

        12              5.0          10.0             10.0       100

        13              1.0           2.0             10.0        20

        14              5.0          10.0             10.0       100

        15              4.5           9.0             10.0        90

        16              3.0           6.0             10.0        60

        17              2.0           4.0             10.0        40

        18              2.0           4.0             10.0        40

        19              3.0           6.0             10.0        60

        20              3.0           6.0             10.0        60

        21              3.0           6.0             10.0        60

        22              2.0           4.0             10.0        40

        23              2.0           4.0             10.0        40

        24              3.0           7.0             10.0        70

        25              2.0           4.0             10.0        40        

        26              2.0           4.0             10.0        40

        27              4.0           8.0             10.0        80

        28              3.0           6.0             10.0        60

        29              3.0           3.0              5.0        60 

        30              2.0           2.0              5.0        40

        31              3.0           3.0              5.0        60

        32              3.0           3.0              5.0        60

        33              3.0           3.0              5.0        60

        34              2.0           2.0              5.0        40

   TOTAL              102.5         227.0            365.0        62.2%    
                     =======        ======           ======       =====
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1. Freedom from Internal Control: 3.0

Generally, Russian citizens are free from pro-active control by government agencies. Russians are free to move about and engage in any activity that is not prohibited by the law. This freedom provides the maximum opportunity to create new enterprises and wealth. Illegal individuals must obtain legal permission before undertaking any wealth creating activity.

But freedom in Russia is pretty subjective. Some smart individuals can find ways to create illegal activities as well as illegal immigrants can find their ways to live and succeed in Russia. Since the power of bureaucracy is very strong it’s easy for authorities to put off some unwanted individuals’ paperwork and vice versa.

Sources: 1. Personal ; 2. Russian Elections Lack Legitimacy; Meaningful Political Competition Absent, December 3, 2007, read October 31, 2011

2. Freedom of Speech: 3.0

Russia is a democratic federal state with a republic form of government. The legislative body of the Russian Federation is the bicameral Federal Assembly (the Council of Federation and the State Duma).Usually, democracy associates with freedom of speech. But the situation is a little bit different in Russia. Everybody can have their own opinion in Russia, but everyone must think before sharing this opinion (specially, if this opinion is quite different from the authorities’ point of view). Freedom of speech plays a huge role in perception of news covered by mass media.

However, things on paper and real life are different. Today people of Russia have access to a big variety of information whether it's scandalous or not. People today can listen and watch to any radio or TV station, make their own conclusions on different issues and that's a big advantage. On the other hand everybody knows that people have to filter the information that the government or journalists try to feed them. Looking from a different point of view as a journalist or broadcaster you don't have so many options about what to say. With some truthful information it's possible to get away with it if it serves other powerful people.

Sources: 1. Eismont, Maria. Index on Censorship, 2009, Vol. 38 Issue 3, p122-131, 10p, 2 Black and White Photographs; DOI: 10.1080/03064220903167451 ; 2. Mironov, Nikolai. Russian Politics & Law, Jan/Feb2005, Vol. 43 Issue 1, p70-76.

3. Effective, Fair Police Force: 3.0

As any other official organization in Russia police forces are corrupted as well and that's a pain. Policemen that are called to serve and protect their own citizens in reality appear to be kind of crime. Not everybody is corrupted but it's better not to deal with the police. However, on the simple level police could be kind of a threat for some homeless and drunk people. Only few people actually believe in the efficiency of the police force, in fact people may laugh if somebody asks about the efficiency of the police. Sources: 1. Matthews, Owen. Newsweek, 4/12/2010, Vol. 155 Issue 15, p7-7, 2/3p ; 2. Wilson, Deborah G.; Kolennikova, Olga; Kosals, Leonid; Ryvkina, Rozalina; Simagin, Yu. International Journal of Police Science & Management, Spring2008, Vol. 10 Issue 1, p65-75, 11p, 4 Charts; DOI: 10.1350/ijps.2008.10.1.65 ; 3. Personal

4. Private Property: 3.0

The market of private property in Russia is not the same as before. People have more choices buying/selling their private property, but all deals usually are signed in “friends” groups, when people decide to work with friends of their friends. It happens because of tons of smart fraud schemes. People do not believe in honest agencies checking on legality of the ownership and accuracy of the documentation. The hardship in selling/buying property is in money. As monthly salaries are very low (average monthly salary is 200$) and property prices are high ($300,000 for a studio, 250 sq. feet), mortgage rates are high (about 20% per year).

Russian laws of property selling/buying are tricky like all other laws in Russia. By the way apartments today (and houses as well) can be sold and bought for cash which can be in US dollars, in Moscow for example. Needless to say how dangerous it is to carry around such a huge amount of money. People don't trust banks because of the potential fear that they won't be able to get their money back in case of financial crises or default.

Sources: 1. Personal ; 2. Subbotin, Sergei Russia needs better private property protection, RIA Novosti, Jan. 21, 2010,

5. Commercial Banks 4.0

Russia's banking sector remains dominated by the state-owned retail giant Sberbank, which is three times the size of its nearest rival (another state-owned giant, VTB Bank). However, in recent years Sberbank's near monopoly of retail banking has been whittled away by the rise of commercial banks – both foreign and local. Big international banks have left most of the play to their smaller continental peers, like Raiffeisen International and Unicredit, which have been specializing in Eastern Europe since 1998. But everyone got seriously interested in 2007, when a wave of mergers and acquisitions swept the region, sending the price of bank stocks hurtling through the roof. Britain's HSBC was an early mover, setting up shop in 2005. Another British bank, Barclays, also entered the market in 2007, buying Expobank right at the top of the market.

The Russian banking sector remains wide open. Surprisingly, the average Russian is a much better credit risk than the average European, because everyone was simply given their apartment following the collapse of the Soviet Union in 1991, Russians have almost no debt. Commercial banks offer all kinds of loans, but the rates are very high (about 20%), and do deposits and all kinds of transactions like money transfer, credit cards, deposits.

Sources: 1. Ben Aris, Russia Now, 1:05PM GMT 04 Jan 2010, ; 2. Personal

6. Communication Systems 4.0

Communication is as important to business activity as is transportation. The communication facilities are ubiquitous in Russia. The telephone system is experiencing significant changes; there are more than 1,000 companies licensed to offer communication services; access to digital lines has improved, particularly in urban centers. Internet and e-mail services are improving; Russia has made progress toward building the telecommunications infrastructure necessary for a market economy; the estimated number of mobile subscribers jumped from fewer than 1 million in 1998 to some 230 million in 2009.

Roughly 3,300 national, regional, and local TV stations operating with over two-thirds completely or partially controlled by the federal or local governments; satellite TV services are available.

There are plenty of newspapers and magazines for different purposes. As for fax, you can use it at post-offices only which have certain operation hours. That makes use of FAX inconvenient.

Sources: 1. ; 2. Personal

7. Transportation 3.0

The transportation infrastructure in Russia is underdeveloped. The transport system is heavily Moscow-centered, with virtually all transportation channels of economic significance emanating from Moscow. Roads are the main problem in Russia: high volume of cars and 4-season weather requires constant road works and spending a lot of money, sometimes the money is in wrong hands and not used for road works. Commercial transportation relies heavily on rail. Roughly 90 percent of commercial haulage is rail-based and insufficiently integrated into world transport systems. But the railroad transportation is monopolized as it is owned by the government. The Russian trucking industry is only minimally developed, and roads are not designed to carry heavy and long-distance truck traffic. Russia's transportation system is extensive, but is in a state of general decay. Maintenance, modernization, and expansion are required for Russia's infrastructure, much of which operates beyond capacity. Good transportation facilitates the movement of merchandise and people, thereby improving the commercial activity of the country.

Sources: 1. ; 2. Personal

8. Education 4.0

The literacy rate in Russia is currently 99.4%. As a result of great emphasis on science and technology in education, Russian medical, mathematical, scientific, and space and aviation research is generally of a high order. Today, the country has 685 governmental higher education institutions, all of these having state accreditation. Besides, 619 non-governmental higher education institutions have been licensed for educational activities, 367 of these having been given accreditation in the past decade.

Students in Russia are always stimulated to get higher education, thus students get monthly scholarships for getting A’s and B’s at the end of the semester. The scholarship is not big, but encourages students to succeed in the learning process. Today Russian higher education system is changing, now students can obtain Bachelor Degree after 4 years at the university and Master’s Degree after 6 years at the university. This helps them in transfer to American or European universities. Level of education in state universities is high, many students find jobs abroad after graduating.

Students do not get financial aid in Russia, this makes students go to school to study, not just get money from the government for nothing. It’s sad that the quality of the education received by some of the universities does not match and does not exceed the industrialized world. People of any age can attend classes and choose on-line, day, or evening classes. The education system and the scholarship policy have a potential to become successful.

Sources: 1. ; 2. Personal

9. Social Mobility 2.0

Routes to professional success in Russia are fewer and fewer. Only children of the elite find their route to the top an easy one. The son of the head of the Federal Security Service is the president of the north-west regional branch of VTB, the second largest bank in Russia. The daughter of the governor of Sverdlovsk province in the Urals co-founded and made $4.5 mln. investment in timber-mill after just a few years of work for a Moscow accounting company. These are just two names from a huge list.

If we look at the list of famous Russians published by Russian Forbes we’ll notice that half of them are people from influential families and half of them are just gifted Russians who made their way to success in foreign countries. After 2000 we notice an immigration wave from Russia, these are young talented and well-educated people who move in life using their own brains, not parents’ connections.

Sources: 1.Forbes published a list of Russians who gained prominence, October 24, 2011, 13:01 ; 2. Russia: Ascent and dissent By Charles Clover, July 11, 2011 8:35 pm,

10. Freedom from outside control 5.0

Residents and citizens of Russia feel secure from kidnapping by other governments. Only rich citizens of Russia can be kidnapped because the kidnappers want to get money, and young healthy people can be kidnapped for organs. But all the crime is centered in Russia itself. Citizens of Russia feel absolutely secure, and they are subject only to the laws of the home country.

Sources: 1. Personal

11. Protection of Domestic Enterprises 3.0

Russia applies mandatory certification to imported products such as foodstuffs, household electrical appliances, electronics, cosmetics, furniture, toys and ceramics. These policies help to create jobs for people living in Russia. However, Russia does not recognize the relevant international standards, and all imported products must be GOST-certified before they are allowed to enter the Russian market. The Russian mandatory certification standards are multifarious and complicated, 70% of which are not in line with corresponding international standards, and its safety standards in certain areas are higher than those of many developed countries. The relevant international enterprises exporting to Russia should pay close attention to the laws and regulations regarding product certification.

Considering the impact of the global financial crisis, Russia has decided to postpone its plan to increase by 2009 its export tariff on logs to 80% so as to promote its exports. However, Russia’s export tariff on logs is expected to rise in 2010 to 80% or 50 euro per cubic meter, whichever is higher.

When we compare imports and exports in Russia we see exports are 80% higher than imports. So the trade balance of goods and services in the current account are above balanced. Unfortunately, for now Russia has not an explicit plan to establish some specified industries for future growth.

Sources: 1. Foreign Market Access Report: Russian Federation, ; 2. Personal

12. Foreign Currency Transactions 5.0

The currency regulation system of the Russian Federation is based on the assumption that certain currency operations stipulated by the Central Bank of the Russian Federation may only be carried out with the possession of a license obtained from the Central Bank. Obtaining such a license takes from one to several months and requires a number of documents to be submitted.

Goods (work, services) may not be sold for foreign currency in the Russian Federation. For shopping purposes, foreign individuals may exchange hard currency cash into roubles in banks.

Russian legal entities must carry out all export and import transactions and transfer roubles and rouble-denominated securities across the border according to a special procedure established by the Central Bank of the Russian Federation. This creates a single currency and enables the government's fiscal and monetary policies to be effective.

Sources: 1. Business Guide October 25, 2011; 7:03am (GMT+4), ; 2. Personal

13. Border Control 1.0

The Border Control in Russia is weak. We have millions of illegal immigrants from former Soviet Union republics like Tajikikistan, Usbekistan and others. Official Russian policy toward immigrants has also lurched toward anti-immigrant populism. With unemployment expected to soar as the economic crisis takes hold, Putin announced in December that quotas would be cut in half in 2009, from 4 million to 2 million permits a year. Russia's State Organization for Migration complains that corrupt police and officials are now routinely shaking down foreign workers. Unfortunately, the quotas have nothing to do with the immigration. The officials are too corrupted: poor immigrants come hoping to make money and help their families; they live in terrible conditions; sometimes do not get money because the employers are dishonest. Citizens of Russia are unemployed because of the cheap immigrant labor. But the only people who make money are officials.

Sources: 1. Personal ; 2. Owen Mathews “The Kremlin Vigilantes”, Feb 13, 2009 7:00 PM EST

14. Currency 5.0

Rouble is the only currency issued in Russia and government approved. The official exchange rate is determined by the outcome of large-volume, daily auctions on the Moscow Interbank Currency Exchange. Use of a single currency as money throughout a country encourages commerce within the country. Apart from the economic crisis of 1998, the rouble exchange rate has been predictable and reasonably stable in the past years.

Sources: 1. Personal ; 2. “What is the Russian Ruble (RUB)?” Visited on October, 24th 2011,

15. Cultural, language homogeneity 4.5

As of July 2010 the population of Russia is139.4 million. The population consists of many different ethnic groups: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, other 14.4%. Each ethnic group speaks its own ethnic language and Russian, which is state language, so there are more than 140 languages and dialects

The multi-ethnical situation causes minor clashes. The government doesn’t react anyhow.

Sources: 1. Personal ; 2. US Department of State, Russia

16. Political Effectiveness 3.0

According to the analyses at by O. V. Gaman-Golutvina, L.V.Smorgunov, A.I.Solovjev, and R.F. Turovskij the government tries to do its best to reform urban and rural areas. But it faces obstructions like the rural authorities, financial crises, shortage of experts in particular spheres. According to my experience and internet articles and blogs, we have political ineffectiveness in today Russia. And it is caused by corrupted government that does everything to be wealthy, but not to make citizens of the country somehow wealthy.

Sources: 1. Personal ; 2. O. V. Gaman-Golutvina, L.V.Smorgunov, A.I.Solovjev, and R.F. Turovskij

17. Institutional Stability 2.0

It’s hard to get any stability in Russia which came from command economic system to market economic system not long ago. It is hard and long process for the whole country. For these 16 years of new economic regime Russia survived default, short war with Georgia, economic fights with the Ukraine and many other problems. We don’t talk about the future in Russia; the future of Russians living in Russia is unpredictable. There are no companies existing in Russia during long time, there are no companies commanded by the same owner or president for a long period. Every level of the government is slightly changing every year.

Sources: 1. Personal ; 2. Augustynowicz, Pawel (2005): Russian economic stability in the nearest future. Published in: Annales Universitatis Mariae Curie-Sklodowska Sectio H Oeconomia XL (2006): pp. 219-232.

18. Honest Government 2.0

According to the data from on October 1st, 2011 corruption index of Russian government is 2.1 meaning Russia is one of highly corrupted countries. While making research for the analysis this was proved not once in the internet articles.

Sources: 1. Transparency International, ; 2. “Is an honest Russian government possible?” October 1st, 2011

19. Common Laws 3.0

According to the Constitution of Russian Federation all citizens of Russia are equal. But it’s not like that in real life. Different departments create their own regulations. But because of the poor coordination between these regulations many of them contain mutually exclusive provisions, even within a single regulation. The lack of coordination between the State and Federal regulations, and departments is a destabilizing factor for entrepreneurial activity. This leads to the growth in corruption. And inequality shows itself: people with money get what they need and get it faster, then poor people.

Sources: 1. Perosnal ;

20. Central bank 3.0

According to the constitution, the Bank of Russia is an independent entity, with the primary responsibility of protecting the stability of the national currency, the ruble. It also holds exclusive right to issue ruble banknotes and coins. Under Russian law, half of the Central Bank's profit has to be channeled into the federal budget. The Bank of Russia is the main regulator of the banking industry. It is responsible for issuing banking licenses and setting rules of banking operations and accounting standards. The bank serves as a lender of last resort for credit organizations. It is responsible for the country's monetary policy, including the level of the shortest interbank interest rate. By influencing the ruble interest rate, it also influences the price of the ruble in terms of foreign currencies. Unfortunately, the Central bank doesn’t do its job properly. After the denomination of 1998, the situation is quite unstable, interest rates are high (mortgage rate is about 20%). The bank is mainly influenced by the President.

Sources: 1. Personal ; 2.

21. Domestic Budget Management 3.0

In 2007 the federal budget surplus was 5.5% of GDP, and in 2008 the government ended the year with a surplus of 4.1% of GDP. Although the government revised its budget projections during 2009 to reflect lower oil prices and the effects of the economic crisis, it ended the year with a budget deficit amounting to 7.9% of GDP, which it financed from the Reserve Fund, one of the government’s two stabilization funds. The government’s anti-crisis package in 2008 and 2009 amounted to about 6.7% of GDP, according to World Bank estimates. The package provided support to the financial sector and enterprises--through liquidity injections to banks and tax cuts/fiscal support to enterprises--as well as modest support for households and small and medium enterprises (SMEs) and increased unemployment benefits. By the end of 2010, due to improving economic conditions, Russia had lowered its budget deficit to 3.9% of GDP. The government hoped to lower it to 3.6% in 2011 and admitted that deficits may be in place through 2015 and beyond.

Sources: 1. Russia – US Department of State, ; 2. Personal

22. Government debt 2.0

According to on October 1st, 2011 National Debt of Russia is $151,3 billion what is 6,8% of GDP.

According to on October 1st, 2011 the Public debt is 9% of GDP (2010 est.). This entry records the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. Public debt should not be confused with external debt, which reflects the foreign currency liabilities of both the private and public sector and must be financed out of foreign exchange earnings.

According to Russia’s total debt is $540,823 mln. in June 2011. If we compare this figure to the figure of Budget Income in Jan.-Jul. 2010 ($300.35 mln.) we see that situation is not so bright as the Government usually says.

Sources: 1. ; 2.

23. Economic statistics 2.0

Searching net to get the information we meet a problem in accuracy of the data. On the site of the Federal State Statistics Service the data is quite different from other sources like Russian Embassy’s site, news. The information for insiders, Russians, is more or less real and objective. At the same time the information for the outsiders is more positive and promising.

Sources: 1. ; 2. Personal

24. Protection of public health and safety 3.0

Good management and regulation of waste, food inspection, infectious disease and other public health issues increases wealth in a country. The Mortality rate; infant (per 1;000 live births) in Russia was reported at 11.94 in 2008, according to the World Bank. Infant mortality rate is the number of infants dying before reaching one year of age, per 1,000 live births in a given year. The Russian economy is commodity-driven. Payments from the fuel and energy sector in the form of customs duties and taxes accounted for nearly half of the federal budget's revenues. However, during the past decade, poverty and unemployment declined steadily and the middle class continued to expand. Russia ranks 11th on the list of 22 high-burden tuberculosis (TB) countries in the world. After years of gradual decline, TB incidence doubled during the 1990s, but since 2000, the annual growth in the number of new cases has been smaller. According to the World Health Organization’s (WHO’s) Global Tuberculosis Control Report 2009, the TB incidence rate in 2007 was an estimated 110 new cases per 100,000 population, and an estimated one in five people have latent TB in Russia. Around 282,850 people died from TB between 1998 and 2007. These figures show the poor health situation in Russia.

Sources: 1. Mortality rate; infant (per 1,000 live births) in Russia, ; 2. USAID, Infectious Diseases, Russia,

25. High wage policies 2.0

As in the USA we compare minimum wages in states, in Russia we compare Minimum Monthly Wage, because they represent people’s real opportunities to live full life. Minimum Wage Legislation is set through a variety of means such as: tripartite commissions; national agreements; tripartite institutions; collective agreements; and directly by government. For instance in Russia MWL is set below the current official subsistence level (but minimum wages are also set by collective agreements).

On June 1, 2011 Minimum Monthly Wage was increased to 4611 rubles, which is about $153. The Minimum Monthly Wage must be bigger than a Minimum Standard of Living, which is 6367 rubles, which is about $212. At the same time there are 2 types of Minimum Monthly Wage: All-Russia and regional. The Minimum Monthly Wage in Moscow for example is 10,900 rubles, which is about $363($1=30,00 rubles). Obviously, the situation is very tough. But our prime-minister Vladimir Putin promises to increase the average salary to 32,000 rubles ($1066) by the end of 2011.

Sources: 1. Medvedev increases minimum monthly wage, June 02, 2011, ; 2. Rosbalt, Pitin: The minimum monthly wage will be 32,000 rubles,, September 23, 2011

26. Environmental Protection 2.0

Although Russian Government officials decry the economic and social costs of environmental degradation, they lack the commitment, resources, and organizational capacity to address environmental problems:

· Policymakers are focusing on stopping Russia's economic deterioration and stabilizing the country's financial markets, not on the environmental impact of their actions.(e.g. The quickening tempo of oil and gas efforts in the Barents Sea region due to the prospective development of Russia’s Arctic shelf for drilling is driving up environmental risks to the already vulnerable landscape, and current Russian legislation is ill equipped to handle the inevitable accidents that will come with the black gold rush.)

· Russia has a comprehensive legal and regulatory framework in the environmental area, but government institutions responsible for environmental protection lack the authority and capability to enforce legislation.

· A continued Russian tendency to treat certain nuclear waste and chemical weapons information as a state secret will complicate Western cleanup assistance programs.

· Environmental activism has been on the wane since the breakup of the Soviet Union. Despite growing concerns about environmentally related health problems, the Russian public is preoccupied with economic survival and accords much less priority to environmental issues.

Environmental pollution has had a substantially negative impact on Russia's economy. It contributes to health-related budgetary strains, reduces labor productivity, curbs tourism and investment, and lowers the yield of natural resources. Environmentally linked illnesses also limit the military manpower pool.

Sources: 1. ; 2. Anna Kireeva, Charles Digges, 14/11-2007

27. Strong army 4.0

The Russian Army is considered to be one of the strongest. The Russian army consists of Ground Forces, Military Air Forces, Naval Forces, Military Strategic Army, Space Forces and Air Assault Forces. There are about one million people serving in the army. I consider the Russian Army one of the strongest ones. According to the reassertion of Russian power, especially military power, in recent years requires a more sophisticated understanding of the Russian military and its possible future development. The necessity for such study has become even more important with the Obama administration actively seeking a new foreign policy toward Russia. This understanding must include the current defense reform efforts, Russian perceptions of security trends in Europe and Asia, new Russian concepts of national security, and Russian views regarding future war, information warfare, the role of nuclear weapons, and Russia's efforts to develop forces for power projection beyond Russia's borders.

Sources: 1. The Russian Military Today and Tomorrow, August 24, 2009 ; 2. Department of Defense of Russian Federation,

28. Foreign trade impact 3.0

After adding together the total annual imports ($191,8 billion) and exports ($376,7 billion) of goods and services and divide the result by the country's GDP ($1,477 trillion) for 2010 year the total foreign trade account is for 38% of the GDP. This shows excellent export-import relations, it is likely that the country will create more wealth for its citizens by increasing foreign trade.

Sources: 1. Russian Statistics Site, ; 2. Russian Statistics Site,

29. Management of foreign currency budget 3.0

The GDP (2010) is $1.477 trillion and the growth rate (2010) is 3.8%. After analyzing the information below:

Natural resources: Petroleum, natural gas, timber, furs, precious and nonferrous metals.

Agriculture: Products--Grain, sugar beets, sunflower seeds, meat, dairy products.

Industry: Types--Complete range of manufactures: automobiles, trucks, trains, agricultural equipment, advanced aircraft, aerospace, machine and equipment products; mining and extractive industry; medical and scientific instruments; construction equipment.

Trade (2010): Exports--$376.7 billion: petroleum and petroleum products, natural gas, woods and wood products, metals, chemicals. Major markets--EU, CIS, China, Japan. Imports--$191.8 billion: machinery and equipment, chemicals, consumer goods, medicines, meat, sugar, semi-finished metal products. Major partners--EU, CIS, Japan, China, U.S. U.S. exports--$6.0 billion. Principal U.S. exports (2010)--oil/gas equipment, meat, motor vehicles and parts, aircraft, electrical machinery, automatic data processing machines and parts, medical equipment, plastics, cosmetics, and chemicals. U.S. imports--$25.7 billion. Principal U.S. imports (2010)--oil, chemicals (including fertilizer), radioactive materials, iron/steel, precious stones, nickel, aluminum, fish and crustaceans, alcoholic beverages, and base metals.

We see exports are almost twice bigger than imports that must be excellent for Russia.

Sources: 1. Russia - US Department of State, ; 2. Personal

30. Layers of collective action 2.0

As we said already, democracy in Russia exists on paper only and we know “epistula non erubescit”. We do not vote for elementary schools board or anything like that. We can vote for presidents, governors and mayors only. And sometimes even those elections are forged.

So if an individual has a problem and wants to solve it in official order then s/he has to go through the whole list of different authorities till s/he'll get any results. And in this battle the individual will be by himself, or with a small bunch of neighbors. Even mass media working on the topic of this group’s concern do not guarantee a victory.

Sources: 1. Personal ; 2. Sandler, Todd Overcoming Global and Regional Collective Action Impediments, Jan. 27, 2010, November 11, 2011

31. Pro-business climate 3.0

President Dmitry Medvedev on March 30, 2011 criticized Russia's poor business climate and ordered improvements. The rhetoric is not new. Today Russia is not Russia of 1990-s, that period of time was called “restless 90-s”, but it’s impossible to make money honestly. Besides state regulations and taxes businessmen have to deal with Russian mafia who decides whether you can have your business in their neighborhood. Today Russian businessmen are not considered as criminals, but smart and strong people, who are able to live and make money in this dangerous environment.

That’s why Russian businessmen open businesses not in Russia, but abroad, where they feel safer. Russians also tend to keep their money in foreign countries, where they feel more confidence in safety of their hard earned money.

Sources: 1. Combined reports, The Moscow Times ; 2. Personal

32. Government enterprises 3.0

The current political leadership has always claimed that it believes private companies should dominate the economy, even as it has overseen an expansion of state ownership. Hence, the announcement in late autumn of a wave of privatization kicking off in 2010 is consistent with stated intentions, even if on the ground it signals a distinct policy shift from what has happened over the last decade. In September, First Deputy Prime Minister Igor Shuvalov predicted as many as 5,500 companies could be privatized (at least partially) over the coming years, with 449 due on the block in 2010. In February, he announced that the privatization plan for this year is to be substantially expanded.

State ownership in Russia's economy has increased substantially since 2004 - from 25-30 percent to over 50 percent, according to most estimates. On today Russian market only foreign companies and state companies can compete. Due to the tax increases and economic recession private companies can not survive. The state owned companies like Gazprom, Rosneft, Russian Railways create monopoly, decreasing the quality of goods and services and increasing the prices.

Sources: 1. Personal ; 2. Tim Gosling, The Companies that Russia Keeps, March 17, 2010, BNE,

33. International security agreements 3.0

Russian Federation like other Western and European countries tries to do everything in order to have not only friendly relationships with other countries, but also document these relationships in the form of international agreements. Ties between Russia and the West had already been damaged by NATO's continued eastward expansion, Washington's missile defense plans, Moscow's decision to suspend its participation to the 1990 Conventional Armed Forces in Europe (CFE) Treaty, and Kosovo's unilateral declaration of independence. The August 2008 Russian-Georgian war and the subsequent Russian-Ukrainian natural gas dispute further strained those relations.Despite recent improvements in Russia-EU and Russia-NATO relations, Georgia, Ukraine, the three Baltic States and most Central and Eastern European countries -- all states that view NATO as the main pillar of Europe's security -- remain either openly hostile to, or extremely wary of the Russian security proposal.

Unfortunately, Russia does not carry any agreements with the Asian countries like China. U.S. – Russian bilateral cooperation in the military sphere is based on intergovernmental Agreement on military cooperation, Agreement between Ministries of Defense of the two countries and understandings reached during the regular meetings between their military representatives.

Sources: 1. Ministry of Justice of Russian Federation, ; 2. March 3, 2009 - 8:00pm, by Jean-Christophe Peuch, Russian Proposal for New European Security Pact Encounters Skepticism

34. Protection of domestic enterprises from government mandated costs 2.0

Today, studies have turned the state capture agreement on its head and have instead emphasized that the state has captured private business. It is the federal government that defines what companies will be favored. The turning point in this relationship occurred with the arrest of Mikhail Khodorkovsky, the principal owner of Yukos, on charges of underpaying taxes and abusing privatization in the fall of 2003. At the time of the Khodorkovsky’s arrest Yukos was the largest private oil company in Russia. The federal government bankrupted Yukos and auctioned off its main oil-producing entities which eventually ended up in the hands of the state-owned Rosneft.

Another difficulty in the state-domestic enterprises relationships is paper-work and regulations. There are several governmental organizations working on checking domestic enterprises. It takes 1-2 months to be checked by one of the organizations, and only one day to be closed. Growing every year taxes make the company-owners raise prices. People stop buying as they can not afford products with high prices. In order to keep the businesses working people use bribes. Since the bribery level is very high in Russia, the quality control and price control at the enterprises are low.

Sources: 1. By: Frye, Timothy; Yakovlev, Andrei; Yasin, Yevgeny. Social Research, Spring2009, Vol. 76 Issue 1, p29-54, 25p ; 2. Personal


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Comparison of Russia's economic policies to MIEPA criteria as prepared by Alex Shkurko, studying in the US in December 2011.



        1               4.0          12.0             15.0        80 %

        2               1.5           4.5             15.0        30

        3               1.0           3.0             15.0        20

        4               3.0           9.0             15.0        60

        5               1.0           3.0             15.0        20

        6               4.0          12.0             15.0        80

        7               2.5           7.5             15.0        50

        8               5.0          15.0             15.0       100

        9               2.0           6.0             15.0        40

        10              4.0          12.0             15.0        80

        11              3.0           9.0             15.0        60

        12              5.0          10.0             10.0       100

        13              1.0           2.0             10.0        20

        14              4.0           8.0             10.0        80

        15              4.0           8.0             10.0        80

        16              1.0           2.0             10.0        20

        17              3.0           6.0             10.0        60

        18              1.0           2.0             10.0        20

        19              2.5           5.0             10.0        50       

	  20              3.0           6.0             10.0        60

        21              2.0           4.0             10.0        40

        22              3.0           6.0             10.0        60

        23              3.0           6.0             10.0        60

        24              2.0           6.0             10.0        60

        25              1.0           2.0             10.0        20        

        26              2.0           4.0             10.0        40

        27              2.0           4.0             10.0        40

        28              3.0           6.0             10.0        60

        29              2.0           2.0              5.0        40 

        30              2.0           2.0              5.0        40

        31              1.0           1.0              5.0        20

        32              1.0           1.0              5.0        20

        33              2.0           2.0              5.0        40

        34              1.0           1.0              5.0        20

   TOTAL               82.5         189.0            365.0        51.8%    
                     =======        ======           ======       =====
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1. Freedom from internal control - 4.0

Theoretically, entrepreneurs who can move freely inside the country create more jobs; however I don’t feel like that would be the case in Russia. Despite not being restricted to move around the country, the creation and establishment of a company that would create more jobs may depend more on contacts, wealth and power rather than the ability to move around freely. Despite being an important freedom, Russia’s citizens are also free to practice the religion of their choosing, the freedom from internal control does not result in the citizen having more control in other, equally important areas.

Having basic freedom to travel around the country is one of the most basic freedoms that one can be given, therefore the Russian government still has a long way to go to really give their citizens free speech.

Sources: ; Personal Experience

2. Freedom of speech - 1.5

Freedom of speech has come a long way for Russian citizens, however speaking out is still not tolerated or socially acceptable. After 90 years of socialist rule, Russian citizens tend to be socially conservative and don’t generally think it’s acceptable to speak out or draw large amounts of attention to oneself. Freedom of the press-usually associated with free speech, is however less common. Being defined as the ability to work and publish articles without outside pressure, freedom of press is likely not very common throughout Russia where the State still carries an extraordinary amount of influence.

There’s the occasional article about a reporter that disappeared right before he was due to publish an important story, but analyzing such small sets of data is not possible or accurate. It’s fair to say that there is an unspoken restriction on free speech because citizens are afraid to speak out, essentially being the same thing.

Sources: Personal Experience ;

3. Effective, fair police force - 1.0

Evaluating the Russian police or ‘militsiya,’ as it is known is Russia, is not a difficult task if we were to analyze it by looking at the perception held by the citizens of the Russian Federation. It is not a myth that Russia is as corrupt as it’s thought to be, one may get that idea from counting the number of times that the word ‘corrupt’ has appeared in the analyses of these policies; however the corruption is not a fabrication nor an exaggeration. Russia’s citizens fear the police because of the obvious physical and legal power that they hold over the heads of citizens. Corruption likely happens less in higher populated cities, however it may just be taking place off the main roadways and streets and in the homes of people.

I’ve heard recent stories from friends of mine who were cornered by cops and asked abusive questions, till they coughed up some money. Police often accept bribes in exchange for not giving out higher tickets that may have possibly been warranted. Citizens’ perception of the police force has barely changed since the Soviet days, which is both a recurring and not surprising theme due to the collapse of the USSR only taking place a decade and a half ago. It’s not entirely fair to simply blame the Russian police force for being corrupt, without listing reasons for why the corruption is present. As a country, Russia has a large income disparity with many people earning only the minimum to survive. Being public servants, police officers are not paid well and have to supplement their $400 a week salary with bribes and other illegal activities to be able to provide for their families. This kind of corruption is well known and familiar to everyone, but especially the people that lived through the transition from socialist republic to federation. Sources: ; Personal Experience

4. Private Property - 3.0

It’s important to examine the different types of private property when determining the score that Russia deserves. Real property is fairly secure in Russia and titles are deeded to their owners and likely have been since before the collapse of the Soviet Union. In the past, places of residence were given out by the state for free-and in accordance with the necessity, prestige and the degree to which the family was connected to the elites. Intellectual property, being the most modern concept for Soviets to understand is also the least protected. Therefore the lack of protection surrounding intellectual property certainly doesn’t give small business owners much rights and power to grow their business, thus growing the economy.

While copyright, trademark and patent infringement largely end up harming the biggest businesses the most, it’s important to note that without duly registering a small company’s trademarks, copyrights and patents with the Federal Service for Intellectual Property, Patents and Trademarks, then other companies will likely steal things away from you. This could be devastating to your business and thus the economy.

Sources: ;

5. Commercial Banks - 1.0

The public is wary of trusting banks with their money, due to the multiple instances in the past 20 years where deposit holders lost more than half of their savings. Sberbank, a state owned bank is the only bank that is currently backed by Russia’s form of the FDIC, the national deposit insurance agency or DIA. Being the only bank that has deposit insurance backed by the Central Bank of Russia, which also operates Sberbank along with the Russian government, provides an unfair advantage to the state asset. Deposit protection has a compensation cap at 700,000 roubles, roughly equivalent to $23,000 US dollars. And as of January 2008, DIA funds were estimated at being more than $2.8 billion US dollars, certainly higher now. At present, only 24% of Russian households have bank accounts (according to Credit Suisse); however many young people, having not experienced the financial crisis of 1998, are eager to loan money to finance their purchases. Foreign banks have recently been pulling out of Russia, including Morgan Stanley, and Spanish bank-Banco Santander. They had trouble competing with state-run banks, Sberbank and VTB, which also carry the top two banks by assets. However partnering with the Russian government, some foreign banks are finding traction by helping sell off state owned assets and attempting to gain market share in the growing lending market.

Historically, Lenin believed that banks were important in building a great socialist society. He believed that private western style banks should become state controlled and be responsible for the economy. Commercial banks closed in October 1917, and the staff was told not to perform any of their duties in hope of further weakening the Bolshevik regime. Today’s Russia’s banking system still has remnants from its Soviet days; there are numerous state banks and now more than a thousand financial institutions. However, the state banks are still extremely prominent and powerful.

Sources: ; ; ;

6. Communication Systems - 4.0

Being an industrialized country, Russia’s communication network is fairly ubiquitous. Having not been this way for a very long period time, many citizens are slowly getting used to the internet as a communication tool. Access to such new technology was restricted to the extremely elite and privileged during the Soviet era, where even telephones were only given out on a need basis with exceptions being the long lists that contained the names of people that wanted them.

Russia has 44.559 million main telephone lines in use, and is the 4th biggest country with main lines in use. 238 million people (2010) use cellular phones, and again Russia places fourth in the world in that category. More than 1,000 companies are licensed to provide communication services, therefore the high degree of competition has provided for a never before present access to digital lines. 60 regional capitals across Russia have ‘modern digital infrastructures’, cellular services, both analog and digital, are available in many areas; in rural areas, the telephone services are still outdated, inadequate, and low density. (CIA Factbook)


Personal Experience ;

7. Transportation - 2.5

Russia spans across an incredibly large amount of land, most of which can be reached by train, car, boat, or by air. They have the second largest amount of railway, however the degree to which all that railway is in operating order is a problem of its own. Fairly easy to be navigated, Russia’s terrain is conducive to a large network of shipment routes.

Total:150,000km-1997 est. (154,000 -1994 est.),87,000 km in common carrier service 67,000km serve specific industries (not for common carrier use).Broad Gauge : 150,000km (154,000km- 1994est.) 1.520-m gauge (1997est.)

Highways: Total: 948,000km –1997est (934,000km-1994 est.) – 445,000km are not available for common carrier use). Paved –336,000 km, unpaved –612,00km (including 411,000 km of graveled or some other form of surfacing and 201,000 km of unsterilized earth) (1995est.)

Waterways: total navigable routes in general use 101,000km ; routes with navigation guides serving the Russian River Fleet 95,900km; routes with night navigational aids 60,400 km;man-made navigable routes 16,900km.

Pipelines: oil 48,000km;petroleum products 15,000km; natural gas 140,000km (1993est.)

Merchant marine: total: 617 ships (1,000 GRT or over) totaling 4,146,329 GRT/5,278,909 DWT Ships by type: barge carrier 1,bulk 19,cargo 309,combination bulk 21,combination ore/oil 6,container 25,multifunction large-load carrier 1,oil tanker 149,passenger 35,passenger-cargo 3,refrigerated cargo 16,roll-on/roll-off cargo 25,short-sea passenger 7 (1998 est.).

Airports: 2,517 (1994 EST.) Airports with paved runways: 630 Airports with unpaved runways: 1,887 Sources: Personal Experience ;

8. Education - 5.0

Russia has strong education infrastructure and high literacy rates that have carried over from the Soviet Union who first established Russia’s education system and made it into one of the strongest in the world. Recently, Russian institutions are switching from their Soviet era system of having people attend University for 5 years, after which they would graduate with a degree in a professional field, and now adopting the Western style of separating undergraduate and postgraduate work into two separate periods; however this has so far been only cosmetic, for universities have largely left their curriculums untouched.

Russia possesses a fairly high literacy rate that is parallel to the rates of other western, industrial countries. “The literacy rate in Russia, according to the 2002 census, is 99.4% (99.7% men, 99.2% women). 16.0% of population over 15 years of age (17.6 million) has tertiary (undergraduate level or higher) education; 47.7% have completed secondary education (9 or 10 years old); 26.5% have completed middle (8 or 9 years old) and 8.1% have elementary education (5 years old). Highest rates of tertiary education, 24.7% are recorded among women aged 35–39 years (compared to 19.5% for men of the same age bracket).” This is due to the high quality education that was provided to the citizens of the Soviet Union. Education was emphasized due to the Soviets’ goal of dominating the world and overpowering and beating capitalism. The Soviets produced many well educated individuals, my parents included, and some of these socialist values still remain today in Russia’s public institutions.

Sources: Personal Experience ; "Data tables of 2002 census: Breakdown by level of education" (in Russian). Retrieved 2008-10-06.

9. Social Mobility - 2.0

Social mobility in Russia has drastically changed in recent years due to the demise of the Soviet Union. Therefore it’s important to look at the Soviet Union and the state of social mobility during that time. Social mobility was actually higher during the Soviet Era than following the collapse of the USSR and even through the transformation and the then creation of the Russian Federation.

Defining social mobility as the ability of an individual person to increase their salary and earning capacity interestingly affects the analysis of Soviet era conditions. During that time salaries didn’t greatly differ even with jobs that would in other places be high paying, only yielded minimal salary benefits. There was a strict and well defined elite class, mainly characterized by connections and influence rather than salary, although that was often a part of it. Following the demise of the Soviet Union, upward mobility decreased and ‘as the transformation took hold, upward mobility became less frequent and downward mobility more frequent while social origins became a more salient factor in sorting workers into privileged and impoverished positions. Skilled manual employment has been replaced by lower-skill, lower-wage jobs in retailing and personal services, and, to a lesser degree, opportunities for self employment.’ (Berkeley 1) While upward mobility is certainly more possible due to education being a larger determinant of the salary one would make, connections and an elite background is still largely a necessity to attain great amounts of wealth in present day Russia.

Sources: Personal Experience ;

10. Freedom from Outside Control - 4.0

There is no reason to believe that the citizens of Russia are at any danger of being kidnapped by other governments. From my understanding, citizens are free from control by any citizen or agency of a foreign country. However, that isn’t to say that they’re not at risk of being unfairly treated by the citizens and agencies of the Russian Federation. There is little information pointing one way or the other, but my personal experience and the experiences of my collective family have shown that Russia is relatively safe from the control of other nation’s agencies and citizens. Therefore I feel confident in asserting that the Russian Federation does not inhibit the potential of small businesses by not protecting its citizens from outside control.

Sources: Personal Experience ;

11. Protection of Domestic Enterprises - 3.0

The Russian Federation’s imports and exports produce a trade surplus. The management of their country’s imports and exports has been strong; however the sustainability of their success has been brought into question multiple times and more recently by the Managing Director of the International Monetary Fund, Christine Lagarde.

In 2010, Russia export business accounted for 28.67% of GDP and its import business accounted for a smaller 20.46% of GDP. Due to the 8% difference in between the exports and imports, it is easy to say that Russia’s trading produced a surplus. While Russia has been criticized for lacking to create a sustainable economic plan that would reduce their reliance on their production and selling of oil, they have made a large goal of developing a domestic nano-industry inside of Russia. Rusnano, the joint stock company completely owned by Russia’s government is attempting to create a silicon valley on its home soil and to develop a strong domestic market that would produce $30 billion dollars worth of ‘marketable goods.’

Sources: ; ;,,contentMDK:21032960~menuPK:989684~pagePK:1497618~piPK:217854~theSitePK:305600,00.html ;

12. Foreign Currency Transactions - 5.0

Russia receives a high score for conducting all domestic business in one currency, the Russian ruble. A single Russian ruble is equal to 0.032 of an American dollar, at present market exchange rates. It is still in use by surrounding countries and former members of the USSR; Belarus, Abkhazia, South Ossetia and Transnistria still utilize the ruble.

Source: ; Personal Experience

13. Border Control - 1.0

Corruption is a recurring theme in this entire Economic analysis of the Russian Federation; therefore it is no surprise that corruption affects yet another sector of the economy. Russia’s borders have been ill secured for many decades, especially due to them not existing up until the collapse of the Soviet Union only two decades ago. Even with some of the borders being secure, it is fairly likely and possibly more convenient for people passing through to simply pay off the guards than go through the trouble of getting legitimate documentation allowing either the import or export of whatever is passing through.

This being the case, it is unfortunately not benefiting small business owners by taking away the potential business that they could have done. I assert that this is not an issue that is going to be properly dealt with in the near future, due to the Russian army’s lack of resources able to do address the issue.

Sources: Personal Experience ;

14. Currency - 4.0

Despite Russia’s past failures in dispersing and maintaining only one, legitimate currency, they were finally able to stabilize it. During the transition from a communist state to a federal republic, the Ruble experienced an exorbitant amount of inflation and proved to be barely worth the paper that it was printed on. In 1997, a single American dollar was equal to nearly 6,000 rubles. That number dropped a year later to nearly 10 rubles and then went back up to 28 rubles, a value that closely resembles the current market price of it.

Russia redenominated its money, essentially assigning the money a different number; in this case it involved the removal of 3 zeroes that otherwise plagued the value of the ruble and the strength of the economy. This was only to instill confidence in the public and to urge them to use the ruble the way it was intended to be used. At this point, the ruble is the only operating currency in the Russian Federation and in that sense encourages consumption and helps the government’s actions to have predictable effects on the economy.

Sources: ; ; Personal Experience

15. Cultural, Language Homogeneity - 4.0

Russia has a history of conflict with the Chechnya and Armenians both of whose citizens constitute minorities. Russia has invaded and fought in those territories, however those battles have never carried on inside of Russia’s borders. 80% of Russia’s citizens are Russian with Tatars and Ukrainians following at 3.8% and 2%. The official language is Russian, with basically the entire population speaking it. The USSR has a history of not treating all its citizens equally, often persecuting Jews and people of other religions. Russian Orthodoxy is the dominant religion in the country, with Judaism, Orthodox Christianity, Buddhism and Islam also being represented. As far as homogeneity and common language, customs and values go, Russia does very well. Even during times of conflict in times of the Soviet Union, families of different religions would be very friendly with one another, building on common values rather than focusing on the differences in religion and the larger history of their separate peoples. This was at least true for my Dad, whose family never had any issues with the Muslim or Russian Orthodox families in the neighborhood despite being of a different religion.

Sources: Personal Experience ;

16. Political Effectiveness - 1.0

The Political effectiveness of Russia’s government is largely inexistent and also hard to prove. As these last few categories have shown, corruption is rampant and the government hides behind a veil of secrecy. Evaluating political effectiveness by analyzing the responses of the government to natural disasters and other crises is a novel idea. In responding to the fires that swept rural Russian in 2010, the government failed miserably.

Smoke swept through Russia and filled Moscow with smoke and claimed more than 50 lives. Artillery had to be transferred from a military base because of concerns that it would blow. Hundreds of wildfires spread in Russia that year, due to the inability to contain them and the generally arid climate that comes with summer. Medvedev and Putin blame local mayors for the poor response to the wildfires. Regardless, overall the government did a poor job of helping attack the fires. There’s no other explanation. Therefore their political effectiveness is usually only self serving and not generally effective in addressing the nation’s issues.

Sources: ; Personal Experience

17. Institutional Stability - 3.0

Institutional Stability is generally high; however there is high political risk in Russia. The current government, believed by many to be truly headed by Vladimir Putin, has been in power for a relatively long time and will continue to be dominant with the soon to be made official ‘clarification’ to the constitution of Russia, changing the term length to 6 years and extending the limit to 12 years. This is being instituted by his rumored puppet, the current President Dmitry Medvedev. In that sense, the institution is extremely stable, perhaps too stable for some.

A.M. Best, a rating agency designated as a Nationally Recognized Statistical Rating Organization, recognized in a report on country risks, that there is a high political risk present in Russia. It believes that the central governments, including Prime Minister Putin, ‘maintain a dominating presence in Russia.’ They cite regional military conflicts, opaque regulations, an inefficient and corrupt legal system and government intervention in the private sector as the reasons.

Sources: ;

18. Honest Government - 1.0

Russia is an incredibly corrupt country with a highly dishonest government. This was my assertion before I researched the topic further, but not to my surprise this was the same conclusion that Transparency International came to. Russia has a history of unpredictable corruption that penetrated every part of a person’s life. That corruption and dishonesty is still present, with many small businesses not being able to survive because of powerful people favoring larger corporations that they have a financial interest in. It’s been this way for a very long time and it doesn’t look to be changing.

Transparency International, in their annual Corruption Perception Index gave Russia a score of 2.1. On their scale a country’s score of 9-10 would mean that it’s “very clean”, while a score of 1-1.9 would mean that the country is highly corrupt. Residing in one of the lower spots on the CPI, is sure to turn off some investors from doing business in Russia.

Source: ; Personal Experience

19. Common Laws - 2.5

The Russian Federation’s Judicial System is greatly flawed and tends to have more favorable outcomes for powerful businessmen and other state connected people. Corruption of Judges and the judicial system has so far proved to be an adamant force and not one that will likely change its behavior in the near future. Despite the current legal system being very young, the processes of the system are still corrupt and can be accessed for your benefit in the same way you would have been able to before the Soviet Union was disbanded. According to the Department of State’s profile of the Russian Judicial System, judges still feel compelled to rule in the interest of the Russian government.

Russia’s legal system differs from the United States for many reasons, one of the most important of which is that there are no precedents set in Russia. While our system functions on precedents, Russia’s makes rulings based on the current law, which often contain many gray areas that the judges are free to rule on. However a system of legal precedents is slowly being developed in Russia.

Sources: ; ; Personal Experience

20. Central Bank - 3.0

In assigning the Central Bank of Russia a score, we were told to analyze the efficacy of the bank’s ability to manage the country’s monetary policy and the level of independence the bank has from political control. I believe that the Central Bank is legally independent and officially presided over solely by its chairman. I also believe that the bank manages the monetary policy and supply effectively; however, there is an unofficial side of business that is also pertinent in this analysis. Russia’s Central Bank may be heavily influenced by political leaders, often indirectly. There is no way of knowing all the dealings that go on and the pressures that are exerted by Duma leaders on the chairman. The lack of belief in the system and the probable presence of corruption lower the score significantly.

Officially, Article 75 of the Constitution of the Russian Federation assigns a special legal status to the Bank of Russia giving it the right to print currency and ensure its stability. The Central Bank’s legal status gives it independence as a ‘special public and legal institution.’ Finally, the Central Bank is held accountable by the Duma of the Russian Federation, which also has the responsibility and right to appoint and dismiss the Chairman of the Bank of Russia.

Sources: Personal Experience ;

21. Domestic Budget Management - 2.0

Russia’s domestic budget management was hard to accurately pinpoint due to the fact that its tax revenues and expenditures were impossible to locate. If this was an analysis of the availability of the Russian government’s finances, then this analysis would surely yield a low score. Due to this not being the case, I found out that Russia’s budget deficit may fall to 2% of gross GDP but is being forecast to stand at 3.6% of GDP.

That 3.6% of GDP has little effect on small businesses, because from what I’ve read; Russia poorly supports their small businesses. I don’t think the 3% of GDP that Russia had to borrow to balance their budget would have done any good for businesses.

Source: ; Personal Experience

22. Government Debt - 3.0

Russia receives a score of 3, a middle of the road score which it deserves because of its large cash reserves and because Russia’s debt may reach 585% of GDP by 2050. Russia has no immediate debt due to its constantly strong performing market which could be attributed to their sales of oil, metal and the like.

The Russian economy has been growing since 1998 and has averaged 7% increases in GDP ever since then. Unfortunately, the Russian economy was heavily hit in the 2008-2009 crisis due to the fall in oil prices and the foreign credits that Russian banks relied upon. It has also been predicted that Russia’s debt may rise significantly in the coming half century due to the decline of the population and the subsequent increase in spending. It has been said that Russia’s population will shrink to a mere 116 million from 140 million in 2009. This sharp decrease will cause the amount of age related spending to skyrocket to 25.5% of GDP from 13%.

Sources: ;

23. Economic Statistics - 3.0

In my search for economic statistics, I was quickly directed to the Russian Federation’s Statistics Service. The title sounds awkward due to its translation from its better sounding Russian name. Statistics are plentiful and easy to access. Statistics for the national debt, cost of living, federal and local organizations prices, finances, inner market commerce, and international comparisons are plentiful providing the average citizen a wealth of information if they so desire.

The caveat with all this seemingly great information is that Russia’s government has a tendency and a reputation for manipulating their information and processes. I have no way of knowing the legitimacy of the information that they provide other than what I can deduce from the data myself. It’s a paradox that probably leads Russia’s businessmen to looking for other, possibly more legitimate, sources of information.

24. Protection of Public Health and Safety - 2.0

Russia receives a score of 2 due to its 73rd spot on the United Nation’s ranking of countries by infant mortality rates. As if its low ranking wasn’t enough, Russia also has one of the world’s highest rates of tuberculosis among its citizens. The number of new TB infections has doubled between 1990 and 2004. The reporting of TB has also increased considerably due to better programs and awareness. It is hard to guess the effects that this low score has on small business owners, however it may be indicative of the state and ability of the government to control the livelihood of its country. It is also important to note that Russia’s TB immunization rate of children under 2 was 96.1%.

The Ministry of Health estimates that 80% of the Russian populations are carriers of Tuberculosis. The Red Cross also estimates that 70 people die from TB every day in Russia. Additionally, the mortality rate has more than doubled between 1991 and 2006, and that statistic doesn’t even account for the deaths related to TB carriers and those caused by aids. Sources: ;

25. High Wage Policies - 1.0

Russia had the lowest minimum wage of all European countries at $139. Russia has an incredibly high income disparity and largely no middle class. It deserves a low score due to the average Russian not being able to afford much more than the basic necessities.

Some of my family residing in Russia are Neurologists, Surgeons and Physicians and none of them have much disposable income despite going through many years of school. The same would not be true in the United States. The wealthy in Russia are businessmen or politicians or some combination of the two and that sad truth has been the reality since the beginning of the Soviet Union.


Personal Experience

26. Environmental Protection - 2.0

Russia deserves a score of 2 due to their history of neglecting and being unable or willing to deal with their environmental issues such as water pollution, air quality, hazardous waste disposal problems, and nuclear waste.

Russians have a deep history of being apathetic to environmental causes due to having more important causes and immediate dangers. During the Soviet Union, people weren’t generally worried about the state of the environment since the government was completely in charge of all affairs. Currently, the average Russian is more concerned with making enough money than about the state or health of the environment. Due to the incredible degree of corruption in Russia, corporations that may be responsible for polluting the environment will likely go undeterred due to their likely political power.

Source: ; Personal experience

27. Strong Army - 2.0

Russia deserves a score of 2 due to having active military personnel of 1.2 million people and an active reserve of nearly 800,000 people. They have been increasing their army budget in recent years and also trying to revamp old programs that carried over from the Soviet Union. Despite these seemingly positive indicators, Russia’s army faces great problems. Many of the Army’s brigades are unprepared due to the recent reform and professional sergeants, who are responsible for the training of contract soldiers, are being trained very slowly themselves.

Until recent years, Russia has mandated that males at the age of 18 serve in the army for numerous years. It was this policy and Russia’s and the Soviet Union’s reputation for having an army which abused its soldiers and often sent them into controversial battles.

Source: ; Personal Experience

28. Foreign Trade Impact - 3.0

Russia does fairly well in this category achieving a score of 4 due to their import and export account equaling a little over 33% of total GDP. That number shows that while Russia values foreign trade, it’s not consumed by it to the point where it could be vulnerable to external forces.

In 2007, Russia exported $299.9 billion dollars worth of goods and imported $169.9 billion dollars worth of goods. When added, these numbers equal $469.8 billion dollars or 41% of total GDP. While it is higher than a third of GDP, I don’t think that a significant enough percentage to indicate that Russia relies too heavily on trade. In fact, it may be possible that without that trading, Russia’s GDP would be dually affected due to a majority of its trades having to do with oil.

Sources: ;

29. Management of Foreign Currency Budget - 2.0

Russia receives a low score for their foreign currency due to the import-export calculation yielding a number that wasn’t greater than 10% of GDP for that year. With their GDP rising and the management of their foreign currency budget resulting in a balance of zero, Russia shows that matters could be far worse.

Russia’s GDP has been steadily rising by averages of 5, 6, or 7% since the beginning of the 21st century and in 2007, Russia imported $299.9 billion while exporting goods worth $169.9 billion. When you subtract the value of goods imported from the value of goods exported you’re left with $130 billion. This number adds is equivalent to 10% of Russia’s GDP for the 2007 year.

Source: ;

30. Layers of collective action - 2.0

Collective action is largely inexistent in Russia and is a little laughable. Back in the days of the Soviet Union this was even more nonexistent than it is today due to the centralized control of everything. As Russia becomes more and more privatized, I imagine that groups of collection action will start developing in communities and be based around schools and local community groups.

By having an extremely powerful centralized government with the President appointing many regional leaders therefore eliminating any chances for those regions to have one of their own candidates become a leader. Although, out of the 12,215 municipalities in Russia, and depending on their location, 4,519 elect a mayor. However, the power of these low level government leaders is another large subject of debate. ; Personal Experience

31. Pro-business climate - 1.0

Currently, Russia is not a place for small business or for entrepreneurs looking to start out. In Russia, entrepreneurship is not seen as an attractive career. Entrepreneurs in Russia lack the sophistication and education and are seen as thuggish and dishonest individuals. (Zaviyalov) There are few online sources that could adequately address the presence of corruption as personal experience can. Corruption is an integral part of the way corporations function and the way people make significant amount of money. Russia is pro-big business, and pro corruption. If you’re an obedient citizen that wants to learn an honest living, you probably don’t live Russia or you will find that you have an extremely hard time making enough money.

Officially, Russia is very pro-business; even creating a site devoted to the reasons why you should invest in its economy. The website outlines reasons why companies should invest, such as dynamic economic growth for which it cites that since 1999, GDP growth has averaged 6.8% per year and reached 8.1% in 2007 compared to the 4-5% average world economic growth. They also apparently possess an ‘attractive taxation system’ and while their personal income is at a low rate of 13%, they are not pro-small business which this project addresses.

The relationship of political elites with the development of Russia’s economy which was privatized after the collapse of the Soviet Union explains the reason why corruption is so present. By having so much power at such an integral part of the formation of the new economy, politicians were getting in at the ground floor of what they knew was going to be a profitable venture. That power is still present today and is the reason why the economy is so favorable to big business while almost explicitly opposing small business. ; ;

32. Government enterprises - 1.0

By being closely tied to Moscow’s elite, who see the company as a vehicle of achieving their political agenda, this company fails to achieve its goal. While some companies receive financing from RUSNANO, they’re simultaneously trying to get grants from abroad which eventually results in them moving to the other abroad locale. Competition is difficult due to corruption and the unrivaled support of RUSNANO towards its investments.

Russia’s state controlled entity, Gazprom, which holds a virtual monopoly over the entire country earns Russia a score of 1. George Soros recently said, “Europe is relying for a large portion of energy supplies on a country that does not hesitate to use its monopoly power in devious and arbitrary ways." By holding a majority stake in Gazprom, we can’t expect them to play nice and provide for a competitive economic climate.

Another example indicative of Russia’s control over government enterprises is perfectly portrayed in RUSNANO’s case. RUSNANO stands for The Russian Corporation of Nanotechnologies, which is a 100% state owned entity.

Source: ; ; ; Personal Experience

33. International security agreements - 2.0

However, many countries are on changing terms with Russia. In accepting the proposed missile defense scheme, the United States helped complicate its relationship with Russia due to Russia’s continued reluctance and refusal to agree to anything unless the system is made interoperable so that Moscow isn’t threatened. With Washington’s adamant reluctance to sign any contracts about its missile policies, this situation is indicative of Russia’s strained relationships with many of the world’s powers.

Russia is part of the big eight, a group of the 8 most industrialized nations. While having a powerful nuclear program, Russia also allocated $100 billion to upgrade and reform the military in the following two decades. Doing business in Russia would not be threatened by another country’s armed threat, because like the United States and China; Russia has a strong enough military and nuclear presence to be able to thwart that. ;

34. Protection of domestic enterprises from government mandated costs - 1.0

Unfortunately, there are very few instances where small domestic enterprises could evade government mandated costs. In fact, that is one of the reasons that the majority of small businesses go under in less than a year. There are high costs for licensing as well as government fees and taxes and due to this I believe that Russia’s policies warrant it a score of 1.

The Russian government created an organization called ‘Opora of Russia’ dedicated to assisting small domestic enterprises survive. Recently, they lobbied Prime Minister Putin to pass a law that would remove ‘legislative conflicts’ that prevent medical organizations from taking advantage of tax benefits provided by the law. ‘Opora,’ which translates as ‘Support of Russia’, is pushing for this amendment because of the tax reductions on a lot of companies.

In addition, Russia temporarily raised import customs duties on certain products in 2009. Since the end of 2008, Russia imposed a temporary customs duty of 30% on the imports of tractors, trucks and brand cars among which the import duty on vehicles with an engine displacement between 1.5L to 1.8L. While this helps large domestic enterprises, it affects small enterprises minimally.

Sources: ; ; Personal experience


To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

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Comparison of Russia's economic policies to MIEPA criteria as prepared by Zula Hadeeva, studying in the US in December 2011.



        1               4.0          12.0             15.0        80 %

        2               2.5           7.5             15.0        50

        3               2.0           6.0             15.0        40

        4               4.0          12.0             15.0        80

        5               2.5           7.5             15.0        50

        6               3.3           9.9             15.0        66

        7               2.0           6.0             15.0        40 
        8               2.5           7.5             15.0        50

        9               1.5           4.5             15.0        30

        10              5.0          15.0             15.0       100

        11              1.0           3.0             15.0        20

        12              4.0           8.0             10.0        80

        13              2.5           5.0             10.0        50

        14              3.0           6.0             10.0        60

        15              4.0           8.0             10.0        80

        16              4.0           8.0             10.0        80

        17              4.0           8.0             10.0        80

        18              1.5           3.0             10.0        30

        19              2.1           4.2             10.0        42       

	  20              2.5           5.0             10.0        50

        21              3.5           7.0             10.0        70

        22              1.0           3.0             10.0        30

        23              2.0           4.0             10.0        40

        24              3.0           6.0             10.0        60

        25              2.0           4.0             10.0        40        

        26              2.0           4.0             10.0        40

        27              4.0           8.0             10.0        80

        28              4.0           8.0             10.0        80

        29              1.0           1.0              5.0        20 

        30              2.0           2.0              5.0        40

        31              1.0           1.0              5.0        20

        32              2.0           2.0              5.0        40

        33              4.0           4.0              5.0        80

        34              2.0           2.0              5.0        40

   TOTAL               91.4         202.1            365.0        55.4%    
                     =======        ======           ======       =====
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1.Freedom from internal control - 4.0

Formally, there are a freedom from internal control in Russia. Even though people are free to move about and engage in any activity, the conditions to create new enterprises and wealth seems hard or even impossible. Freedom to move about at own discretion is limited by lack or misrepresentation of information in the mass media and in the system of education. Some freedom is limited by corruption, when money and connection is replacing the justice.

Personal experience

2. Freedom of speech - 2.5

According to the report of Freedom House, human rights organization, Russia occupies 175 place in a rating of freedom of mass-media. There are freedom of speech formally, but factually citizens are not really able to express themselves freely without censorship or restriction.

3. Effective, fair police force – 2.0

About 40% of Russians don't trust police, according research of analytical center of Juri Levada. 58% of interrogated believe that extortion by police represent stable system. The Russian police's organization and preparation of its employees basically do not correspond to modern professional criteria of police structures. It is shown directly by daily activity of militia: both ignorance and default of legislative norms, and low level of professionalism in all kinds of activity – from driving of the car and use of the weapon before carrying out of professional operations. ;

4. Private property - 4.0

Private property is one of patterns of ownership in Russia. Private property rights are protected by Constitution of Russian Federation.

5. Commercial banks - 2.5

People are becoming more trustful for commercial banks after crisis of banks of 1998, but still they have more trust to government banks. On supervision of Bank of Russia, considerable number of regional banks in the activity become isolated on the limited circle of local clients, these clients, as usual, are also shareholders of this banks. Geographic distribution of banks and the banking capital is insufficiently in regular intervals. The greatest number of banks, namely 37 % from their total, is concentrated in Moscow. The second financial center of Russia is Saint Petersburg. At the same time there are regions of Russia which are needed expansion of a bank infrastructure. ; Personal experience

6. Communication systems – 3.3

Russia's communication systems are good in terms of business applications. Cell phones have become very common and affordable among teenagers, business people and families alike. Radio, TV, FAX are also readily available nation wide.

Personal experience

7. Transportation – 2.0

Modern Russian transport system and its infrastructure aren't developed in different degree in different regions of the country, which is creates certain problems in the economy development. The quality of the majority of the roads is bad, because of insufficient financing. Road system often is not thought over for the future, for example, in Moscow, the roads are organized radially compare with parallel structure in New York, so,when there are a traffic it is hard to move in Moscow because there are no parallel road as in New York, and plus there were built a lot of buildings for profit purposes in the center of Moscow, so in the future it is going to cause a big problem. ; personal experience

8. Education - 2.5

Quality of Russian education is declining in all levels. There are no standards of accreditation of colleges and universities. Almost half of inhabitants of Russia, 45 %, is not satisfied by a present education system in the country. 37 % of citizens believe that quality of education for last year only has worsened. According to Rosobrnadzora Russians annually are getting illegaly up to 500 thousands of diplomas about higher education. Victor Panin, the vice-president of the Russian Society of Protection of the Rights of Consumers of Educational Services , said: “Danger of corruption in an education system consists that since childhood in consciousness of the person there are representation about defencelessness against criminality and and authority...Thus automatically there is an uncivilized format of dialogue which conducts to the subsequent corruption lawlessness in all other branches and spheres of ability to live of a society". ; ; personal experience

9. Social Mobility – 1.5

It is very hard to join elite class if you wasn't born reach or you don't have connection. Level of corruption is very high in Russia. Highly paid jobs are usually distributed by acquaintance. Education system is also very corrupted. ; personal experience

10. Freedom from outside control - 5.0

Russians citizens are free from control by any citizen or agency of any other country.

Personal experience

11. Protection of Domestic Enterprises - 1.0

There is an absence of industrial policy in Russia. Some industries which could be rational to develop isn't developing. For example, cultivation of vegetables in the areas where is it possible. A lot of space isn't using; the majority of vegetables on the market is from China. There are many of examples of absence of industrial policy.

Personal experience

12.Foreign currency transactions – 4.0

It is authorized to save money in foreign currency in Russia, but all transactions are conducted in rubles. In order to conduct business within Russian Federation all foreign currencies must be converted to rubles.

Personal experience

13.Border control - 2.5

Smuggling is a big problem in Russia. One of the main reasons of contraband in the Russian Federation are unfairly overestimated customs duties, customs payments. Lower level of the taxation which exists in Russia, practically pushes the businessmen who are carrying out foreign trade activities on application of various illegal ways of moving of the goods through customs border. In order to maintain a competition with big quantity of illicit goods smugglers use illegal schemes of customs registration, or they just have to stop foreign trade activities.

The major reason of growth of contraband in Russia is corruption of law-enforcement and supervising bodies. The corruption question is often exaggerated in a press, but things are right where they started. There is no businessman carrying out foreign trade activities which would not face extortion of bribes of enforcement bodies.

14. Currency - 3.0

According to Definition of the Constitutional Court of the Russian Federation from 7/12/2001 N 179 items 75 (p.1) by the Constitution of the Russian Federation it is established that monetary unit in the Russian Federation is the ruble. There is exclusive right of the Central bank of the Russian Federation of realization of monetary issue; there is an interdiction for introduction and issue of other money. However, this interdiction does not exclude possibility for citizens to exchange ruble national currencies of other states. The reference in the Russian Federation, as well as in other countries, foreign currency does not mean introduction and issue of other money, besides the national currencies, neither these countries, nor the Russian Federation. ;

15. Cultural, language homogeneity – 4.0

Over 160 different nationalities live in Russia. 80% are represented by Russians; 20% are represented by not Russian. The most widespread language in Russia is Russian. It also is a state language of the Russian Federation according to article 69 of its constitution. The tendency of using not Russian languages is declining. Minority groups share common values and customs along with their national customs and values. In general, the all population is changing to cultural homogeneity.

16. Political effectiveness – 4.0

Emergency Control Ministry of Russia solves problems effectively in the all parts of Russia according opinion of majority of Russians. The ministry is well organized and well equipped.

17. Institutional stability - 4.0

Major changes of institutions had been happening during epoch of Perestroika from 1986 to 1991, when USSR disintegrated on sovereign countries. Russia, the official successor of USSR, have began new way of life. New institutions of democracy and institutions of capitalism appeared in Russia; some formations were modified from USSR's formations. Since that time institutions remain stable. At the same time Russians have to develop their political, economic and social structures in order to be real democratic country. I believe that some changes and reformations will be happening, but its going to be within concept of democracy.

Personal experience ;

18. Honest government – 1.5

Index of perception of corruption of Russia of 2011 is 2.1 that is 143rd place between 182 countries. Transparency International has started to count the Index of perception of corruption for Russia since 1996. The head of the Russian branch of the organization, Elena Panfilova, has noticed that position of Russia in a rating remains stable since 2000. She said that numerous reforms of ex-president Putin did not change opinion of businessmen and experts about level of corruption of the Russian bureaucratic machinery. President Medvedev has strengthened actions on fight against corruption also, but factually nothing is changed. Countries with a rating below 3 points is in a zone of very high corruption. High level of corruption acknowledges by simple Russians and by top management. This phenomenon is everywhere; it is in political, institutional, economic, judicial, law-enforcement, educational, social protection, medical, investment, international trade spheres. ;

19. Common laws 2.1

A system of common law is not officially a source of the law in Russia. The role of precedent is carried out by decisions of Plenums of Supreme Court and by decisions of Supreme Court of Arbitration of Russia, which are choosing the most significant affairs. So, the system works not absolutely effectively. High level of corruption and set of contradictions in legal system aggravate the situation.

20.Central bank - 2.5

The State Duma to which Central Bank is formally accountable cannot take any independent decisions concerning activity or management of the bank. So basically, the only person who can real influence on Central Bank activity is the President of Russia, who can make political decision about assignment or removal from the post of the chairman of Bank of Russia and its members of board of directors as well.

The Central Bank of Russia has been founded on July, 13th, 1990. The supreme body of the Central Bank of Russia is the Board of Directors of the Bank of Russia. The principle of the accountability of the Central Bank to federal representative bodies is fixed in the Law about the Central bank of the Russian Federation from 2of December, 1990. New edition of the law of 2002 describes the mechanisms of parliamentary control and control of enforcement authorities over Central Bank activity through the checks conducted by Audit Chamber and through National Bank Board, the advisory body of Central Bank, which is consists of representatives of President of Russia, Federal Assembly, Government, Central Bank, credit organizations and experts. Modified law about Central Bank of 2002 has given to National Bank Board an additional power of control of expenses of Central Bank and power of consideration of questions concerning policy and goals of Central Bank. These changes gave to enforcement authorities the levers of influence on monetary policy and on economic activities of Central Bank. ; ;

21. Domestic budget management – 3.5

The Ministry of Finance has informed that proficiency of the Russian federal budget in 2011 will make 0,5 % of gross national product. The proficiency is due to high prices on oil and gas. Level of inflation in 2010 is 8.78%

http://xn----ctbjnaatncev9av3a8f8b.xn--p1ai/ ;

22.Government debt - 1.0

The volume of government debt of Russia of 2011 has exceeded an indicator of 2010 on 28,7%. The prognosis of A. Kudrin, the minister of economy development, is that the government debt will increased at the expense of national debt. The resources are going out from the country to pay the debts, while the borrowed money are doesn't make a better situation in the country.

Government debt of 2010 is 3 233,1 B of roubles – 8,3% of GDP.

Government debt of 2011 is 5 316,7 B of roubles – 11,8% of GDP. ;

23. Economic statistics – 2.0

According to the opinions of American and some Russian experts Russian statistic doesn't corresponds the reality.

Russian Supreme School of Economy suspects Rosstat, Russian Federal Agency of Statistics in manipulation of the data, which allowed to declare about 4 % growth of GDP in 2010. The reason of that was a revision data, which result showed the difference... Data of the forest resources is incorrect also. Information about illegal and legal timber cuttings are absent. The majority of Federative States are providing the information of 1980s and some States of 1960s.

The Russia Census procedure isn't seems reliable, because it is based on counters data. And many people doesn't open the door because of the criminal situation in the country. Yuri Mamchur, Director of Discovery Institute's Real Russia Project, Executive Director of the World Russia Forum witnessed a census count in Russia, he said that some counters don't come back, if people don't open the door, they said that they doesn't get payed enough to spend all day for work. The Russia Census was unfunded until late in the process, it was about to be postponed when Prime Minister Vladimir Putin intervened and found 10.5 billion rubles to pay for it.

Dr. Cynthia Buckley, a Social Demographer at the University of Texas who currently serves as the Program Director for Eurasia at the Social Science Research Council. She follows the Russian Census closely, she confirmed: ”Yes, very few people opened their doors... and this has been a huge problem in the past as well. Mailing the questionnaire is not an option because of the mandatory residency registration that results in people being registered at addresses where they don't really live.

Corresponding information about infant mortality in policy #24.

No wonder foreign investors afraid to invest the money in Russia. ; ;

24. Protection of public health and safety - 3.0

Lets look at the statistics of TB from 2007 to 2009

In 2007 in Russia it is noticed 117 738 sick for the first time by the revealed tuberculosis in the active form.

In 2008 — 107 988 people.

In 2009 - 105 530 people.

It shows that the number is going down.

Let's look at the official statistic of infant mortality during the period from 2001 to 2005.

Infant mortality rate in the Russian Federation decreased on 25 %, from 14,6 in 2001 to 11,0 infants between 1000 born alive in 2005.

But, there are a sources that doesn't really trust the statistics about it. I'm going to quote one of it. The member of Public chamber Leonid Roshal: “In Russia, the indicators of infant mortality rate are underestimated approximately twice … “ He also noticed that children, who is less then 500 grams are not registered in Russia. «If to register them, as in the Western societies the rate indicators would grow twice – to 20, instead of to 11. According to Roshal, such incorrect information is represented to the country leaders while the whole world knows about this problem in Russia. It is possible to believe that statistics might provide not corresponding information.

Public health and safety in Russia has very serious system problems: absence of modern hi-tech hospitals, insufficient equipment of medical institutions, the medical equipment and their inadequate maintenance with expendable materials, a lack of the qualified medical professionals, level of theoretical and practical preparation which corresponds to the today's world standards. There is no effective, high-grade and impartial system of licensing and certification medicians. The mark of quality of medical aid is complicated also because there is an absence of world medical aid standards on various specialities, which in civilized countries are based on results of careful and reliable researches of efficiency and safety of those or other methods of treatment and preventive maintenance of diseases. As a result doctors treat patients generally proceeding from the purely theoretical representations, being guided by the information received on hearing and from few authentic sources. ; ; ;

25. High wage policies - 2.0

The majority of Russians, who works full time, can hardly pay the basic needs. They are working just to survive. In the majority of cases it doesn't depends of level of education. There are many people with university diploma are working, for example, as a waiters or construction workers. The mechanism of formation of a salary on the Russian labor market remains to be an unfixed. Many guesses and assumptions about it, usually, as a matter of experience of other countries, but it still isn't a subject of all-round, regular studying.

26. Environmental protection – 2.0

Russia doesn't have proper ecological legislation. The absence of the professionals and high level of corruption aggravates this situation.

Quality of surrounding environment in the Russian Federation is very non-uniform on regions. About 65 % of territory of the country are characterized as «the wild nature», or undisturbed ecosystems. 20% of territory of Russia of the environment characteristic are satisfactory by criteria of ecological safety. Ecosystems keep reproduction potential,even though it impoverished as a result of the economic influences which decreased a bioproductivity and biodiversity. At the same time, approximately 15 % of territory does not correspond to the specifications defining level of ecological safety of people. These are the areas of the basic part of the population, capacities and the most productive agricultural grounds. Natural ecosystems are strongly oppressed or degraded, their stabilization or, especially, restoration are impossible at modern size of anthropogenous loading on them.

27.Strong army - 4.0

In 2011, the Russian military budget has made 1520,62 billions of roubles that is 14,3 % from all expenses of the budget and 3,02 % of GDP. Russian Army is one of the largest Armed forces in the world, the number of the staff is 1 million of people. Armed forces of Russia differ by the presence of the world's largest arsenals of weapons of mass destruction, including nuclear weapon, and well developed system of means of its delivery.

But, Russia is going to reform the Armed Forces. The estimate of the reform is 12 years. There will be reduction of number of armies, including the staff device, and change of structure of military districts. The goal of reformation is to reduce the Army, and to it make it more professional. ;

28. Foreign trade impact - 4.0

The total of imports and exports of 2009 is about one-third of the GDP, but I can't give a high score because it doesn't really effect people, the majority are live poor.


Russian exports basically are hydrocarbonic raw materials (oil, gas, coal), oil products, metallurgical production, cars and the equipment, arms, mineral fertilizers, wheat. The largest three of the goods of export for January-November, 2010: crude oil — 33 % (a total cost of export), oil products — 17,7 %, natural gas — 10,9 %.

The Russian export of 2009 is $301,7 billions.


In 2007, the share of import to Russia of final goods in an internal final demand made 14,2 %. [60]

Leading articles of import for January-November, 2010: cars and the equipment — 42,9 % (from a total cost of import), medicines — 4,1 %, meat and fish — 2,8 %, clothes — 2,5 %. [275]

The largest importer of the goods to Russia — Germany ($21,2 2009).

The Russian import of 2009 is $167,4 billions.

29. Management of foreign currency budget - 1.0

The trade surplus of the Russian Federation increased by 21 % in January-September of 2011; from $121.8 B. to $154.3 B.

The increase in cost volume of export has been caused by the growth of the average prices of the the fuel and energy goods exported by Russia. The index of the average prices of export is 131 %, while the index of its physical volume - 97.9 %. The share of fuel and energy goods in the structure of the export equaled 72.4% (a year before it was 70.8%)

The increase in cost of the Russian import has been in a greater degree because of the growth of its physical volume. The index of the average prices of the imported goods is 109.8 %. The share of cars and the equipment is 49.8 % (a year before -it was 45.3 %). Cost the volume of import of machine-building production has increased by 52.3 %.

Let's say, for example, if Russia doesn't have the raw materials there would be the trade deficit and devaluation of the money, because Russia couldn't pay for import goods. So, the export of fuel and energy goods is allowing to cover expenses of the imports, and it's creating the trade surplus. What is the mechanism of this problem?

The Russian export is basing on the export of the raw materials. The high-technology production are not competitive on the market (the exceptions are cosmic and military branches). Historically, during the time of USSR the social and economic structure hadn't been allowing the technology to develop. So, Russia had a weak start position in the beginning if the capitalization and competition. The USA and Japan have capital-intensive and hi-tech branches of economy that involves essential volumes of the capital from all over the world.

The level of competitiveness of the goods mainly depends of the financing system. In Russia, the credits for national manufacturers in maintenance of the national money are pursuing at the expense of foreign currency (credits of IMF and other creditors). The cost price of manufacture of export production is in 1,5 times more expensive than, for example, in Japan at equality of the other conditions. The difference of the Japanese-Chinese model of the financing is that the strategic export - oriented enterprises receive, basically, direct investments through a network of bank structures, at the expense of issue of national money in their authorized capitals under well-founded business plans. The risks is secured, and the actions are becoming, on-essence, a liquid maintenance of the national money. Therefore, the yens are 100 % provided by national actives, and it's remain in economy, their quantity increases in the national economy all the time without inflation. ; ; ;

30. Layers of collective action – 2.0

These kinds of activities are existing in education sphere (schools, colleges, universities) in forms of student unions, and in other spheres in forms of nonprofit organization. They are not that active as they supposed to be and they don't have that much influence as they have in western societies.

In general, the social capital in Russia, in comparison with European countries and the U.S., is low. The majority of people don't participate in social collective activities, because they don't have time, they need to work and survive and even if they have that time, they won't do it, because they would think it is not rational to work for free or do something which is not useful for them particularly. There are different priorities in their life.

In Russia, there are no such methods of stimulation and encouragement for the businesses if they want to participate in these kinds of activities. There is no federal legislation for these actions such as tax privileges and mode of favored treatment for businessmen who would like to participate in collective actions. Russia doesn't have tradition about the decision of social problems thru non government organizations.

It is hard to compare economic indicators which are capable for European countries, the U.S. and other countries where European or American influence was great, with Russia. I believe that Russia has its own path of development, which is different from other countries. ; personal experience

31. Pro business climate - 1.0

It is one of the paradox of Russian Federation, how the country with biggest amount of resources and land live that poor live.

The probusiness climate in the regions of the Russian does not correspond to the requirements of small and average business. It is the conclusion of research of the Russian regions on quality of conditions for development of small and average business.

The principal causes of that are shortage of engineers and qualified workers, deficiency of financing, high tariffs for the electric power together with low availability of new power capacities limit development of the companies., bad legislation some examples of which I wrote in #34, inefficient work of government agencies, high level corruption (39,1 %), discrepancy of a transport infrastructure to requirements of business.

Personal experience ; › ... ›

32. Government enterprises - 2.0

The government enterprises of Russia represent relicts of the Soviet period. Those enterprises are not only impractical, but also noncompetitive. Nevertheless, it have a place in the economy in the forms of commercial and noncommercial organizations.

From the beginning of Perestroika the government enterprises are in sphere of unresolved problems. Despite impressive quantity of the existing legislative documents which regulates all the Government Enterprises and its aspects of activity, the basic law, the Law of the government and municipal unitary enterprises isn't exist. The great number of documents creates precedents at occurrence of disputable situations, like its allows to carry out illegal actions in the legal way. For example, regarding distribution of profit or property relations. The situation is aggravated by the crisis and the absence of stability in economy.

33. International security agreements - 4.0

Russia admits as superstate, but the influence in the world politics is much less then in the Soviet time.Russia participates in the following international organizations: Union State, The United Nations, THE CIS (The Commonwealth of Independent States), CSTO(The Collective Security Treaty Organization), The organization on safety and cooperation in Europe,

The organization of the Black Sea economic cooperation, The Council of Europe, G8, BRICK, The Shanghai organization of cooperation, The central-Asian cooperation (organization),The Euroasian economic community, ISO, The international Olympic committee. But nevertheless Russia has not entered yet in the WTO.

34. Protection of domestic enterprises from Government Mandated Costs. – 2.0

I understand protection of domestic enterprises from Government Mandated Costs as: It is first of all a good credit conditions for opening business. In Russia, banks doesn't have a target crediting for the people who wants to open own business. Thus, that people have to use standard credit on security of something. Such situation is atypical for the majority of the western countries, in which banks have a special subdividings, which on the basis of an estimation of viability of business idea and credit status of the person, when that person passing the decision about giving a credit.

Secondly, it is a regulation of imports and foreign business within territory of the country. The taken measures about it give some advantage formally, but in a reality I can't consider it as an effective measures. For example, lets look at the order of Ministry of Economic Development and Trade of Russia from 5/12/2011 N 217 "About conditions of the passing of the goods from the foreign countries for the purpose of placing orders of supplying of the goods for the needs of customers". It says that domestic enterprices have 15 percent price advantage of production comparely with foreign .The list of these goods includes animals, textile products, fur, skin and products from them, footwear, synthesis production, the equipment and equipment for radio, television and communication, a photo- and cinematographic equipment, medical equipment, measuring means, hours, the garage equipment, cars and other vehicles, and also some other goods. Similar privileges are entered and for separate types of the goods from Belarus, first of all - buses, cars and of some raw materials types, including polyethylene and polypropylene. Many items from that list is possible to produce in Russia, therefore I consider it as rather strange act. Many of the foreign businesses are afraid to put up money in the Russian business if it isn't connected to oil or gas. ; personal experience


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