Federal Research Division, Library of Congress
Edited by Glenn E. Curtis
Headquarters, Department of the Army
Research completed July, 1996
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Table of Contents:
• Acknowledgments
• Preface
• Chronology of Important Events
• History
o Early History
o Muscovy
o Early Imperial Russia
o Ruling the Empire
o Transformation of Russia in the Nineteenth Century
o The Last Years of the Autocracy
o Revolutions and Civil War
o The Era of the New Economic Policy
o Transformation and Terror
o The War Years
o Reconstruction and Cold War
o The Khrushchev Era
o The Brezhnev Era
o The Leadership Transition Period
o The Gorbachev Era
o New Thinking: Foreign Policy under Gorbachev
o Gorbachev's Reform Dilemma
o Nationality Ferment
o The August Coup and Its Aftermath
• Geography
o Global Position and Boundaries
o Topography and Drainage
o Climate
o Environmental Problems
• Society
o Population
o Demographics
o Migration
o Ethnic, Religious, and Cultural Setting
o Ethnic Composition
o The Russians
o Minority Peoples and Their Territories
o Other Ethnic Groups
o Movements Toward Sovereignty, Chechnya
o Religion
o The Russian Orthodox Church
o Other Religions
o Islam
o Judaism
o The Russian Language
o Literature
o Music
o Ballet
o Architecture and Painting
o Social Structure
o Social Stratification
o Wages and Work
o Rural Life
o Social Organizations
o The Family
o The Role of Women
o Education
o Health
o Social Welfare
• The Economy
o Historical Background
o Economic Reform in the 1990s
o Economic Conditions in Mid-1996
o Natural Resources
o Agriculture
o Energy
o Banking and Finance
o The Labor Force
o Manufacturing
o Transportation
o Telecommunications
o Foreign Economic Relations
• Government
o Historical Background
o The Constitution and Government Structure
o The Executive Branch
o The Parliament
o The Judiciary
o Local and Regional Government
o Political Parties and Legislative Elections
o Civil Rights
o The Media
• Foreign Relations
o The Emergence of Russian Foreign Policy
o The Foreign Policy Mechanism
o Regional Policies
o The Near Abroad
o The United States
o Western Europe
o NATO
o Central Europe
o China
o Japan
o Other Asian States
o The Third World
o The Middle East
o Latin America
• Appendix. Tables
• Bibliography
• Glossary
THE DEMISE OF THE SOVIET UNION in 1991 brought a measure of freedom to Russia's people, but at the same time this change removed or severely weakened certain elements of the social safety net, which for many years had included a guarantee of employment, basic medical care, and government subsidies for food, clothing, shelter, and transportation. For the average citizen, social and economic conditions worsened considerably in the early postcommunist era. Although some components of state support remained close to their Soviet-era levels, the government lacked the resources to compensate Russia's citizens for the stresses of the transition period.
The end of the Soviet Union meant the disappearance of a reliable, if mediocre, set of social expectations for every Russian. Lacking such guidance, various elements of Russian society moved in very different directions. A small segment took immediate action--both legal and illegal--to make the most of its newfound range of opportunities for self-expression and economic advancement. Although few such adventurers found success, those who did coalesced into a new class of wealthy Russians independent of the government. The vast majority, however, met the prospect of reduced predictability in their lives with suspicion, confusion, or resentment. Remembering the security of Soviet life, many clung to symbolic or real remnants of that life, particularly in the workplace.
As the economic controls of centralized government were eased, prices for basic necessities rose--sometimes precipitously--and society was buffeted by marked increases in crime, infectious diseases, drug addiction, homelessness, and suicide. Growing pollution and other environmental hazards added to the malaise....
Despite Marxist-Leninist (see Glossary) notions of a classless society, the Soviet Union had a powerful ruling class, the nomenklatura, which consisted of party officials and key personnel in the government and other important sectors such as heavy industry. This class enjoyed privileges such as roomy apartments, country dachas, and access to special stores, schools, medical facilities, and recreational sites. The social status and income of members of the nomenklatura increased as they were promoted to higher positions in the party....
Postcommunist society also is characterized by a wide disparity in wealth and privilege. Although there is no rigid class structure, social stratification based on wealth is evident and growing. The nomenklatura as it existed in Soviet times disappeared with the demise of the CPSU, but many of its members used their continuing connections with industry and finance to enrich themselves in the emerging capitalist system. According to a 1995 study conducted by the Russian Academy of Sciences, more than 60 percent of Russia's wealthiest millionaires, and 75 percent of the new political elite, are former members of the communist nomenklatura, and 38 percent of Russia's businesspeople held economic positions in the CPSU. The wealth of the new capitalists, who constitute 1 to 2 percent of the population, derives from the ownership of private property, which was prohibited under the communist regime; from former black-market transactions that now are pursued legally; and from repatriation of funds that were secretly transferred abroad during the Soviet era. Entrepreneurs have purchased former state-owned enterprises privatized by the government (often using connections with government authorities to gain favorable treatment) and have opened banks, stock exchanges, and other ventures typical of a market economy.
The most successful of the new capitalists practice conspicuous consumption on an extravagant scale, driving flashy Western cars, sporting expensive clothing and jewelry, and frequenting stylish restaurants and clubs that are far beyond the reach of ordinary Russians. Russian biznesmeny with cash-filled briefcases purchase expensive real estate in exclusive areas of Western Europe and the United States. Other areas of the world, such as the city of Limassol, Cyprus, have been transformed into virtual Russian enclaves where illicit commercial transactions help fuel the economy. Russian capitalists attempting to achieve at a high level using legitimate means must nonetheless pay protection money to criminal groups, especially in the larger cities.
In the first half of the 1990s, the gap between the richest and poorest citizens of Russia grew steadily, and it became a source of social alienation because newly successful Russians are resented and often are assumed to have criminal connections. In 1995 the World Bank (see Glossary) ranked Russia's dichotomy between the highest and lowest economic echelons on a par with the wide gaps between rich and poor in Argentina and Turkey....
Nonreporting of incomes by the highest socioeconomic level likely makes the real gap wider than the official statistics indicate. The overall decline in living standards in 1995 is revealed by an 8 percent decrease in retail trade and by opinion surveys. For instance, in early 1995 some 56 percent of respondents said that their material situation had declined, and 17 percent said that it had improved. Another survey identified 68 percent of respondents claiming to live below the poverty line in 1995, compared with 56 percent the previous year. Such self-perceptions of victimization promote the platforms of antireform political parties that promise a return to the guaranteed well-being of the Soviet era...
Conditions for the working class and the peasants are sharply at variance with those of the new capitalist class. Political repression has eased, but economic privations have increased. Although more goods are available, they are often beyond the means of the average worker. Full employment, the virtually guaranteed basis of survival under communism, no longer is the norm (see Unemployment, ch. 6). At the lower end of the social scale, the "working poor" toil predominantly in agriculture, education, culture, science, and health, most of which are considered middle-class fields of employment in the West. State employees, who suffer especially from inflation because of infrequent wage adjustments, often fall below the official poverty line.
Young parents with little work experience and more than one child are especially likely to be members of the working poor. In 1993 some 57 percent of families classified as poor by the World Bank had one or more children, and 86 percent of families with three or more children were classified in the lowest income group. Most single-parent families also belonged to this group....
In the post-Soviet era, social mobility is unlimited in theory, but in the mid-1990s economic factors play an important role in restricting upward movement for most Russians. Those without an established source of wealth generally are unable to purchase land, real estate, or enterprises, or to take advantage of other financial opportunities to increase their income and status. Because individuals under such limitations also lack opportunities to pursue higher education, they tend to remain at or below the socioeconomic level of their parents. In many cases, the younger generation has less earning power than the one that preceded it.
In 1995 official government estimates placed 39 million people, or 26 percent of the population, below the poverty line....
Among the low-paying jobs are some that require higher or specialized education and that carry some level of prestige. Women predominate in these job categories, which include engineers, veterinarians, agronomists, accountants, legal advisers, translators, schoolteachers, librarians, organizers of clubs and cultural events, musicians, and even doctors. A 1994 World Bank report identified an increasing likelihood that positions offering lower wages would be filled by women, in most sectors and occupations of the Russian economy....
Rural dwellers tend to spend more time in their homes than residents of urban areas. Rural homes generally are larger than those in the city and have private garden plots. The tastes of country people are simpler and less Western-oriented than those of their urban counterparts, and they have less money to spend on leisure pursuits. The routine of life in many rural villages has scarcely changed over many generations; the central concerns continue to be the weather and the condition of crops and livestock.
The end of Soviet rule cast a shadow over the villages' guarantee of medical care, job training, and entertainment, and rural areas benefited much less from the increased pace of information exchange characteristic of urban centers. Rural young people continue to leave their families to seek a better life elsewhere because village life has improved little since their grandparents were young. In this process, the family, the foundation of peasant society, has become fragmented. Villages with fewer than 1,000 inhabitants are disappearing at a rapid rate: between 1960 and 1995, the entire population of an estimated two-thirds of such villages either died or moved away. In the remaining rural villages, health care and education are increasingly inadequate, and essential commodities such as propane gas have become extremely expensive.
Many young people return to their rural homes after acquiring the type of education or technical training that is available only in cities and that is increasingly necessary to run mechanized farming operations and agroindustrial enterprises. They are joined by Russian émigrés from former Soviet republics, especially Central Asia, for whom it is easier to start life in Russia in a rural rather than an urban setting. However, most of those additions to the rural population are only stopping temporarily until they find more satisfying situations elsewhere. According to most experts, the long-term prospects of the traditional Russian village became grim in the immediate post-Soviet period....
In the 1980s, the divorce rate in the Soviet Union was second in the world only to that of the United States, although "unofficial divorces" and separations also were common. Crowded housing and lack of privacy contributed heavily to the divorce rate, especially for couples forced to live with the parents of one spouse....In the first half of the 1990s, the conditions contributing to the majority of Russia's divorces did not change, and the divorce rate increased....
The average distribution of common household tasks was shown to be far from equal, with women performing an average of about 75 percent of cooking, cleaning, and shopping chores. Between 1989 and 1994, women's expression of dissatisfaction with their family situation increased 13 percent, while that of men rose only 2 percent....
In the post-Soviet era, the position of women in Russian society remains at least as problematic as it was in previous decades. In both cases, a number of nominal legal protections for women either have failed to address the existing conditions or have failed to supply adequate support. In the 1990s, increasing economic pressures and shrinking government programs left women with little choice but to seek employment, although most available positions were as substandard as in the Soviet period, and generally jobs of any sort were more difficult to obtain. Such conditions contribute heavily to Russia's declining birthrate and the general deterioration of the family....
Russian women in the 1990s predominate in economic sectors where pay is low, and they continue to receive less pay than men for comparable positions. In 1995 men in health care earned an average of 50 percent more than women in that field, and male engineers received an average of 40 percent more than their female colleagues. Despite the fact that, on average, women are better educated than men, women remain in the minority in senior management positions. In the Soviet era, women's wages averaged 70 percent of men's; by 1995 the figure was 40 percent, according to the Moscow-based Center for Gender Studies. According to a 1996 report, 87 percent of employed urban Russians earning less than 100,000 rubles a month (for value of the ruble--see Glossary) were women, and the percentage of women decreased consistently in the higher wage categories.
According to reports, women generally are the first to be fired, and they face other forms of on-the-job discrimination as well. Struggling companies often fire women to avoid paying child care benefits or granting maternity leave, as the law still requires. In 1995 women constituted an estimated 70 percent of Russia's unemployed, and as much as 90 percent in some areas.
Sociological surveys show that sexual harassment and violence against women have increased at all levels of society in the 1990s. More than 13,000 rapes were reported in 1994, meaning that several times that number of that often-unreported crime probably were committed. In 1993 an estimated 14,000 women were murdered by their husbands or lovers, about twenty times the figure in the United States and several times the figure in Russia five years earlier. More than 300,000 other types of crimes, including spousal abuse, were committed against women in 1994....
Often women with families are forced to work because of insufficient state child allowances and unemployment benefits. Economic hardship has driven some women into prostitution. In the Soviet period, prostitution was viewed officially as a form of social deviancy that was dying out as the Soviet Union advanced toward communism. In the 1990s, organized crime has become heavily involved in prostitution, both in Russia and in the cities of Central and Western Europe, to which Russian women often are lured by bogus advertisements for match-making services or modeling agencies. According to one estimate, 10,000 women from Central Europe, including a high proportion of Russians, have been lured or forced into prostitution in Germany alone....
[T]he most frequently offered job in new businesses is that of secretary, and advertisements often specify physical attractiveness as a primary requirement. Russian law provides for as much as three years' imprisonment for sexual harassment, but the law rarely is enforced. Although the Fund for Protection from Sexual Harassment has blacklisted 300 Moscow firms where sexual harassment is known to have taken place, demands for sex and even rape still are common on-the-job occurrences....
Prior to the 1995 elections, women held about 10 percent of the seats in parliament: fifty-seven of 450 seats in the State Duma and nine of 178 seats in the upper house of parliament, the Federation Council. The Soviet system of mandating legislative seats generally allocated about one-third of the seats in republic-level legislatures and one-half of the seats in local soviets to women, but those proportions shrank drastically with the first multiparty elections of 1990....
In 1992 and 1993, the Government expanded the money supply and credits at explosive rates that led directly to high inflation and to a deterioration in the exchange rate of the ruble. In January 1992, the Government clamped down on money and credit creation at the same time that it lifted price controls. However, beginning in February the RCB loosened the reins on the money supply. In the second and third quarters of 1992, the money supply had increased at especially sharp rates of 34 and 30 percent, respectively, and by the end of 1992, the Russian money supply had increased by eighteen times.
The sharp increase in the money supply was influenced by large foreign currency deposits that state-run enterprises and individuals had built up and by the depreciation of the ruble. Enterprises drew on these deposits to pay wages and other expenses after the Government had tightened restrictions on monetary emissions....
Government efforts to control credit expansion also proved ephemeral in the early years of the transition. Domestic credit increased about nine times between the end of 1991 and 1992. The credit expansion was caused in part by the buildup of interenterprise arrears and the RCB's subsequent financing of those arrears. The Government restricted financing to state enterprises after it lifted controls on prices in January 1992, but enterprises faced cash shortages because the decontrol of prices cut demand for their products. Instead of curtailing production, most firms chose to build up inventories. To support continued production under these circumstances, enterprises relied on loans from other enterprises. By mid-1992, when the amount of unpaid interenterprise loans had reached 3.2 trillion rubles (about US$20 billion), the government froze interenterprise debts. Shortly thereafter, the government provided 181 billion rubles (about US$1.1 billion) in credits to enterprises that were still holding debt.
The Government also failed to constrain its own expenditures in this period, partially under the influence of the conservative Supreme Soviet, which encouraged the Soviet-style financing of favored industries. By the end of 1992, the Russian budget deficit was 20 percent of GDP, much higher than the 5 percent projected under the economic program and stipulated under the International Monetary Fund (IMF--see Glossary) conditions for international funding. This budget deficit was financed largely by expanding the money supply. These ill-advised monetary and fiscal policies resulted in an inflation rate of over 2,000 percent in 1992....
In May 1993, the Ministry of Finance and the RCB agreed to macroeconomic measures, such as reducing subsidies and increasing revenues, to stabilize the economy. The RCB was to raise the discount lending rate to reflect inflation. Based on positive early results from this policy, the IMF extended the first payment of US$1.5 billion to Russia from a special Systemic Transformation Facility (STF) the following July....
The 1993 annual inflation rate was around 1,000 percent, a sharp improvement over 1992, but still very high. The improvement figures were exaggerated, however, because state expenditures had been delayed from the last quarter of 1993 to the first quarter of 1994. State enterprise arrears, for example, had built up in 1993 to about 15 trillion rubles (about US$13 billion, according to the mid-1993 exchange rate).
In June 1994, Chernomyrdin presented a set of moderate reforms calculated to accommodate the more conservative elements of the Government and parliament while placating reformers and Western creditors. The prime minister pledged to move ahead with restructuring the economy and pursuing fiscal and monetary policies conducive to macroeconomic stabilization. But stabilization was undermined by the RCB, which issued credits to enterprises at subsidized rates, and by strong pressure from industrial and agricultural lobbies seeking additional credits.
By October 1994, inflation, which had been reduced by tighter fiscal and monetary policies early in 1994, began to soar once again to dangerous levels. On October 11, a day that became known as Black Tuesday, the value of the ruble on interbank exchange markets plunged by 27 percent....
During most of 1995, the government maintained its commitment to tight fiscal constraints, and budget deficits remained within prescribed parameters. However, in 1995 pressures mounted to increase government spending to alleviate wage arrearages, which were becoming a chronic problem within state enterprises, and to improve the increasingly tattered social safety net. In fact, in 1995 and 1996 the state's failure to pay many such obligations (as well as the wages of most state workers) was a major factor in keeping Russia's budget deficit at a moderate level (see Social Welfare, ch. 5). Conditions changed by the second half of 1995. The members of the State Duma (beginning in 1994, the lower house of the Federal Assembly, Russia's parliament) faced elections in December, and Yeltsin faced dim prospects in his 1996 presidential reelection bid. Therefore, political conditions caused both Duma deputies and the president to make promises to increase spending....
In 1992, the first year of economic reform, retail prices in Russia increased by 2,520 percent. A major cause of the increase was the decontrol of most prices in January 1992, a step that prompted an average price increase of 245 percent in that month alone. By 1993 the annual rate had declined to 840 percent, still a very high figure. In 1994 the inflation rate had improved to 224 percent.....
For the first half of 1996, the inflation rate was 16.5 percent. However, experts noted that control of inflation was aided substantially by the failure to pay wages to workers in state enterprises, a policy that kept prices low by depressing demand....
From July 1992, when the ruble first could be legally exchanged for United States dollars, to October 1995, the rate of exchange between the ruble and the dollar declined from 144 rubles per US$1 to around 5,000 per US$1....
The essence of economic restructuring, and a critical consideration for foreign loans and investment in Russia's economy, is the privatization program. In most respects, between 1992 and 1995 Russia kept pace with or exceeded the rate established in the original privatization program of October 1991. As deputy prime minister for economic policy, the reformist Chubays was an effective advocate of privatization during its important early stages. In 1992 privatization of small enterprises began through employee buyouts and public auctions. By the end of 1993, more than 85 percent of Russian small enterprises and more than 82,000 Russian state enterprises, or about one-third of the total in existence, had been privatized....
By the end of June 1994, the voucher privatization program had completed its first phase. It succeeded in transferring ownership of 70 percent of Russia's large and medium-sized enterprises to private hands and in privatizing about 90 percent of small enterprises. By that time, 96 percent of the vouchers issued in 1992 had been used by their owners to buy shares in firms directly, invest in investment funds, or sell on the secondary markets. According to the organizers of the voucher system, some 14,000 firms employing about two-thirds of the industrial labor force had moved into private hands.
The next phase of the privatization program called for direct cash sales of shares in remaining state enterprises. That phase would complete the transfer of state enterprises and would add to government revenues. After that procedure met stiff opposition in the State Duma, Yeltsin implemented it by decree in July 1994....
By 1995 privatization had gained a negative reputation with ordinary Russians, who coined the slang word prikhvatizatsiya, a combination of the Russian word for "grab" and the Russianized English word "privatize," producing the equivalent of "grabification." The term reflects the belief that the privatization process most often shifted control of enterprises from state agencies to groups of individuals with inside connections in the Government, the mafiya [mafia], or both....
Because the faults of the Yeltsin privatization program were an important plank in the 1996 presidential election platform of the Communist Party of the Russian Federation (Kommunisticheskaya partiya Rossiyskoy Federatsii--KPRF), the strongest opposition party, Yeltsin's campaign strategy was to reduce privatization as far as possible as a campaign issue (see The Executive Branch, ch. 7). Part of that strategy was to shift the privatization process from Moscow to the regions....
After Yeltsin's reelection in July 1996, his financial representatives announced continuation of the privatization program, with a new focus on selling ten to fifteen large state enterprises, including the joint-stock company of the Unified Electric Power System of Russia (YeES Rossii), the Russian State Insurance Company (Rosgosstrakh), and the St. Petersburg Maritime Port. The Communications Investment Joint-Stock Company (Svyazinvest), sale of which had failed in 1995, was to be offered to Western telecommunications companies in 1996.
The new, postelection privatization stage also was to reduce the role of enterprise workers in shareholding. Within the first years of such ownership, most worker shares had been sold at depressed prices, devaluing all shares and cutting state profits from enterprise sales....
As of mid-1996, four and one-half years after the launching of Russia's post-Soviet economic reform, experts found the results promising but mixed. The Russian economy has passed through a long and wrenching depression. Official Russian economic statistics indicate that from 1990 to the end of 1995, Russian GDP declined by roughly 50 percent, far greater than the decline that the United States experienced during the Great Depression....Much of the decline in production has occurred in the military-industrial complex and other heavy industries...
But other major sectors such as agriculture, energy, and light industry also suffered from the transition. To enable these sectors to function in a market system, inefficient enterprises had to be closed and workers laid off, with resulting short-term declines in output and consumption. Analysts had expected that Russia's GDP would begin to rise in 1996, but data for the first six months of the year showed a continuing decline, and some Russian experts predicted a new phase of economic crisis in the second half of the year....
An important but unconventional service in Russia's economy is "shuttle trading"--the transport and sale of consumer goods by individual entrepreneurs, of whom 5 to 10 million were estimated to be active in 1996. Traders buy goods in foreign countries such as China, Turkey, and the United Arab Emirates and in Russian cities, then sell them on the domestic market where demand is highest. Yevgeniy Yasin, minister of economics, estimated that in 1995 some US$11 billion worth of goods entered Russia in this way. Shuttle traders have been vital in maintaining the standard of living of Russians who cannot afford consumer goods on the conventional market. However, domestic industries such as textiles suffer from this infusion of competing merchandise, whose movement is unmonitored, untaxed, and often mafiya [mafia]-controlled....
In Moscow an economic oligarchy, composed of politicians, banks, businesspeople, security forces, and city agencies, controlled a huge percentage of Russia's financial assets under the rule of Moscow's energetic and popular mayor, Yuriy Luzhkov. Unfortunately, organized crime also has played a strong role in the growth of the city (see The Crime Wave of the 1990s, ch. 10). Opposed by a weak police force, Moscow's rate of protection rackets, contract murders, kickbacks, and bribes--all intimately connected with the economic infrastructure--has remained among the highest in Russia. Most businesses have not been able to function without paying for some form of mafiya [mafia] protection, informally called a krysha (the Russian word for roof).
Luzhkov, who has close ties to all legitimate power centers in the city, has overseen the construction of sports stadiums, shopping malls, monuments to Moscow's history, and the ornate Christ the Savior Cathedral. In 1994 Yeltsin gave Luzhkov full control over all state property in Moscow. In the first half of 1996, the city privatized state enterprises at the rate of US$1 billion per year, a faster rate than the entire national privatization process in the same period. Under Luzhkov's leadership, the city government also acquired full or major interests in a wide variety of enterprises--from banking, hotels, and construction to bakeries and beauty salons. Such ownership has allowed Luzhkov's planners to manipulate resources efficiently and with little or no competition. Meanwhile, Moscow also became the center of foreign investment in Russia, often to the exclusion of other regions. For example, the McDonald's fast-food chain, which began operations in Moscow in 1990, enjoyed immediate success but expanded only in Moscow. The concentration of Russia's banking industry in Moscow gave the city a huge advantage in competing for foreign commercial activity....
With the decline in demand for defense industry goods, overall production has shifted from heavy industry to consumer production (see The Defense Industry, ch. 9). However, in the mid-1990s the low quality of most domestically produced consumer goods continued to limit enterprises' profits and therefore their ability to modernize production operations. On the other side of the "vicious circle," reliance on an outmoded production system guaranteed that product quality would remain low and uncompetitive....
Russia is one of the world's richest countries in raw materials, many of which are significant inputs for an industrial economy. Russia accounts for around 20 percent of the world's production of oil and natural gas and possesses large reserves of both fuels. This abundance has made Russia virtually self-sufficient in energy and a large-scale exporter of fuels. Oil and gas were primary hard-currency earners for the Soviet Union, and they remain so for the Russian Federation. Russia also is self-sufficient in nearly all major industrial raw materials and has at least some reserves of every industrially valuable nonfuel mineral....Russia possesses rich reserves of iron ore, manganese, chromium, nickel, platinum, titanium, copper, tin, lead, tungsten, diamonds, phosphates, and gold, and the forests of Siberia contain an estimated one-fifth of the world's timber, mainly conifers (see fig. 8; Environmental Conditions, ch. 3).
The iron ore deposits of the Kursk Magnetic Anomaly, close to the Ukrainian border in the southwest, are believed to contain one-sixth of the world's total reserves. Intensive exploitation began there in the 1950s. Other large iron ore deposits are located in the Kola Peninsula, Karelia, south-central Siberia, and the Far East. The largest copper deposits are located in the Kola Peninsula and the Urals, and lead and zinc are found in North Ossetia....
The Yeltsin regime has attempted to address some of the fundamental reform issues of Russian agriculture. But agricultural reform has moved very slowly, causing output to decline steadily through the mid-1990s. Reform began in Russia shortly before the final collapse of the Soviet Union. In December 1990, the Congress of People's Deputies of the Russian Republic enacted a number of laws that were designed to restructure the agricultural sector and make it more commercially viable. The Law on Peasant Farms legalized private farms and allowed them to operate alongside state and collective farms, to hire labor, and to sell produce without state supervision. The same session of the congress passed the Law on Land Reform, which permitted land to be bequeathed as an inheritance from one generation to the next, but not to be bought or sold. The government also established the State Committee for Agrarian Reform, whose responsibility was to oversee the transfer of available land to private farming.
The main thrust of Yeltsin's agricultural reform has been toward reorganizing state and collective farms into more efficient, market-oriented units. A decree of December 1991 and its subsequent amendments provided several options to state and collective farmers for the future structure of their farms. The decree required that farmers choose either to reorganize into joint-stock companies, cooperatives, or individual private farms, or to maintain their existing structure. Under the first two arrangements, workers would hold shares in the farms and be responsible for managing the enterprises. An individual farmer could later decide to break from the larger unit and establish private ownership of his or her share of the land, as determined by an established procedure.
This restructuring program has progressed slowly. Although 95 percent of the state and collective farms underwent some form of reorganization, about one-third of them retained essentially their earlier structure. Most of the others, fearing the unstable conditions of market supply and demand that faced individual entrepreneurs, chose a form of collective ownership, either as joint-stock companies or as cooperatives. The conservatism of Russia's farmers prompted them to preserve as much as possible of the inefficient but secure Soviet-era controlled relationships of supply and output.
As of 1996, individual private farming had not assumed the significance in Russian agriculture that reformers and Western supporters had envisioned. Although the number of private farms increased considerably following the reforms of 1990, by the early 1990s the growth of farms had stalled, and by the mid-1990s the number of private farms actually may have dropped as some individuals opted to return to a form of cooperative enterprise or left farming entirely. By the end of 1995, Russia's 280,000 private farms accounted for only 5 percent of the arable land in Russia.
A number of factors have contributed to the slow progress of agricultural reform. Until the mid-1990s, the state government continued to act as the chief marketing agent for the food sector by establishing fixed orders for goods, thus guaranteeing farmers a market. The government also subsidized farms through guaranteed prices, which reduced the incentive of farmers to become efficient producers.
Perhaps most important, effective land reform has not been accomplished in Russia. The original land reform law and subsequent decrees did not provide a clear definition of private property, and they did not prescribe landholders' rights and protections. The nebulous status of private landholders under the new legislation made farmers reluctant to take the risk of proprietorship. In March 1996, President Yeltsin issued a decree that allows farmers to buy and sell land. However, in April 1996 the State Duma, heavily influenced by the antireform KPRF and its ally, the Agrarian Party of Russia (representing the still formidable vested interests of collective and state farms), passed a draft law that prohibits land sales by anyone but the state. Recent opposition to the new notion of private landownership is based in a strong traditional Russian view that land must be held as collective rather than individual property.
However, in 1996 several factors were exerting pressure on the agricultural sector to become commercially viable. The federal government has retreated from its role as a guaranteed purchaser and marketer, although some regional governments are stepping in to fill the role. And private markets are emerging slowly. Increasingly, Russian agricultural production must compete with imported goods as the gap between domestic prices and world prices narrows. In addition, the fiscal position of the federal government has forced it to reduce subsidies to many sectors of the economy, including agriculture. Subsidies are among the targets of major budget cuts to comply with the standards of the IMF and other Western lenders and achieve macroeconomic stabilization.
Like the rest of the economy, the Russian agricultural sector has experienced a long, severe recession in the 1990s. Even before the dissolution of the Soviet Union, the output of grains and other crops began to decline, and it decreased steadily through 1996 because of the unavailability of fertilizers and other inputs, bad weather, and major readjustments during the period of transition. In 1995 overall agricultural production declined 8 percent, including a drop of 5 percent in crop production and 11 percent in livestock production. That year Russia suffered its worst grain harvest since 1963, with a yield of 63.5 million tons.
The most dramatic declines occurred in livestock production. Farmers reduced their holdings of animals as the price of grains and other inputs increased. As meat prices rose, the composition of the average consumer's diet included less meat and more starches and vegetables. Reduced demand in turn exacerbated the decline in livestock production.
-- Russia: A Country Study, by Federal Research Division, Library of Congress, edited by Glenn E. Curtis