Following the 1991 collapse of the Soviet Union, a state marked by its centrally planned economic system, the modern Russian state transitioned to a market-based economy. However, Russia’s economy is still significantly influenced by a powerful conglomerate of policymakers and oligarchs.
Economic Status of Russian Citizens
Russia ranks 70th internationally in quality of life of citizens. Low wages are a large part of the problem; the average yearly income is roughly $11,260. Although the financial standing for the average Russian has improved over the last thirty years, 12.6% of Russian live below the poverty line. In addition, the average Russian pensioner receives a monthly stipend of $59. Because of this, many pensioners have to supplement this stipend by growing their own food. Russian currency has depreciated over the last few years. In 2020, 74 Russian Rubles were equal to 1 USD or 0.85 Euros. However, the Russian government provides free healthcare and public school education to every citizen. Thus, the average Russian is not burdened by these expenses, and can use their income for other essentials. While Russia has experienced some economic growth since 1991, there is still much to be done to improve the living standards for the average citizen.
Image Courtesy of The Moscow Times
Population Decline
Due to lower birth rates and increased emigration, compounded with the Covid-19 pandemic, Russia’s population is expected to decrease significantly. Between 2021 and 2024, Russia’s population is projected to decrease by roughly 1.2 million people. This potential population decrease would have a disastrous impact on Russia’s already limited labor force, and the inability of immigrants to enter the country to work due to the pandemic has only exasperated this problem.
Imports and Exports
Although Russia is quickly transitioning to a service-based economy, it is still a prominent exporter of raw materials. In 2019, Russia’s primary export partners were China (14%), the Netherlands (10%), Belarus (5%), and Germany (5%). Of these exports, wheat, iron, and especially natural gas and petroleum to western Europe were most significant. Russia must import technology from more technologically developed states to keep up. It relies on imported car and vehicle parts, medicine, computers, and aircraft technology from China, Germany, and Belarus, each state accounting for 20%, 13%, and 6% of Russia’s total imports in 2019, respectively.
Europe relies heavily on Russian natural gas and oil, and a new pipeline called Nord Stream II is currently under construction. The Nord Stream II project will stretch from Ust-Luga, Russia, to Northeast Germany. The pipeline will strengthen the European Union’s natural gas supply security and streamline the delivery of Russian gas. The new pipeline is predicted to add 2.7 billion euros to the Russian GDP and create roughly 144,000 full-time pipeline-related jobs.
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Despite the tumultuous relationship between American president Biden and Russian president Putin, the former seems to have little objection to the European Union furthering its reliance on Russian energy. President Biden elected not to sanction the company behind the project, Nord Stream AG, even though engaged in sanctionable behavior, because the pipeline was almost complete. Sanctions would have a damaging effect on the United States’ European allies, who stand to benefit significantly from the pipeline.
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The United States has become increasingly reliant on Russian energy as well. Given the sanctions on Venezuelan crude oil and the reduced shipments from OPEC states, Russian oil and petroleum products have supplemented the United States’ energy needs. In 2020, Russian oil and refined products accounted for a record high 7% of American oil imports and surpassed imports from Saudi Arabia. Valero and Exxon Mobil imported roughly 55 million and 50 million barrels of Russian oil in 2020, respectively.
