Economy of Russia

• 1. Introduction

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  Russia's economy carries a contradiction at its core. It holds the world's largest natural gas reserves, the second-largest coal reserves, and oil shale deposits that dwarf every other European nation. And yet, as of 2015, real income for 99% of Russians was still lower than it had been in 1991. How does a country sitting atop such extraordinary natural wealth end up in that position? And what happens when the world tries to isolate it from the global financial system? Those are the questions this documentary sets out to answer. The path runs through the chaos of Soviet collapse, the shock of overnight price liberalization, a series of financial crises, a commodities-fueled renaissance, and then the rupture of 2022. Along the way, the shape of the Russian economy shifted in ways that surprised almost everyone who thought they understood it.

• 2. From Plan to Market

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  On the 2nd of January 1992, Russia lifted price controls. Within a single month, prices jumped by 300%. Within the first three months, they had risen by as much as 1,000%. The inflation rate for the full year 1992 reached 2,509%. Deputy Prime Minister Yegor Gaidar had designed the reform program, which was grounded in the policies known as the Washington Consensus and shaped by recommendations from the IMF and a group of American economists. Larry Summers, writing in 1994, urged that privatization, stabilization, and liberalization be completed as soon as possible. President Boris Yeltsin's program became known as shock therapy, and the shock was real. The savings that ordinary Russians had accumulated under socialism were wiped out almost immediately as prices surged past what wages could reach. The people who benefited were those who already held non-monetary assets. Corruption ran deep through the privatization process. Factory directors from the Soviet era routinely became the owners of the same enterprises they had managed, acquiring them for far less than their true value. Russians coined a phrase for it: prikhvatizatisiya, or grab-itization. Hyperinflation persisted from 1992 through 1995. The inflation rate was 840% in 1993, 215% in 1994, and 131% in 1995. Meat consumption tells part of the human story: in 1990, the average Russian consumed 63 kilograms of meat per year. By 1999, that figure had fallen to 45 kilograms. By 1997, the number of people in poverty had grown fifteen times compared to 1990, leaving roughly half the population below the poverty line. Russia suffered what the source describes as the largest peacetime rise in mortality ever experienced by an industrialized country.

• 3. Crisis, Then Boom

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  In 1997, for the first time in years, Russia achieved economic growth alongside low inflation. The moment was brief. Weak oil prices, a fixed and overvalued ruble, and a budget system barely assembled from scratch after the Soviet era had no modern tax infrastructure to rely on combined to expose just how fragile the recovery was. The 1998 financial crisis followed, fed partly by difficulties collecting government revenues and a heavy dependence on short-term borrowing. In the 1990s, Russia had borrowed from the IMF against loan facilities totalling $20 billion. Critics argued that Russia introduced little of the promised reforms and that a large part of those funds may have left the country illegally. What followed the 1998 crash, however, was a transformation that few analysts had expected. Between 2000 and 2008, GDP grew on average 7% per year. Disposable incomes more than doubled in real terms; in dollar-denominated terms they increased eightfold. The volume of consumer credit between 2000 and 2006 rose 45 times, fuelling a private spending surge. The share of people living below the poverty line dropped from 30% in 2000 to 14% in 2008. A flat income tax of 13% introduced between 2000 and 2002 was among the pro-growth reforms that helped stabilize the fiscal base. In 2005, Russia repaid its remaining $3.3 billion IMF borrowing three years ahead of schedule. By 2007, the World Bank declared that the Russian economy had achieved unprecedented macroeconomic stability. The engine of all of this was the global commodities boom and the high oil prices that accompanied it.

• 4. The Resource Question

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  Russia's mineral-packed Ural Mountains and the fossil fuel and timber reserves of Siberia and the Russian Far East dominate the country's exports. The country is the second-largest natural gas producer and the second-largest oil exporter and producer. It is the third-largest coal exporter. Oil and gas exports are the main source of hard currency. In 2012, oil, gas and petroleum products accounted for over 70% of Russia's total exports. Russian leaders repeatedly spoke of the need to diversify away from this dependence, and there is evidence that diversification, however slow, has been happening. The oil and gas sector accounted for up to 30% of Russia's federal budget revenues in 2024, down from 50% in the mid-2010s. A comprehensive assessment published by the Russian statistics agency Rosstat in 2021 found that the maximum total share of the oil and gas sector in Russia's GDP, including extraction, refining, transport, and all supporting activities, reached 21.1% in 2018, and was 15.2% in 2020. For context, the same methodology puts oil and gas at around 8% of GDP in the United States and less than 10% in Canada. Beyond fossil fuels, the country is the world's largest diamond producer, estimated to produce over 33 million carats in 2013, representing 25% of global output. State-owned ALROSA accounts for approximately 95% of all Russian diamond production. Russia also holds the world's third-largest cultivated agricultural area and is the world's largest exporter of wheat. It is the largest producer of barley, buckwheat, oats, and rye. Ukraine drone and missile strikes had, as of September 2025, disrupted nearly 40% of Russia's oil refining capacity, forcing gasoline imports from Asian nations and creating fuel shortages across more than 20 regions.

• 5. Integration and Isolation

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  Russia joined the World Trade Organization on the 22nd of August 2012, after 19 years of negotiations, making it the last major economy to do so. The path toward that membership ran alongside a parallel project of regional economic integration. On the 6th of January 1995 in Minsk, Russia and Belarus signed an Agreement on the Customs Union. Kazakhstan joined in a second agreement signed in Moscow on the 20th of January 1995. These bilateral arrangements eventually evolved into the Customs Union of the Eurasian Economic Community, launched in 2010. Russia, Belarus, and Kazakhstan became founding members together in July 2010. In 2015, Russia became a founding member of the Eurasian Economic Union, which replaced the earlier arrangement and established what the source describes as the deepest stage of economic integration, providing for free movement of goods, services, capital, and labour across a single market of 183 million people. The EAEU has since signed trade agreements with Vietnam, Iran, Singapore, and Serbia, and in 2018 signed a trade cooperation agreement with China. The Iran-EAEU free trade agreement came into force on the 15th of May 2025. Then came 2022. Following Russia's invasion of Ukraine, the G7 finance ministers agreed on the 2nd of September 2022 to cap the price of Russian oil and petroleum products. Asset freezes on the Russian Central Bank, which held $630 billion in foreign-exchange reserves, were enacted to prevent it from offsetting the effects of sanctions. Russia defaulted on part of its foreign currency debt in 2022, its first such default since 1918. The ruble crossed the psychological barrier of 100 to the US dollar in October 2023. By June 2023, Russia's exports to the European Union had fallen to just 1.7% of its total exports.

• 6. War Economy

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  Defence spending in Russia's 2024 budget was set to double, reaching 10.78 trillion rubles and representing 29.4% of total government expenditure. By 2025, defence and security spending accounted for approximately 40% of Russia's total government spending, exceeding combined spending on education, healthcare, social policy, and the national economy. The war has been financed through two channels. There is the official defence budget, with direct financial expenditure on the war estimated at $250 billion through June 2024, rising to over 20% of annual GDP. And there is an off-budget mechanism: more than $200 billion from preferential bank loans made to defence contractors and war-related businesses, loans that the Russian government compelled banks to provide. Russia currently carries a record low unemployment rate of just 3%, driven not by prosperity but by the demands of the war for industrial and military manpower, large-scale emigration, and demographic decline. Every day of the war in Ukraine, by most estimates, costs Russia between $500 million and $1 billion. Inflation has remained comparatively high, and analysts have warned that the Russian economy risks stagnation in 2025 and beyond due to labour shortages, high inflation, military overspending, falling resource prices, and a dwindling National Wealth Fund. The National Wealth Fund peaked at $201 billion in August 2022 and fell to $133 billion by December 2023, with liquid assets at $56 billion. Russia was rated the lowest-ranked European country in Transparency International's Corruption Perceptions Index for 2025, placed 157th out of 181 countries, which reflects a persistent structural vulnerability that predates the current conflict and shapes everything from contract enforcement to the distribution of resource wealth across regions.

• 7. Moscow and the Periphery

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  Moscow alone accounts for more than 20% of Russia's total gross regional product, according to the Moscow Government. In May 2025, Mayor Sergei Sobyanin reported to President Putin that Moscow's gross regional product at purchasing power parity for 2024 had grown to $1.39 trillion, ranking the capital second among the world's largest urban economies, behind only New York and ahead of Shanghai. In 2020, Moscow had ranked fifth. Moscow is home to 90 billionaires as of 2025-16 more than a year before, placing it second globally behind New York City according to Forbes. The academic Professor Natalia Zubarevich has proposed what she calls the theory of four Russias, a framework dividing the country into distinct social and economic zones. First Russia consists of the large cities with millions of inhabitants. Second Russia is made up of medium-sized cities with a pronounced industrial profile, where monoprofile or single-industry towns form the most unstable segment. Third Russia covers small towns, workers' settlements, and rural areas. Fourth Russia is the national republics of the Caucasus and the south of Siberia, including Tuva and the Altai Republic, where the demographic transition has not been completed and patriarchal-clan principles remain strong. Income inequality remains comparatively high across the country, caused in part by the uneven distribution of natural resources among federal subjects. Research has also found that greater income inequality within a region is associated with higher air pollution, and that areas lacking hospital beds per capita suffer greater environmental inequality. The concentration of wealth in Moscow, and the weakness of horizontal economic links between regions, is what a 2011 research article described as a stable characteristic of Russian political and economic space, constantly reproduced over time.