Huge natural resources; in particular hydrocarbons, precious metals, fuel, timber. Enormous engineering and scientific base. Some dynamic small joint-stock enterprises. Privatization is proceeding fast; by July 1994, it will embrace 60% of large-scale industry and agriculture. Huge potential for oil and natural gas.
Weaknesses
Many company directors are asset-stripping privatized companies. Most are adjusting to a market economy unwillingly. Many of the skills developed under communism are not relevant in a competitive economy. Lack of adequate legal infrastructure making establishing property rights and trading transactions difficult. Russian companies have an estimated $32 billion in Western bank accounts and the outflow of capital is estimated at $1 billion monthly. New commercial sector has to meet costs of its own security as police protection is now inadequate.
Profile
In 1988, President Gorbachev began a program of introducing market principles to Russia's command economy. The result by 1991 was a fall in industrial output of 19%. Russian currency reserves were spent in an attempt to cover up the collapse and $10 billion was appropriated from Russian company deposits in the state bank. Foreign currency reserves fell to $21 million. By the end of 1991, the formal economy had almost collapsed and some estimates suggested output was down by 40%.
The next crop of reformers, backed by Yeltsin and led by Gaidar, liberalized prices. Massive inflation was the result, but goods and food were once again readily available. However, Russia's huge unprofitable industrial concerns were not broken up. Many continue to supply goods for which there is little demand. The largest item of government spending remains the 10% of GDP spent on subsidies รป a larger amount than on education and defense put together.
