The Economy of the Russian Federation

A. Pre-Reading activities

TaskI. Study the vocabulary notes that will help you to understand the text better:

arrear (n) – задолженность, просрочка

average (v) – составить в среднем

balance of payments – платежныйбаланс

cod (n) – треска

combat (v) – бороться

consumer (n) – потребитель

copper (n) – медь

co-product (n) – побочныйпродукт

crop (n) – урожай

crunch (n) – перелом, кризисная ситуация

cutback (n) – сокращение, понижение

dampen (v) – ослаблять, сдерживать

decline (v) – уменьшаться, приходить в упадок

deposit (n) – месторождение

diamond (n) – алмаз

disperse (adj) – рассеянный

diverse (adj) – различный

enterprise (n) – промышленное предприятие, предпринимательство

expand (v) – расширяться

expenditure (n) – расход

extract (v) – добывать, извлекать

fertile (adj) – плодородный

flounder (n) – камбала

fodder (n) – корм для скота, кормовое растение

foreigndebt – внешний долг

GDP (GrossDomesticProduct) – валовый внутренний продукт

herring (n) – сельдь

in the vicinity – поблизости

iron (n) – железо

lead (n) – свинец

livestock (n) – домашнийскот

lumber (n) – пиломатериалы, бревна

manufacturing (n) – производство, обрабатывающая промышленность

meadow (n) – луг

mine (v) – добывать

mining (n) – горное дело

nonferrousmetals – цветные металлы

offshore (adj) – иностранный, осуществляемый в других странах, оффшорный

ore (n) – руда

outline (v) – очертить, набрасывать

pasture (n) – пастбище

poverty (n) – бедность

principal (adj) – главный

rank (v) – занимать место

raw (adj) – сырой, сырьевой

rescue (adj) – спасательный, аварийный

retailtrade – розничная торговля

revenue (n) – доход

reverse (v) – перевернуть на 180 градусов, полностью измениться

scatter (v) – разбрасывать, рассредоточивать

sentiment (n) – мнение

setup (n) – структура, система

skew (v) – склониться, сдвинуться

specialty (n) – специализированное изделие

stockmarket – рынок акций / ценных бумаг, фондовая биржа

surplus (n) – излишек, избыток

taper (v) – сузить(ся), заостряться

unemployment (n) – безработица

unveil (v) – открыть, обнародовать

walrus (n) – морж

welfare (n) – благосостояние

 

Task II. Task II. Mind the following proper nouns and abbreviations:

CIS (the Commonwealth of Independent States) – СНГ, СодружествоНезависимыхГосударств

EU (the European Union) – Европейскийсоюз

APEC (Asia-Pacific Economic Cooperation) – Азиатско-тихоокеанскоеэкономическоесотрудничество

G 8 (the Group of 8: Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States) – страны «Большойвосьмерки»

SCO (the Shanghai Cooperation Organization) – Шанхайскаяорганизациясотрудничества

Task III. Guess the meaning of these words and word combinations checking your guesses as you read the text:

domestic manufacturing global crisis to diversify and modernize industries

light-industry sector the catch Strategic Sectors

 

B. Reading and Comprehension Activities

Task IV. Read the text and check your understanding by doing the tasks that follow:

Russia ended 2008 with GDP growth of 6.0%, following 10 straight years of growth averaging 7% annually since the financial crisis of 1998. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. Growth in 2008 was driven largely by non-tradable services and domestic manufacturing, rather than exports. During the past decade, poverty and unemployment declined steadily and the middle class continued to expand.

Russia also improved its international financial position, running balance of payments surpluses since 2000. Foreign exchange reserves grew from $12 billion in 1999 to almost $600 billion by end July 2008, which include $200 billion in two sovereign wealth funds: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development. Total foreign debt is approximately one-third of GDP. The state component of foreign debt has declined, but commercial short-term debt to foreigners has risen strongly.

These positive trends began to reverse in the second half of 2008. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global credit crunch caused the Russian stock market to fall by roughly 70%. The global crisis also affected Russia’s banking system, which faced liquidity problems. Moscow responded quickly in 2008, initiating a rescue plan of over $200 billion that was designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The Government also unveiled a $20 billion tax cut plan and other safety nets for society and industry.

In the first year of his term, President Medvedev outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state’s role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. The Russian Government needs to diversify the economy further, as energy and other raw materials still dominate Russian export earnings and federal budget receipts. Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption, lack of trust in institutions, exchange rate uncertainty and the global economic crisis continue to dampen domestic and foreign investor sentiment.

Sectors of Economy

Mining is a major sector of the Russian economy and provides a sizable share of the country’s exports. Russia is a leading producer of nickel and aluminium. Nickel ores are extracted primarily in eastern Siberia, although significant deposits are also located in the Kola Peninsula near Murmansk. Aluminium bauxite deposits are located mainly in the Urals and northwest European Russia near Saint Petersburg; other deposits are found in western and eastern Siberia.

Russia ranks among the world’s top five producers of gold, silver, and diamonds. Gold is mined in the Urals, western Siberia, and the LenaRiver valley of eastern Siberia. Most diamonds are extracted in the republic of Sakha (Yakutia) in north-eastern Siberia, and nearly all the output is exported. Silver is mined in the far eastern region, and as a co-product at gold mines in the Urals and western Siberia.

Russia is also among the top five producers of lead, copper, and uranium ores. Lead is mined in European Russia and western Siberia, copper in the southern Urals, and uranium in eastern Siberia. Russia is also an important producer of iron and zinc ores. Most iron extraction takes place in the Kursk region of western Russia, while zinc is mined in Siberia.

Manufacturing: The Russian economy is dominated by large industrial enterprises, and manufacturing remains strongly skewed toward heavy industries. Small and medium-sized enterprises are growing but remain badly underdeveloped by international standards.

Russia’s manufacturing capacity is located principally in western Russia and the Ural Mountains region. Extractive industries, such as mining and oil and gas production, are more widely dispersed, with major facilities located in Siberia. Other industrial centers such as Tomsk and Novosibirsk in Siberia, the eastern regions of Russia remain largely unindustrialized, having traditionally served as a base for the extraction of raw materials and the production of energy. The processing industries are concentrated in Moscow, Saint Petersburg, Yekaterinburg, and Nizhniy Novgorod. These larger cities have managed the economic transition relatively well, as they have been able to diversify and modernize their industries.

Russia’s manufacturing enterprises produce many types of goods. The machine building sector makes a wide range of products, from computers and precision tools to railroad locomotives, automobiles, agricultural machinery, space vehicles, and military weapons. The metallurgical industry produces a number of specialty steels and non-ferrous metals, and the chemical sector produces an array of industrial chemicals and chemical fertilizers. Some of these manufacturing branches, such as the aerospace industry and certain types of defence production, are technologically advanced, but the overall level of technology in the manufacturing sector is far below the levels of other highly industrialized countries. The technological level of manufacturing processes and products is particularly low in the light-industry sector (which produces consumer goods such as footwear, clothing, and textiles).

Energy plays a central role in the Russian economy because it drives all the other elements of the system – the industrial, agricultural, commercial, and government sectors. In addition, energy, particularly petroleum and natural gas, is the most important export and source of foreign exchange for the Russian economy.

Climatic and geographic factors limit Russia’s agricultural activity to about 10% of the country’s total land area. Of that amount, about 60% is used for crops, the remainder for pasture and meadow. Most of the farmland lies in the so-called fertile triangle. The base of the triangle extends along the country’s western border from the Baltic to the Black seas, and its two sides taper eastward to the southern Ural Mountains, where it becomes a narrow strip of land extending across the south-western fringes of Siberia. East of the Altai Mountains, agriculture is found only in isolated mountain basins along the southern edge of Siberia. Without human modification, areas outside the fertile triangle are unsuitable for crops.

The country’s major grain crops are wheat, barley, oats, and rye. Other important crops are potatoes, sugar beets, and sunflower seeds. Increased production of fodder crops and expansion of pasture land have supported Russia’s livestock industry, although economic conditions have caused cutbacks in animal holdings. Cattle are the most common form of livestock except in the drier areas, where sheep and goats dominate. The third largest category is pigs, which are raised in areas of European Russia and the Pacific coast that offer grain, potatoes, or sugar beets as fodder.

Forestry: Russia is a major producer of lumber and wood products. The principal commercial hardwood tree is birch. The primary areas of timber production are north-western European Russia, the central Ural Mountains, southern Siberia in the vicinity of the Trans-Siberian Railroad, and south-eastern Siberia.

Russia’s fishing industry is one of the largest in the world. More than half of the Russian catch is taken from the Pacific Ocean and its marginal seas, including the Bering Sea. Vladivostok is the largest fishing port and fish-processing centre of the far eastern region; many smaller fishing ports are scattered along the mainland coast as well as on SakhalinIsland. The Sea of Okhotsk is one of the richest fishing grounds, known especially for its salmon. Other species taken in the Pacific include herring, flounder, mackerel, and cod, as well as marine mammals such as walrus and seal.

The IT market is one of the most dynamic sectors of the Russian economy. Since the year 2000 the IT market has demonstrated growth rates of 30-40% a year. The biggest sector in terms of revenue is system and network integration, which accounts for 28.3% of the total market revenues. Meanwhile the fastest growing segment of the IT market is offshore programming.

Important service industries include financial services and insurance; advertising, marketing, and sales; tourism; retail trade. By the beginning of the 21^st century, services accounted for more than half of GDP. Still, complaints remained regarding the provision of services by the public sector, particularly the police, schools, and hospitals. Owing to budget shortfalls, many of the public-sector services are poorly financed and have been unable to retain skilled employees.

In the Russian law, there are sectors of the Economy which are considered to be crucial for national security, foreign companies are restricted from owning them. Investments in the so-called Strategic Sectors (oil, gas, media and telecoms) are defined in a law Adopted by the Russian Parliament in 2006 Federal Law ‘On the Access of Foreigners to Strategic Sectors’.

Foreign trade is tremendously important to the Russian economy. The country has generally enjoyed a healthy trade surplus since the dissolution of the Soviet Union. The country’s principal exports have traditionally been oil (accounting for about 33% of earnings), natural gas, minerals, military equipment and weapons, gold, shipping, and transport services. Principal imports include machinery and equipment, consumer goods, medicines, meat, grain, sugar, and semi-finished metal products.Russia’s chief trade-partners are the countries of the EU, Belarus, Ukraine, China, and Japan.

 

It’s interesting to know …

ü Russia is a permanent member of the United Nations Security Council, a member of the G8, APEC and the SCO, and is a leading member of the Commonwealth of Independent States.

ü The Shanghai Cooperation Organization (SCO) is an intergovernmental mutual-security organization which was founded in 2001 by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan.

ü On 29 March 1996 the Eurasian Economic Community originated from a customs union between Belarus, Russia and Kazakhstan. It was named EEC on 10 October 2000 when Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan signed the treaty. EurAsEC was formally created when the treaty was finally ratified by all five member states in May 2001. Armenia, Moldova and Ukraine have the observer status. EurAsEC is working on establishing a common energy market and exploring the more efficient use of water in central Asia.

ü The ruble or rouble (code: RUB) is the currency of the Russian Federation and the two partially recognized republics of Abkhazia and South Ossetia.

ü Russia has the largest stockpile of nuclear weapons in the world. It has the second largest fleet of ballistic missile submarines and is the only country apart from the US with a modern strategic bomber force. The country has a large and fully indigenous arms industry, producing all of its own military equipment. The country is the world’s top supplier of weapons, a spot it has held since 2001, accounting for around 30% of worldwide weapons sales and exporting weapons to about 80 countries.

ü The country has more than one-fifth of the world’s total forests – an area nearly as large as the continental United States.

ü The Russian fishing industry rivals the size of the world’s other leading producers (Japan, the United States, and China). Russia produces about one-third of all canned fish and some one-fourth of the world’s total fresh and frozen fish.

ü Russia produces about one-sixth of the world’s iron ore and between one-tenth and one-fifth of all nonferrous, rare, and precious metals.

ü The Russian Trading System is a stock market established in 1995 in Moscow, consolidating various regional trading floors into one exchange. Originally RTS was modelled on NASDAQ’s trading and settlement software.

ü The Moscow Interbank Currency Exchange or MICEX is one of the largest universal stock exchanges in the Russian Federation and Eastern and Central Europe. It accounts for about 98% of the Russian on-exchange share market.

 

Task V. Fill in the derivatives of the words given in the chart below:

Noun	Verb	Adjective
		average
	mine
corruption / corruptibility
		top
	import
innovation
	diversify
		regional
	transit
service

Task VI. Match the verbs on the left with a suitable object on the right to make correct word-combinations. Recall the contexts in which these combinations are used:

1. to improve	a. budgetary reforms
2. to support	b. banking system
3. to initiate	c. corruption
4. to cause	d. financial position
5. to combat	e. investments
6. to modernize	f. economic priorities
7. to outline	g. a rescue plan
8. to affect	h. growth rates
9. to require	i. industries
10. to demonstrate	j. cutbacks

 

Task VII. Read the text again and decide whether these statements about the economy of your country are True or False:

1. Economic growth in 2008 was driven largely by the middle-class expansion.

2. Positive trends in the Russian economy began to reverse in the second half of 2009.

3. In the first year of his term, President Medvedev outlined a number of economic priorities for Russia which reflected different aspects of economic development.

4. Mining provides a sizable share of the country’s imports.

5. Natural resources, especially energy, dominate Russian exports.

6. Russia’s manufacturing capacity is located mainly in the republic of Sakha and eastern Siberia.

7. Russia is one of the world’s two energy superpowers, is rich in natural energy resources.

8. The Russian timber industry is a significant contributor to the economy of Russia.

9. Russia is among the top ten countries in the world as regards marine and inland capture fisheries, and a huge player in terms of processing, trade and a rapidly developing seafood market.

10. The country’s principal imports have traditionally been oil, natural gas, minerals, military equipment, etc.

 

Task VIII. Read the text more carefully and complete the suggested statements:

1. Russia’s two sovereign wealth funds are: … and ….

2. The decline of Russian stock market was caused by ….

3. Russia’s infrastructure requires … if the country is to achieve broad-based economic growth.

4. Russia ranks among the world’s top producers of ….

5. Russian manufacturing remains strongly skewed toward ….

6. Light-industry sector produces ….

7. … limit Russia’s agricultural activity to about 10% of the country’s total land area.

8. Increased production of … and expansion of … have supported Russia’s livestock industry.

9. The … market is one of the most dynamic sectors of the Russian economy.

10. Russia’s chief trade-partners are ….

 

Task IX. Check your understanding of the detail by answering these questions:

1. What are the country’s economic priorities?

2. What is a major sector of the Russian economy? What do you know about its development?

3. Where are extractive industries located? What do they include?

4. What type of production do Russia’s manufacturing enterprises produce?

5. Why does energy play a central role in the Russian economy?

6. What is fertile triangle?

7. What are the country’s principal crops?

8. Why are some sectors of the Russian economy called ‘strategic’? What are they?

9. What are the country’s principal exports?

10. What does Russia import?

 

Task X. Fill in the blanks with the necessary prepositions:

The growth (1) __ any country starts from its capital and Russia is no exception. Moscow is the biggest and most developed city (2) __ Russia. It is also bigger (3) __ terms (4) __ investment, population and economy than any Russian region. But now more and more Russian cities are developing and are very attractive places to conduct business, (5) __ Russian and foreign companies alike. There are several reasons (6) __ that: Moscow became too small (7) __ big businesses, with fewer opportunities; and growth can be sustained only by expanding and multiplying a well-established and well-run business model into the regions. Consumer power is also dramatically growing (8) __ the regions.

There is also the political factor. Several years ago the Russian President changed the established order (9) __ elections for the Governors and Presidents of the Russian regions and created a system (10) __ which the President of Russia appoints Governors and Presidents (11) __ the Russian regions. This was a major factor prompting tremendous growth (12) __ regional business. Previously Regional Governors and Presidents bothered little (13) __ the economic growth (14) __ their region because (15) __ Russia it has never been necessary (16) __ politicians to answer (17) __ the people who elected them. With the new system, key performance indicators needed to be complied (18) __ in order to be appointed (19) __ the President (20) __ the next term: economic growth, social stability and political loyalty.

Russia Beyond the Headlines

20 March 2008

 

Task XI. Translate into English the sentences that follow:

1. Современная российская политика в отношении трудовых ресурсов ориентирована на сокращение неквалифицированного труда, переподготовку кадров, повышение их профессиональной мобильности.

2. Промышленность России начинает свою историю с конца 17 века, когда в стране возникли первые крепостные мануфактуры.

3. Природные ресурсы, используемые экономикой России, составляют 95,7% национального богатства страны. К ним относятся запасы пресных вод и минерального сырья.

4. По запасам угля РФ занимает лидирующее положение в мире, энергетический потенциал угольной промышленности значительно превышает нефтяной.

5. Россия экспортирует в основном углеводородное сырье (нефть и нефтепродукты, газ, уголь), стальной прокат и некоторые цветные металлы (алюминий, никель, медь) в первичных формах.

6. В агропромышленном комплексе РФ быстрыми темпами идет интеграция и кооперация мелких и средних собственников в акционерные общества, кооперативы, ассоциации, союзы и финансово-промышленные группы.

7. Государственный бюджетв РФ обеспечивает функционирование государства на трех уровнях: общегосударственном, федеральном и местном.

8. Банковская система действует в РФ на двух уровнях: Банк России (Центральный банк РФ) и многочисленные коммерческие банки.

9. Роль банковского сектора в экономике России возрастает: увеличивается кредитование малого и среднего бизнеса, ипотечное кредитование и потребительский кредит.

10. Экономический совет СНГ – основной исполнительный орган, обеспечивающий выполнение соглашений и решений, касающихся формирования и действия зоны свободной торговли, а также других вопросов социально-экономического сотрудничества.

 

C. Follow-up Activities

Task XII. Share your opinions on the following:

1. Do you think that Russia is still a superpower? Give extensive arguments to prove your position.

2. What are recent positive tendencies in the Russian economy?

3. What type of economy does Russia currently have?

 

Task XIII. Comment on the quotation:

“The crisis is not only a time for dramatic trials and troubles; it is also a challenge life gives us. We ought to use this opportunity.” Dmitry Medvedev, President of Russia (Russia Today, 04 June 2009)

D. Optional Reading