The Russian Chronological Origin - Essay Example

Russia Similar to other numerous s globally, the inception of Russia was as a result of migrating people who upon coming together established into strong empire. In earlier, Russia comprised of cities that with time became an empire inhabited by Eastern Slavs and Finno-Ugric. Initially, Vikings formed an economic unit and embracing a collective name Rus, which with time adopted the natives’ way of life due to the trade they had with Byzantine Realm. Similar to the Russian chronological origin account, its culture highly esteems family and homeland values. This is due to the challenges people encountered during communism, which made numerous people end up trusting more their families based on the support they received like combining their resources to survive. Hence, currently people seem to prefer trusting more close families. From then to date the state has significantly grown especially with the inception of Russian Federation, which emerged after the cessation of Soviet Union. This growth has been attributed to exclusively reliance on resources especially oil and gas (whose reserves are in Western Siberia), hence giving the state unequaled power not only economically but also politically in the region. For instance, 2/3 of the state’s oil and gas export head to the European Union region thus comprising 24% of the Russia’s GDP. Oil and gas transportation is merely by pipelines as well as physical tanks by respective firms. The economy of Russian federation has been through immense progress, which has always had many setbacks. Due to rising energy prices and the radiant global economy, the country has benefited greatly and been through higher growth rates before 2008’s great recession (Hanouz & Prazdnichnykh 3). The Western sanction issues during 2014 invasion into Ukraine have also been a contributing factor. During these years, the country faced not only price drops but also low demands and financial sector almost collapsing. Despite all these, the government countered its issues and challenges mainly through stimulus spending. The country has not really grown at the same pace as its competitor despite the availability of many resources as well as educated population but this also as a long term goal, shows the potential Russia has to compete with the super powers. Since the crumpling of Soviet Union, Russia has been changing notably from a centrally planned and globally isolated economy to a more of globally integrated and market based economy. In 1900s during their economic reformations, most of their industries underwent privatization with crucial exceptions from defense and energy related areas. In the world, Russia is among the top producers of oil and natural gas as well as a top exporter of metals like steel and aluminum (Central Intelligence Agency 2015). However, their manufacturing market is not competitive to the rest of the world, as they tend to focus more on domestic consumption. The over dependence of Russia on export of commodities makes them susceptible during periods when the economy has rapid growth followed by a spontaneous decline. The growth of Russia’s economy show gaps and niche in agricultural, automotive, medical, and refinery among other industries that domestic companies alone cannot fill, therefore, they also attract foreign investments. Such substantial improvements in areas as labor productivity will need the intervention and cooperation of top foreign industries as well (U.S. Commercial Service 6). With this kind of demand together with the market and the financial power of the nation, there is creation of opportunities created for other industries, which in turn happen to be beneficial for both parties. In past years, the Russian government has been making effort in making remarkable investments of improving conditions necessary for business operating. This has made Russia come up with opportunities that make the nation to have a place in the global market. In addition, with growth in natural resources, extensive landmass, and growing middle class Russia holds as a promising market for foreign exporters (U.S. Commercial Service 4). The industries in Russia range from agricultural to mining and manufacturing industries. Agricultural industry provides a wide variety of products including milk, meat, sugar beets, and vegetables among others. The extractive and manufacturing industries produce oil, gas, coal, chemicals, all sorts of machines, communication equipments, transport equipments, as well as consumer durables (U.S. Commercial Service 8). Some of these products are for export for instance petroleum, petroleum products, and metals with countries like Germany, China, Netherlands, Japan, and Ukraine being their top exporters. The import commodities include pharmaceuticals, machinery, plastic, iron, and medical instruments with top importers being Germany, Ukraine, the US, china, and Italy. As estimated by 2014, the income from exports was about 520 billion dollars whereas the cost of imports was 323 billion dollars (Global Edge 2015). This is an indication of how the country makes profits from all the exports because of the products it has all over its boundaries hence making exportation as one of their sources of income for their economic development. For easy flow of its exports, the federal government made registration of property transfer much simpler, reducing number of documents required in moving goods across borders, and lowering costs incurred (World Bank Group 2015). Between 1998 and 2008, their economy growth averaged 7% due to the oil prices but when the great recession hit, the prices dropped and the foreign credits to rely on were no more. This led to a slowdown in GDP rates of growth from 4.2% to 2.5% per year because it also became difficult to entice foreign investors (Transparency International 2015). The economy even shot down further after the Russian military invaded Ukraine and the oil prices continued to drop since the capital outflow increased. This forced the government to take critical measure in order to restore back the economy despite it being underway slowly. The possible challenges that put Russian economy at stake include the sudden drop in oil prices that would change the economic stability in the region. The government has the pressure of holding on the economy through social spending by using state companies. The continual hike of oil and gas prices leads to the self-satisfaction about reform in institutions. As this area of the economy continues to bring profits, there are cases of dissatisfaction of public services. Such issues tend to challenge the presumption about the development of the current and future situation of Russian economy (Caan 2013). Russia always considers itself as superpower globally but it does not match up the standards of the global capital markets. The country’s crisis has been evidence on how weak it is as it faces leveraged corporations and lack of strong foreign investment. In the modern world, the super powers are the global capital markets. This is true because once these global capital markets walk away from you and your business then the country will start rumbling (Pahwa 2014). This started when Russia invaded Ukraine and that move received negative support by vast nations. With a move to try to salvage themselves the Russian central bank tried to raise its interests but the currency continued to fall down. Russia has been on sanctions issued by most western nations by freezing financing and investing in Russia and this is the reason why the Russian currency has been dropping in the stock market as well as its economy in general. With this fall of the ruble currency, Russia will go through hard economic times like drop of oil prices, sanctions from trading nations, budget deficit, and consumer inflation (Pahwa 2014). Despite the Western sanctions and withdrawal from business with Russia, the nation’s economy started to bounce back at the start of the year 2015. This situation made many to think and predict how it will get worse for Russia but the opposite happened. Their currency has been appreciating to about 30% and the banks have dropped the interests by about 3% (C.W 2015). All these have been possible because the sanctions imposed started to lose their efficiency and many countries got back to business with Russia. In addition, the oil and gas prices have stopped dropping hence securing the Russian economy since they make up to 52% of the federal budget as well as 70% of annual export. With this in place, the GDP of Russia will probably contract by 3-5% by the year 2015. Overall, Russia has been through many setbacks from the time of great recession and the government has had measures to counter this issue in order to restore back the economy to where it belongs. For them to get back their growth to the average rate globally of 3.5-4%, they will have to implement effective improvements and make use of their market opportunities to attract more investors than before (C.W. & A.O. 2014). The Russians should also reduce their reliance on oil as their economic drive by diversifying through other sectors because it is the drop of oil prices that brings about inflation and economy stumbling. Despite all there, the nation has improved in its economy freedom with gains in corruption-free and business freedom. This nation has a better place in future because they have not yet realized their potential fully. For instance, the government still subsidizes state-owned business as well as screens foreign investors in order to limit competition hence making the business atmosphere restricted by fixed labor market and bureaucracy. Work Cited Caan, Oliver. “Critical Challenges Await Russia’s Economy, New Report Finds.” World Economic Forum, 2013. Retrieved from http://www.weforum.org/news/critical-challenges-await-russia-s-economy-new-report-finds?news=page Central Intelligence Agency. “The World Fact Book.” 2015. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html C.W. & A.O. “The Economist explains: What’s Gone Wrong with Russia’s Economy.” The Economist. 2014. Retrieved from http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-16 C.W. “The Russian Financial Rally: Unfair.” The Economist. 2015. Retrieved from http://www.economist.com/blogs/freeexchange/2015/04/russian-financial-rally?zid=295&ah=0bca374e65f2354d553956ea65f756e0 Global Edge. “Russia: Economy.” 2015. Retrieved from http://globaledge.msu.edu/countries/russia/economy Hanouz, Margareta., & Prazdnichnykh, Alexey. “The Russia Competitiveness Report 2011: Laying the Foundation for Sustainable Prosperity.” World Economic Forum. 2011. Retrieved from http://www3.weforum.org/docs/WEF_GCR_Russia_Report_2011.pdf Transparency International. “Russia: Facts and Figures.” Corruption by Country/Territory. 2015. Retrieved from http://www.transparency.org/country/#RUS U.S. Commercial Service. “Doing Business in Russia: 2013 Country Commercial Guide for U.S. Companies.” 2013. Retrieved from http://www.buyusainfo.net/docs/x_5396902.pdf U.S. Commercial Service. “Doing Business in Russia: 2014 Country Commercial Guide for U.S. Companies.” 2014. Retrieved from http://www.buyusainfo.net/docs/x_7740016.pdf World Bank Group. “Fact Sheet -- Eastern Europe and Central Asia.” 2015. Retrieved from http://www.doingbusiness.org/press/fact-sheets/2011/eca Read More