Russian Federation Country Brief
Introduction
The Russian Federation is the largest country in the world. It covers more than an eighth of the Earth’s land area and stretches from the Baltic and Black Seas in the west to the Pacific Ocean in the east. Russia’s population was 142 million in 2007. Russia celebrates its National Day on 12 June.
Political overview
The Russian Federation consists of 85 administrative units, known as ‘federal subjects’. Executive power resides with the President (Dmitry Medvedev), who is the head of state, and the Prime Minister (Vladimir Putin), who is the head of government. Under the constitution, the President appoints the Prime Minister. Legislative power resides in the two houses of Parliament: the State Duma (Lower House, 450 seats), and the Federation Council (Upper House, 178 seats). Since the Duma elections in December 2003, both Houses have been dominated by the centrist United Russia Party, which has close links to former President Vladimir Putin.
Under the Russian Constitution, which was adopted in 1993, a President may serve only two terms. In the 2 March 2008 presidential election, Dmitry Medvedev, former First Deputy Prime Minister, won a landslide victory with more than 70 per cent of the vote and was inaugurated as President on 7 May 2008. He confirmed his predecessor, Putin, as Prime Minister on 8 May 2008.
Russia is a permanent member of the United Nations Security Council (chairing it in 2007), a member of the G8, the G20, the ASEAN Regional Forum (ARF), the Asia-Pacific Economic Cooperation (APEC) grouping, and a wide range of other international organisations. Russia held the rotating Presidency of the G8 in 2006, hosting the G8 Leaders’ Summit in St Petersburg in July 2006. As a permanent member of the UN Security Council, Russia plays a key role in formulating the international response to Iran’s nuclear program. It is also one of the countries involved in Six-Party Talks with the DPRK and a member of the Middle East Peace Process Quartet.
While human rights and civil freedoms have improved dramatically since the collapse of the Soviet Union, some concerns remain. These include human rights violations in Chechnya and the North Caucasus, lack of media freedom, racially motivated attacks and systemic problems in the legal system.
Economic overview
Russia is a vast country with a wealth of natural resources. It is the world’s largest exporter of natural gas and, since 2007, the largest exporter of oil. Russia’s economy is heavily dependent on these exports. Prior to the global financial crisis, the oil and gas sector generated more than 60 per cent of Russia’s export revenues, and accounted for 30 per cent of all foreign direct investment (FDI) in the country.
The economy has been severely affected by the spread of the global financial market crisis. Macroeconomic stability continues to be threatened by a slump in energy prices while access to external financing is restricted.
Russia has been undertaking WTO accession negotiations since 1995. Work is continuing on the multilateral aspects of the WTO accession but a number of key issues are still to be resolved, including the level of agriculture subsidies. Australia and Russia signed a bilateral agreement in relation to Russia’s WTO accession in June 2006.
In 1997, OECD countries formally acknowledged that the accession of the Russian Federation as a full member of the OECD was a shared ultimate goal. The OECD Council in November 2007 approved the ‘roadmap to accession’ for the Russian Federation.
Bilateral relationship
Official contact between Australia and Russia began in 1807, when the Russian naval vessel Neva arrived in Sydney. Consular relations began in 1857 and diplomatic relations began in 1942. Australia has had an Embassy in Moscow since 1943 and has Consulates in Vladivostok and St Petersburg. The Russian Federation has an Embassy in Canberra, a Consulate-General in Sydney and Consulates in Brisbane and Adelaide. The Russian community in Australia numbers around 67,000 based on figures released in the 2006 Census.
Australia and Russia cooperate in a number of important international and multilateral fora, including those involved with non-proliferation issues and regional security. Russia is involved in the Asia-Pacific region, including APEC, which Russia will host in 2012.
Australia and Russia concluded a bilateral Double Taxation Agreement in September 2000, which came into effect in 2004.
Then President Putin became the first Russian leader to visit Australia when he attended APEC Leaders’ Week in September 2007. Putin was accompanied by five Ministers and a delegation of 150 senior business leaders. Joint statements noted Australia’s and Russia’s shared commitment to addressing the global challenges of climate change and energy, reaffirmed both countries’ interest in combating terrorism and in expanding bilateral trade and investment through the reconvening of the Australia-Russia Joint Commission on Trade and Economic Cooperation (JCTEC) (first held in 1995).
During Putin’s visit, Australia and Russia signed an Agreement on Cooperation in the Use of Nuclear Energy for Peaceful Purpose (Nuclear Cooperation Agreement). The Agreement was tabled in Australia’s Parliament in May 2008 and is currently under consideration by Government.
Several other high level visits have taken place in recent years. On 31 October 2008 the Minister for Trade, the Hon Simon Crean MP, co-chaired in Moscow the second Australia-Russia Joint Commission on Trade and Economic Co-operation (JCTEC) with then Agriculture Minister, Mr Alexsey Gordeyev.
In June 2006 the then Treasurer, the Hon Peter Costello MP, attended a G8 Finance Ministers meeting in St Petersburg. The Governor-General, Major General Michael Jeffery AC CVO MC, visited Moscow in May 2005 to represent Australia at the 60th anniversary celebrations of the end of World War II in Europe. The then Minister for Foreign Affairs, the Hon Alexander Downer MP, visited Russia in 2002 and Russia’s then Agriculture Minister, Mr Gordeyev, visited Australia in 2004 and again in 2007. The then Speaker of the House of Representatives, The Hon David Hawker MP, led a parliamentary delegation to Russia in January 2007 for the 15th Annual Meeting of the Asia Pacific Parliamentary Forum (APPF). A Russian Duma delegation visited Australia in May 2007.
The Chairman of Russia’s Federation Council, Mr Sergei Mironov, visited Australia in March 2009.
Bilateral economic and trade relationship
Russia is growing in importance as a market for Australian exports and investment, a trend that is expected to accelerate once Russia’s WTO accession is complete.
Two-way merchandise trade between Australia and Russia was worth $1.194 billion in 2007-08, an increase of 51.5 per cent on the previous year. Russia is now Australia’s 33rd largest merchandise trading partner. Australian merchandise exports to Russia in 2007-08 were worth $868 million, and imports from Russia totalled $326 million. Key Australian exports to Russia in 2007-08 included meat (particularly beef), raw hides and skins and live animals. Russia is our largest export market for kangaroo meat with exports in 2008 worth $23.8 million. Crude petroleum and fertilisers dominated Australian imports from Russia in 2007-08.
Australia’s exports of services to Russia in 2007-08 were valued at $87 million, and imports of services from Russia were valued at $74 million. Services exports are growing in areas such as education, tourism and specialist services for the mining, metallurgy, oil and gas industries.
Australian companies have had some success in winning business in the Sakhalin Island oil and gas province, located in the Russian Far East near Japan. Sakhalin is among the world’s largest oil and gas fields.
Bilateral investment grew rapidly between 2005 and 2008. In August 2007 Macquarie Bank and Moscow-based Renaissance Capital announced a joint venture to develop infrastructure advisory and fund management opportunities in Russia and other CIS countries. In 2006, BHP Billiton and Rio Tinto separately announced joint ventures with Norilsk Nickel to explore and develop mineral resources in Russia. The first large-scale Russian investment in Australia took place in 2005 when Rusal (Russian Aluminium) invested US$461 million to acquire 20 per cent of Queensland Alumina. Russian investment in Australia has increased substantially since then. In 2006-2007 Norilsk Nickel acquired, indirectly, Australian assets estimated between US$3.5-4.5 billion through its third-country acquisitions of OM Group (USA) and LionOre Mining (Canada). In August 2007, Russia’s Magnitogorsk Iron and Steel Works (MMK) purchased a 5 per cent share of Fortescue Metals Group Limited for $550 million.
Export opportunities
Russia represents a growing market for Australian agricultural products, including meat, livestock, dairy products and skins and hides. Russian agribusiness has expressed interest in Australia’s advanced technologies for tracing livestock and improving herd output. Opportunities also exist in education services, as over 20,000 Russian students study abroad every year.
Blessed with enormous resources and energy reserves, Russia is an important market for advanced Australian technologies that improve the efficiency of resource and energy extraction. Russia is planning to double its level of coal-powered electricity over the next 15 years. While Russia has the world’s second largest coal reserves, it lacks modern technologies. This may create significant opportunities for Australian business to export coal expertise and modern equipment.
Trade successes
Bovis Lend Lease
Bovis Lend Lease entered the Russian market in 1992, providing project and construction management services on large-scale real estate, infrastructure and industrial projects. Since that time Bovis Lend Lease have completed over 70 projects for clients including local developers such as RBI and East Line, as well as major international corporations such as Mars, Heinz, Pepsi, BP, Philip Morris, Volvo, Pilkington, Danfoss, and LG Electronics. With a local headquarters and team located in Moscow, they now successfully operate in a number of cities across the region, including St. Petersburg, Yekaterinburg, Samara, Stavropol and Rostov-on-Don.
BHP
In 2008, Russian resources firm, Norilsk Nickel invited BHP Billiton Ltd to join with them in exploring the largest untapped nickel deposit in Russia. Norilsk, the world's largest producer of nickel and palladium, paid $31 million for the Lisko-Tagulsk field in the Irkutsk region of Siberia. The deposit contains 7.5 million metric tons of nickel, equal to the three-quarters of Norilsk's existing measured and indicated reserves. It also holds 3.5 million tons of copper and 750 tons of platinum and related metals.
Macquarie Renaissance
Macquarie Capital and Renaissance Capital, a leading emerging markets investment banking firm in Russia, joined forces in 2007 to form Macquarie Renaissance. The joint venture was established to develop infrastructure advisory and fund management opportunities in Russia and participate in the estimated US$1 trillion that will be spent on infrastructure projects over the next decade.
Wagners
In February 2008 Wagners announced that they had secured a multi-million dollar deal with Russia, supplying special sand to construct gas and oil pipelines in the far eastern Sakhalin region. In August 2008, Wagners Global was also awarded a major contract in one of the world’s most northerly inhabited places, Pevek, Chukotka Region, in the Artic circle within Russian Far East. The contract was awarded by Zolotorydnaya Kompaniya Mayskoye a subsidiary of Highland Gold Mining Ltd.
More success stories
For more information on exporting Australian goods and services to Russia, or on conducting business in Russia, please visit the website of the Australian Trade Commission (Austrade).
Last reviewed date: 05/03/2009