After the collapse of the Soviet Union in 1991, the Russian government implemented radical reforms designed to transform the economy from one that was centrally planned and controlled to one based on capitalist principles. Privately owned industrial and commercial ventures were permitted, and state-owned enterprises privatized. To encourage privatization, the government issued vouchers to Russian citizens that enabled them to purchase shares in privatized firms, though in practice these vouchers frequently were sold for cash and were accumulated by entrepreneurs. A commodity- and stock-exchange system also was established.
The privatization process was slow, however, and many firms - particularly in the heavy industries - remained under state ownership. In 2001 the government legalized the sale of land, though only for urban housing and industrial real estate, which together accounted for only a small fraction of Russia's total area. At the beginning of the twenty-first century, similar legislation was under discussion for rural and agricultural areas. Though full private ownership of land is provided for in the 1993 constitution, the practice has not yet been implemented. The conversion to market-based agriculture was slow, as many clung to the old, familiar collective system.
The reforms beginning in the 1990s caused considerable hardships for the average Russian citizen; in the decade after the dissolution of the Soviet Union, the Russian economy contracted by more than two-fifths. The removal of price controls caused a huge escalation in inflation and prices; the value of the ruble, the country's currency, plummeted; and real incomes fell dramatically. Conditions had begun to improve by the mid-1990s, but in 1998 a severe financial crisis forced the government to sharply devalue the ruble. Numerous banks became insolvent, and millions of citizens lost their life savings. In response, the licensing of private banks became more rigorous, and the government cracked down on rampant tax evasion. Taxes on medium and small enterprises were moderated, and the government created incentives to reinvest profits in the domestic economy. By the early twenty-first century, the Russian economy was showing signs of recovery and stable growth. Steady earnings from oil exports permitted investments in factories, and the devalued currency made Russian goods more competitive on the international market.
In the post-Soviet years, foreign direct investment was encouraged, but it was constrained by state intervention in industry, by corruption, and by an unpredictable legal system. Violence by organized crime syndicates deterred western investment, and, although the activity of such groups was curtailed in the early twenty-first century, it still presented severe obstacles to both western and Russian businesses. Investment by non-Russian companies was also discouraged by the Russian government assuming ownership of various key industries, including oil and gas, aviation, and motor car manufacturing.
In addition to the difficulties the country encountered in its effort to restructure the economy, Russia had suffered serious long-term environmental degradation during the Soviet period, the full extent of which became apparent only in the 1990s. Its most visible aspects - such as the Chernobyl accident at a nuclear power plant in Ukraine in 1986, widespread industrial pollution, and the drastic reduction in the volume of the Aral Sea as a result of inflow diversions - were symptomatic of decades of wasteful resource exploitation. These environmental concerns placed another burden on Russia's already overwhelmed economic structure.
Agriculture, Forestry, and Fishing
The Russian environment is so harsh that agricultural land constitutes less than one-sixth of the country's territory, and less than one-tenth of the total land area is arable. Overall, agriculture contributes little more than 5 per cent to Russia's GDP, though the sector employs about one-eighth of the total labour force.
The main product of Russian farming has always been grain (mostly wheat, though barley, rye, and oats are also widely grown), which occupies considerably more than half of the crop-land. The rest of the crop-land is devoted to fodder crops and industrial crops such as sunflowers, sugar beets, and flax.
Given that Russia is such a vast country, with wide regional differences in terms of relief, soil, and climate, its agricultural patterns also have pronounced regional variations. In European Russia the further south one goes the more land is devoted to crops - virtually none are grown in the north region, whereas about two-thirds of cultivable land is devoted to crops in the central "black earth" region. In west and east Siberia and the far east, crops are largely confined to the southern fringe. Even in west Siberia, where the cultivated zone is at its widest, crops occupy less than one-tenth of the region's territory, and much less in east Siberia and the far east. Cereals occupy more than two-thirds of the crop-land in most regions, but less than half in the damper north-west and central regions, where fodder crops and livestock are more important. The intensity of farming and the yields achieved are generally much higher in the European section than in Siberia. The same is also the case for livestock farming.
In general, the old collective farms and state farms have continued to function in post-Soviet Russia. Privatized farms have experienced significant obstacles, because many in the agricultural sector treated them as pariahs, and the land that many were allocated was unproductive or inaccessible. Thus, the bulk of the grain continues to be produced by very large agricultural enterprises, particularly those in the Northern Caucasus and in the Volga regions.
Russia contains the world's largest forest reserves. More than two-fifths of the country is forested, and the country has more than one-fifth of the world's total forests - an area nearly as large as the continental United States. However, Russian forests grow very slowly because of the cold, and the country has lost about one-third of its original forest area. Although further deforestation is discouraged, logging continues to endanger the last intact forest landscapes of northern European Russia, and the problem is expanding to areas east of the Urals, The forestry industry in Russia employs some one million people. The lumbering, pulp, paper, and woodworking industries are particularly important, contributing to Russia's export income. The wood is predominantly softwood.
The fishing industry plays a significant role in the Russian economy. With access to the substantial resources of both the Atlantic and Pacific oceans, marine fishing is particularly well developed, and Russia's fleet of factory ships can process huge catches at remote locations. The chief European ocean-fishing ports are Kaliningrad and St Petersburg on the Baltic Sea, and Murmansk and Arkhangelsk in the far north. Russia's chief Pacific port is Vladivostok, but there are several others, particularly in Sakhalin and Kamchatka provinces. Smaller- scale fishing takes place in the Sea of Azov and the Black and
Caspian seas (the Caspian sturgeon is the source of the world's finest caviar}, but reduced river flows and pollution from agricultural run-off, industrial waste, and sewage dumping have thinned fish populations. There are important inland fisheries on lakes and rivers, including a good deal of fish farming.
The Russian fishing industry rivals the size of the world's other leading producers (Japan, the United States, and China), and produces about one-third of all canned fish and some one- fourth of the world's total fresh and frozen fish. The privatization of fishing in the 1990s shifted the industry's focus from production for domestic consumption to exports. Especially important catches are pollack, herring, cod, and salmon. Russia's earnings from the export of fish are steadily larger than from grain export. Salmon, crabmeat, caviar, beluga, sterlet, and herring are among the important seafoods generating export income.