As a majorly industrialized country, Russia continues to grow as its economy improves. Some of the best industries in the Russian Federation include the automotive industry, defense, electronics, finance, telecommunication, and energy. Many of them have support from foreign companies in the European Union as well as the United States.
Since Russia has become an increasingly vocal member of the world economy, foreign companies support these industries and want to see them prosper even further. Thanks in part to the affordability of Russian products and services, Russian companies have clients throughout Europe, Asia, and North America.
In this post, we’ll be taking a look at how industry in the Russian Federation has grown since the fall of the Soviet Union.
Growth of the Russian Economy After the Fall of the Former Soviet Union
When the Soviet Union fell in 1991, Russia once again became an independent nation. Its economic past might make it a bit of a harder nut to crack (and understand), but the potential for ROI is enormous here.
The country’s “golden decade,” between 1999 and 2008, is when its economy grew at an average rate of 7%, growth which was mainly driven by a boom in commodity prices, especially oil.
Today, Russian business and it is economy as a whole is geared toward dealing with the world market and building ties with the West.
Broad Overview of the Russian Industries
Russia’s GDP comprises three broad sectors and major industries. The agricultural industry contributes roughly 5% to the GDP. It’s followed by the industrial sector (contributes 32% to GDP) and the service sector (62% of GDP), according to data from the World Bank. Here’s a look at the top industries.
Agricultural Sector
Cultivating land in Russia is arduous and restricted to a few small areas within the country. The harsh weather and tough geographical conditions are two of the main reasons why the agricultural sector is one of the industries in Russia that contributes the least to Russia’s GDP.
Interestingly enough, Russia’s agricultural sector employs around 6% of the population across the formal and informal sectors. It includes forestry, hunting, fishing, livestock production, and cultivation of crops.
Although Russia does export certain food items, it is a net importer of agriculture and food. The higher inflation in Russia vis-à-vis its partners makes imports more competitive. According to the World Bank, the boom period in the Russian economy between 2000 and 2008 also led to income growth, pushing up consumer demands for food, which was met by imports.
Industrial Sector
Russia’s industrial sector has contributed about 35% to Russia’s GDP over the years. This sector comprises manufacturing, mining, construction, water, electricity, and gas. The sector currently employs roughly 27% of the population.
Although it has an abundance of natural resources, Russia is best known for its rich oil and gas, timber, tungsten, iron, diamonds, gold, platinum, tin, copper, and titanium resources.
Many of the major industries in Russia have capitalized on the resources available in the country. One of the most prominent industries that harness natural resources is machine building. But in terms of importance, the fuel and energy complex (FEC) is by far one of the Russian economy’s most significant contributors. Its products are also what Russia exports the most.
Service Sector
Russia’s service industry contributes about 62% of Russia’s GDP and employs more than 67% of the population. The service sector comprises the following segments:
- Financial Services
- Travel and Tourism
- Communications
- Marketing and Sales
- Advertising
- Real Estate
- Social Services
- Healthcare
- Arts and Culture
- IT Services
- Wholesale
- Retail Trade
- Catering
Zooming In on Specialized Industries in Russia
We’ve highlighted the three main contributors to Russia’s GDP, but here’s an overview of specialized sub-sectors that play vital roles in the Russian economy.
Defense Sector
Employing nearly 3 million people, only the United States has a more extensive defense sector than Russia. The defense sector, in cooperation with the Russian government, develops military weapons such as tanks, air defense systems, helicopters, and fighting vehicles.
In fact, Russia has been a leader in the defense industry since World War II. Along with exporting to Africa and the Middle East, Russia’s military also buys new equipment every year.
Automotive Industry
Russia’s automotive industry employs around 600,000 people, with another 3 million Russians working in fields related to the automotive manufacturing industry. Many foreign automotive producers also operate within Russia, which helps make the country the world’s 15th largest producer.
Telecom & Electronics Industry
Telecommunications and electronics is a booming industry in Russia. Along with the Russian government, they’ve created an effective and efficient wireless communications solution for the country.
With the support for a national broadband network peaking, Russia is much closer to the technological abilities of the Western world too. Because there are many opportunities to expand and do lucrative business in Russia, many European and Asian tech companies are lining up to do business with Russia.
Oil Industry
Did you know that Russia is the world’s largest oil producer? Yep! With more than ten major Russian companies controlling oil exploration, there’s a lot of investment required to keep it growing steadily. As we all know, the oil industry is one that keeps growing, which is why many companies from Europe, the United States, and Asia want to become players in the Russian oil market.
Natural Gas
Russia is one of the world’s largest producers of natural gas, producing around 669 billion cubic meters of gas every year. The country is also the world’s largest gas exporter, producing 25% of the gas consumed in the European Union. The Russian government also encourages the use of gas cars. Companies like Italgas sell aftermarket conversion kits to enable cars to use gas, but organizations like GAZ Group sell vehicles with natural gas systems. Oil and gas exports are some of Russia’s fastest-growing in the Russian republic.
Aerospace
The manufacturing of aircraft is also an essential sector in Russia that employs more than 350,000 people. The aircraft industry’s portfolio includes competitive military aircraft like the MiG-29 and the Su-30, and with new projects like the Sukhoi Superjet 100 set to breathe new life into the sector.
Russia’s space industry comprises more than 100 companies that employ around 250,000 people. This is the most science-intensive hi-tech sector that employs the most skilled personnel in Russia.
Machine Building
The machine-building industry in Russia caters to most of the country’s needs. It manufactures the likes of steam boilers and turbines, electric generators, electric locomotives, and grain combines.
Much of the shipbuilding, electric-power-generating and transmitting equipment, consumer durables, and automation components also come from this industry.
Wrapping Up
As Winston Churchill said: “Russia is a riddle wrapped in a mystery inside an enigma.”
This observation is as relevant today as it was in the mid-20th century. It’s a country that has modernized in leaps and bounds since the fall of the Soviet Union. Yet its culture remains defiant in its distinctiveness compared to Western norms.
Brands looking to broaden their market by entering the territory of the old Soviet Union need to understand the intricacies of doing business in Russia. You’ll encounter new regulations, working with Russian counterparts, and competing with local businesses. It’s also essential to understand the cultural aspect behind Russia’s economic growth if you want to target the right audience.
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