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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 433,491 346,520 310,000 16
         
GNI per capita
 US $ 2,610 2,140 1,750 97
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 357  (26/09/10)

Zhirinovsky recidivus
Vladimir Zhirinovsky, the leader of Russia's Liberal Democratic Party, (infamously neither ‘liberal’ nor ‘democrat’, actually fascist), was a candidate for the presidency of Russia in the 1990s. He never stood a chance against the Kremlin, despite an impressive performance against Yeltsin in December, 1993, when he got 24% of the vote.

He knows as everyone now does that the mayor of Moscow, Yuri Luzkhov, has been fired, after having been given a chance to resign. Luzkhov is widely believed to have used his position to his personal advantage and may even be the richest man in Russia – (there is a relationship between great wealth and crookery that would seem to be standard here in Russia. It was revelatory that with a year or so of the collapse of communism, numerous millionaires, even billionaires had emerged, many of whom had been party apparatchiks who had obtained for themselves incredible deals to acquire previously nationalised businesses, industries even, often borrowing the purchase price from state banks). As in all countries where top level corruption is normal, in Russia there is a ‘saying’ that “one hand washes the other.”

Luzhkov, because of his enormous wealth and corrupt reputation has been the Achilles' Heel of the present Muscovite regime and was due to come up for re-election next year, although the President does have powers to appoint a successor and indeed the former deputy mayor is in charge.

Zhirinovsky said on September 9 that he was ready to contest Luzhkov's seat, next year. The controversial Russian lawmaker, who spoke on the sidelines of the Global Policy Forum in the city of Yaroslavl some 250 km northeast of the Russian capital, pledged to permit all protests and give every Muscovite the chance to start their own business.

"I am ready to become the mayor of Moscow, and Moscow will breathe freely. This will be a different city - more reliable, more modern, happier," Zhirinovsky said. "All protests will be permitted. And each Muscovite will be able to start their own business," he added.

Luzhkov, speaking at the forum, had said earlier he would not leave his post before his term of office ends in 2011. Luzhkov has been Moscow's mayor since 1992 but frequently has had to dismiss rumours he will resign. Asked whether he would work at his post until the end of his term, Luzhkov had said: "I have no grounds to say otherwise." As it turned out he was removed by order of the president citing ‘lack of confidence’.

Journalists at the Yaroslavl forum, where President Dmitry Medvedev was the main speaker on September 9, asked Luzhkov about his "conflict" with federal authorities, but Luzhkov dismissed the idea that he was in conflict. "There are no conflicts, there are different opinions," he said. By now he will have realised that he was so wrong.

According to Russian business daily Vedomosti, Luzkhov has long had the support of Prime Minister Vladimir Putin. When the Yeltsin term of office expired Luzkhov seriously considered standing as his successor, but when he discovered that the KGB had their own man (then their boss), as their candidate, Luzhkov very sensibly decided to stand down in favour of Vladimir Putin, for which he was rewarded with securing the mayoralty of Moscow.

Valentina Matviyenko: the successful Governor of St Petersburg and the next Catherine the Great?

There is a mayoralty of Moscow. But there is also a governorship of St Petersburg, Russia's second city, but first star tourist attraction.

Nobody doubts that the real ruler of Russia is Vladimir Putin. Russia's next presidential election is not until 2012, but speculation is already rife about whether President Dmitry Medvedev will try for another term or whether his premier and predecessor, Putin, will want to reclaim his old job. The one thing almost everyone can agree on is that they will not stand against each other.

But there might just be a third way, and that third way could give Russia its very own Margaret Thatcher or Angela Merkel, or, to make an even bigger comparison, another Catherine the Great perhaps.

Even to mention the possibility risks crushing Valentina Matviyenko's prospects well before nominations open. But if any woman can do it, the 61-year-old Governor of St Petersburg may be the one. In the past seven years, during which she has been essentially the city's chief executive, the city has changed conspicuously for the better.

Vast investment by the central government improved the city's dilapidated fabric in time for the 300th anniversary in 2003. But the bigger changes have happened since, with huge new housing and commercial building projects and, most conspicuously, a transformation of the public mood. People on the streets of St Petersburg seem confident and content with themselves.

At a weekend question and answer session in early September the governor seemed more confident, less soviet in style and generally more modern than she appeared in a similar setting five years ago: a new hairdo, new weight loss, new spontaneity, and above all a new commanding air. Significant, too, may be the way her whole career – from local Communist Youth leader to member of Mikhail Gorbachev's first delegates' conference, to diplomat, to deputy minister, to become elected governor of the city that styles itself Russia's second capital – is a near-ideal reflection of her country's experience.

The third striking aspect is how closely Ms Matviyenko's profile – as an outsider (born and brought up in Ukraine), a natural scientist (a chemist like Mrs Thatcher), and with a phenomenal power of recall – resembles that of Europe's other two ground-breaking female leaders, Thatcher and Merkel.

Russia has never been keen on female politicians; even in Soviet days, when women drove tractors and the Communist Party boasted about equal rights, their presence in the leading institutions was more token than substantial. Alexandra Kollantai was the only leading woman Bolshevik; and she was soon shunted off to be ambassador to Sweden (a safe billet as it turned out – she survived the purges).

Ms Matviyenko acknowledges the problem, cheerfully relating how her opponents festooned the city's streets with banners proclaiming, "Being governor is no job for a woman" before she was convincingly elected. But, she says, she opposes Scandinavian-style quotas and says women will have to learn to be more competitive.

Her detailed answers started with her support – or not – for the Norman Foster tower that the Russian gas giant, Gazprom, wants to build in her city. On balance, she seemed to support it, in the face of fierce ecological objections, but not in a dogmatic way that would prevent compromise with protest groups concerned about damage to St Petersburg's skyline.

She spoke at some length about demography – the city's birthrate has risen rapidly in the past two years after falling every year since 1990 – and families are moving to the city from many other parts of Russia, including Moscow, for the culture and quality of life. Tourism to St Petersburg has more than doubled to 5 million visitors a year – since she took over.

Tackling corruption
She also seems to be one of very few Russian politicians to be actively tackling corruption. All council meetings are now shown live on the internet, as are auctions for building land. The price of land, she gleefully recounted, rose more than tenfold when auctions started to be held in public, showing just how much the public purse had lost to corrupt middlemen.

There is a hotline for citizens to complain anonymously about bribe-takers and advertisements which make clear that bribe-givers, as well as bribe-takers, are breaking the law.

It all depends on Putin
Aside from the administrative competence the Governor oozes when she speaks, and her boundless enthusiasm for her adopted city, Ms Matviyenko has something else going for her. She was spotted and promoted by none other than the former President and current PM, Vladimir Putin. It was he who gave her the big break: the transfer to St Petersburg.

So if he is in two minds about returning to the Kremlin himself, and hesitant to back Medvedev for a second term, Ms Matviyenko's might be the new face of Russia.

Russia has had the hottest summer on record
A record-breaking heat wave in Russia has hurt the economy and the effects have spilled over to the rest of the world, with food prices soaring The heartlands – and wheatlands – of the country have been aflame.

In 2009 Russia was the world's third largest exporter of grain. But around a quarter of the country's farm land was damaged by fires in the first half of August. Expectations for this year's crop have plummeted to about 60m tonnes, down from last year's 97m tonnes.

International grain prices have already risen around 25% since Prime Minister Vladimir Putin announced a ban on grain exports in mid-August and Russia may even be forced to import grain this year, which would force international food prices up further.

In Britain, commentators believe the prices of basic commodities such as beer and bread could be affected. Also, there is the feeling that the ban on exports was unwise, because once Russia has left the league of top grain exporters (which includes the USA, China and the EU), it will be difficult for it to get back into it again.

Moreover, as the fires have delayed the planting of Russia's winter crop – which produces one and a half times more than the summer crop – production is expected to fall further, raising the possibility of a repeat of the food price shock that beset economies around the world in 2008. But it is uncertain what the full effect of the drought on the country's economy will be until the harvesting is over.

In the short term Russia faces a big bill to repair the damage. The state has promised to rebuild the houses that burned down. The total repair bill is an estimated 12bn roubles ($400m), emergencies minister Sergei Shoigu said, although some say it will be closer to 33bn roubles, well over a trillion dollars.

And the knock-on effects will only add to the price. Analysts estimate that the drought and fires could shave up to 1% from GDP, a loss of $15bn.

Farmers, already reeling from a collapse in demand caused by the financial crisis that started in 2008, now find themselves deeper in debt due to the heat wave; analysts estimate that as much as 127bn roubles of agricultural credits – 15pc of total banking sector credits – will need to be restructured, with the two state-owned banks, Sberbank and agricultural specialist Rosselkhozbank, bearing the brunt of the blow. The state has already said it plans to offer 10.5bn roubles to subsidise interest rates to farmers in 2010/11.

The nascent livestock farming is another victim as feedstock costs soars. Russia only recently become self-sufficient in chicken meat, but pork and beef farming is still being developed. The price of meat, eggs and milk are all likely to rise significantly.

Food producers and retailers will need to balance higher prices from suppliers with a government desperately trying to cap inflation.

Russian shipping and transport companies will also feel the heat. Following the government ban, the total volume shipped (mostly to the Middle East) is unlikely to top 4.5m tonnes in 2010 verses 21.5m tonnes last year.

And the crisis has jarred a fragile economic recovery that was just getting underway. In July industrial production was up 5.9pc year-on-year and investments was back in positive territory, up 0.8pc, but both indicators were down by 10pc month-on-month.

Olga Sterina at UralSib said: "Investments fell more than anticipated [and] the August data may also be weaker."

Rapidly rising food prices has caused most analysts to re-rate their inflation forecasts, increasing them by as much as 3pc over and above the government's official prediction for 2010 of a maximum of 7pc – lowest for years.

The reversal of inflation rates will come as a big blow as after nearly 20 years, June saw interest rates turn ‘real’ – higher than inflation – making the economy "normal" for the first time since the fall of the Soviet Union.

If rates stay real the Central Bank of Russia gains sorely-missed efficient levers to control the economy. As the full effects of the heatwave unfold in the autumn, the hopes that real interest rates will return this year are fading.

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