The hybrid system that the Russian transition has evolved into has been called the virtual economy. This paper analyzes the evolution of the virtual economy. We pay particular attention to the interaction of economic reform policies and the adaptive behavior of enterprise directors.

This chapter is provides some new sources of information and a new approach to bear in the analysis of these issues. It presents the types and sources of the data used in the analyses, as well as the statistical methods employed. The chapter discusses data from the mid-1980s to test hypotheses about the economic status of the defense industrial regions on the threshold of the Gorbachev era. It examines the economic performance of the defense regions in the period following the so-called Gaidar reforms of early 1992. The chapter determines the extent to which defense regions may have differed from other regions in their willingness to embrace economic reform policies. It presents an interpretation of the results of the April 1993 referendum with particular emphasis on differences in defense and non-defense regions. Regressions were run to test the relationship between defense industry concentration and both the quantity and quality of housing available to the region's residents.

The future success of the Russian experiment depends on a successful economic transition. If the current crisis is merely a temporary detour, its implications for Russia's fundamental stability are not too severe. Russia's economic development has evolved into a new system—a virtual economy that is stable in the near term but is not conducive to sustainable economic development. This chapter offers an analysis of the evolution of Russia's current economic system, which due to its unusual (some would say unique) characteristics has been referred to here as the "virtual economy". It pays particular attention to the interaction between economic reform policies and the adaptive behavior of enterprise directors, which has blunted the efficacy of attempted reforms. Finally, the chapter explores the dire implications of the virtual economy for Russia's internal stability and development as well as for its international security.

Russia's military annexation of Crimea in early 2014, and the ensuing crisis in its relations with neighboring countries and the Western world, brought to the fore an age-old question that had fade...

Fiona Hill and other U.S. public servants have been recognized as Guardians of the Year in TIME's 2019 Person of the Year issue.From the KGB to the Kremlin: a multidimensional portrait of the man at war with the West.Where do Vladimir Putin's ideas come from? How does he look at the outside world? What does he want, and how far is he willing to go? The great lesson of the outbreak of World War I in 1914 was the danger of misreading the statements, actions, and intentions of the adversary. Today, Vladimir Putin has become the greatest challenge to European security and the global world order in decades. Russia's 8,000 nuclear weapons underscore the huge risks of not understanding who Putin is. Featuring five new chapters, this new edition dispels potentially dangerous misconceptions about Putin and offers a clear-eyed look at his objectives. It presents Putin as a reflection of deeply ingrained Russian ways of thinking as well as his unique personal background and experience. Praise for the first edition: “If you want to begin to understand Russia today, read this book.”—Sir John Scarlett, former chief of the British Secret Intelligence Service (MI6) “For anyone wishing to understand Russia's evolution since the breakup of the Soviet Union and its trajectory since then, the book you hold in your hand is an essential guide.”—John McLaughlin, former deputy director of U.S. Central Intelligence “Of the many biographies of Vladimir Putin that have appeared in recent years, this one is the most useful.”—Foreign Affairs“This is not just another Putin biography. It is a psychological portrait.”—The Financial TimesQ: Do you have time to read books? If so, which ones would you recommend? “My goodness, let's see. There'sMr. Putin, by Fiona Hill and Clifford Gaddy. Insightful.”—Vice President Joseph Biden inJoe Biden: The Rolling Stone Interview.

Introduction 1. Historical Prelude 2. Investment and Physical Capital 3. The Economics of Location 4. Market-Impeding Federalism 5. Human Capital 6. Conclusion

Two prominent American specialists on the Russian economy present a fundamental analysis of basic economic factors explaining how the global financial crisis has played out in Russia and its implications for the country's future. More specifically, the authors examine the consequences of Russia's dependence on and addiction to resource (oil and gas) rents and of the management system put in place under Vladimir Putin to maintain, secure, and distribute these rents. They then investigate how each of these factors has emerged from the crisis and how it might evolve in the years ahead. Focusing on the distinction between rent dependence and addiction, the authors question the conventional wisdom that diversification of Russia's economy (away from oil and gas) is a desirable objective that will render it less vulnerable to external shocks. Journal of Economic Literature, Classification Numbers: E020, F020, G010, O130. 15 figures, 44 references.

Two prominent American specialists on the Russian economy re-examine two key political explanations commonly advanced for the slowdown in Russian oil production after 2007, namely the high tax regime and increasing state control. The authors' objective is not to question the validity of these explanations, but rather to argue that the outcome (i.e., the slowing rate of oil output and revenues derived from it) was an intentional response to rising world prices rather than an undesired, negative consequence of Russian policies. More specifically, the authors outline the elements of a Russian strategy designed to avoid: (a) the launching of long-term investment programs in a high-oil-price environment, in which future world oil prices and the costs of lifting "new" East Siberian crude cannot be reliably predicted (thereby reducing price risk) and (b) expenditure of windfall profits to support noncompetitive enterprises in other sectors of the economy (curbing rent addiction). Journal of Economic Literature, Classification Numbers: E600, O130, Q430. 5 figures, 19 references, appendix.

The virtual economy was the system of informal rent distribution that arose in postSoviet Russia in the 1990s as nonviable Soviet-era manufacturing industries sought to protect themselves from the discipline of the market. Enterprise directors and their allies throughout the economy (including government officials) colluded to use nonmarket prices and various forms of nonmonetary exchange such as barter to transfer value from resource sectors to manufacturing industry. The article discusses the system's historical roots, describes some of its characteristic phenomena, and outlines a model for behaviour of enterprises.

Click to increase image sizeClick to decrease image size Additional informationNotes on contributorsClifford G. GaddyClifford G. Gaddy is a senior fellow at the Brookings Institution. He may be reached at cgaddy@brookings.edu.Andrew C. KuchinsAndrew C. Kuchins is a senior fellow with and director of the CSIS Russia and Eurasia Program. He may be reached at akuchins@csis.org. The authors thank Amy Beavin, Anna Bryndza, and Igor Danchenko for their excellent research assistance.

The good times that Russia has enjoyed for the past six years continued in 2006. I will describe some of the elements of this remarkable recent performance, but only briefly. My main remarks will rather focus on two broader issues. The first is how I view Russia's political economy working today. This is the system of "rent sharing" that Professor Barry Ickes of Penn State University and I have written about. I will also discuss Vladimir Putin's key role in shaping and managing this system. The second topic is the fundamental challenges the economy faces for the longer term. I will especially focus on the pitfalls along the way. In a new book we are writing, Barry Ickes and I describe them as the "bear traps." I will conclude by asking how, against this background, Russia's economy may evolve in the shorter and longer term.