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                     Key Economic Indicators
           (Billions of rubles unless otherwise noted)

                                  1991      1992      1993 /1
Income, Production,
 and Employment

Real GDP (1990 prices) /2             522       459       409
Real GDP Growth (pct.)            -12.9     -18.5     -11
GDP (at current prices) /2          1,300    19,992   165,000
  Production of Goods               1,074    18,887     n/a
  Production of Services              226     1,105     n/a
   Market Services                    116       309     n/a
   Non-market Services                110       796     n/a
GNP Per Capita (US$, IBRD est.)   3,220       n/a       n/a
Labor Force (000's)               73,809    72,300      n/a
Unemployment Rate (pct.)            0.1       0.8       n/a

Money and Prices
 (annual percentage growth)

Money Supply                        n/a     649.9     251.6 /4
Central Discount Rate (pct.) /3    20        80       210
Personal Savings Rate               n/a       n/a       n/a
Retail Inflation (pct.)           277.0     2,539.0   643 /4
Wholesale Inflation
  Industrial                      238.0     2,049.0   975 /4
  Agricultural                    156.0     931.0     851.0 /4
Consumer Price Inflation          260.0     2,609.0   625.0 4/
Exchange Rate (Rubles per $) /3   1.67      414.5     1,186.0 4/

Balance of Payments and Trade
 (millions of U.S. dollars)

Total Exports (FOB) 5/            50,911.1  39,967.4  40,000.0
  Exports to U.S.                   n/a        639.9   1,338.2
Total Imports (CIF) 5/            44,473.0  34,981.3  18,000.0
  Imports from U.S.                 n/a      2,883.7   1,343.4
Aid from U.S.                       n/a        358.4     467.1
Aid from Other Countries            n/a      1,500.6   1,952.9
External Public Debt                n/a     70,000.0  72,000.0
Debt Service Payments (paid)        n/a      1,815.0   2,000.0
Gold and FOREX Reserves             n/a      3,518.0   6,000.0
Trade Balance 5/                    n/a      4,986.1  22,000.0
  Balance with U.S.                 n/a     -2,189.8      -5.2


1/  Figures are from State Statistical Committee and embassy
    estimates; 1993 figures are estimates based on available
    monthly data in October 1993.
2/  GDP at factor cost; 1990 GDP was 644 billion rubles.
3/  Figures are actual, end of period.
4/  Money supply is through 8/93; other figures through 10/93.
5/  Merchandise trade.

1.  General Policy Framework

    The Russian Federation (Russia) is the largest of the
republics of the former Soviet Union and also the wealthiest,
with oil, timber, natural gas, minerals, and fertile soil. 
After the collapse of the Soviet Union in October 1991,
however, Russia was left with serious economic problems
stemming from decades of a planned economy and the disruption
of its traditional commercial and industrial ties.  GDP fell by
13 percent in 1991, 19 percent in 1992, and a further 11
percent in 1993, for a cumulative decline of 37 percent,
greater than that experienced by the United States during the
great depression.

    Industrial production dropped dramatically in 1992 and 1993
as Soviet-era supply lines across new national borders were
disrupted, defense orders plummeted, and low import duties
exposed Russian products to foreign competition, particularly
among consumer goods.  Largely because of the efforts of
Minister of Finance Boris Fedorov, the government made progress
in controlling the amount of state credit made available to
state enterprises in 1993.  However, as in 1992, enterprises
continued to lend to each other, thus maintaining output and
employment while accumulating a large amount of
inter-enterprise arrears, since ultimately much of the
production went unsold.

    The year 1993 also saw the final dissolution of the "ruble
zone."  Following the July 26 Central Bank decision to withdraw
old ruble notes from circulation, other republics of the
Commonwealth of Independent States (CIS) moved to establish
their own currencies.  The collapse of the CIS ruble zone
helped bring the currency under Central Bank control, and
reduced inflationary pressures from other republics.  Still to
be solved, though, was the question of establishing a payments
mechanism that would facilitate rather than hinder market-based
trade between the new CIS states.  An Interstate Bank was
established in December 1993 to tackle this problem.

    By the beginning of 1993 Russia had freed prices on 85
percent of wholesale and retail goods, and remaining controls
on energy, housing, transportation and some other  products
were eliminated during the course of the year.  The often
dramatic increases in formerly controlled prices and the
continuing inflationary impulse of domestic credit expansion
made inflation reduction a top government priority.  Under
pressure from the Ministry of Finance, the Central Bank raised
its discount rate in several stages to 210 percent in 1993 from
the 1992 level of 125 percent, and tightened issuance of
discounted credits.  By the end of 1993 inflation was down to a
monthly level of 15 percent.

    To cut the budget deficit, the government in 1992 slashed
expenditures on defense procurement, investment, and industrial
and consumer subsidies, while introducing a 28-percent
value-added tax, which was lowered to 20 percent in 1993. 
Export taxes and licensing fees, intended to offset the
differential between low domestic prices and world market
prices for energy and other raw materials, also yielded
revenue.  The budget deficit for 1993 was 10 trillion rubles
despite extensive cuts in subsidies.  A significant amount of
taxable income goes unreported.  The government in late 1993
announced plans to limit monetary financing of the budget
deficit by creating a domestic market for government paper and

    The government's privatization program, initiated in August
1992, continued to expand in 1993.  Roughly half of Russia's
medium and large state enterprises and 67 percent of small
enterprises were privatized by the end of 1993; a growing
number of large enterprises were being auctioned.  The two-step
process places the capital of a state enterprises on a share
basis and then privatizes part or all of the ownership.  The
enterprise's managers and employees can receive 25 percent of
the shares free and purchase up to an additional 15 percent. 
More frequently they elect instead to purchase a full 51
percent at discounted prices.  The local state property
committee, and in some cases the central government, typically
retains a 20-30 percent stake; the remaining shares are
auctioned publicly for vouchers or cash.  One-third of the
investment vouchers distributed to Russian citizens in October
1992 have been invested; the vouchers are currently valid to
July 1994.  Foreign investors have access to the public shares
through investment funds or can purchase vouchers directly.  A
September 1993 land decree permitted the sale of agricultural
land among Russian citizens.  High percentages of urban
residential units have been privatized and can be sold on the
market.  In Moscow 90 percent of residential property was
privatized by the end of 1993.  Foreigners still cannot
purchase real estate in Russia but can lease it for 50 years
and sometimes longer.

    A bankruptcy law passed in March 1993 provided the basis
for several test cases in the courts.  In December 1993
President Yeltsin signed a decree outlining criteria and
procedures for reorganizing and eliminating unprofitable state
enterprises through mandatory bankruptcy proceedings.  To avoid
bankruptcy proceedings, such enterprises must prove they have
state orders, subsidies or private financing.  This step
represents a significant implementation of the new bankruptcy
law.  An initial list of 100 enterprises slated for bankruptcy
was being prepared at the end of 1993.

    U.S. direct foreign investment commitments in Russia
totalled $500 million in 1992, 14 percent of total foreign
investment in Russia.  Other leading investors were Germany,
Italy, Austria and France.  U.S. direct foreign investment in
1993 is estimated at $1 billion, comprising 15-20 percent of
worldwide direct investment in Russia.  The U.S.-Russian
bilateral tax treaty, which goes into effect from January 1994,
eliminates double taxation of U.S. citizens and firms, while
the bilateral investment treaty signed in June 1992 awaits
ratification by the Russian legislature.

    Russian exports, concentrated in raw materials, totalled
$40 billion in 1992 and again in 1993, although with falling
commodity prices export volumes increased in 1993.  As a result
of the massive decline in GDP, imports fell from $35 billion in
1992 to $18 billion in 1993, increasing Russia's trade surplus
from $5 billion to $22 billion.  Germany ranked first as
Russia's leading non-CIS trading partner in 1993, followed by
China, the United States, France, Japan and Britain.  Trade
with former allies in Eastern Europe continued to fall.

    Russia became a member of the International Monetary Fund
in June 1992 and made a first credit tranche drawing of $1
billion in December.  In July 1993, Russia borrowed a further
$1.5 billion from the IMF under the new Systemic Transformation
Facility.  The borrowing was intended to support a program of
tighter limits on credit expansion and a reduced budget
deficit.  However, Russia was unable to meet its third quarter
targets as a result of credits issued for the harvest and for
winter provisioning of the Russian northern territories. 
Renewed stabilization policies were implemented during the
fall, opening the way for a second $1.5 billion STF drawing
envisioned for early 1994 to be followed by a $4 billion upper
credit tranche standby program.

    In 1993 the World Bank approved a $610 million loan for oil
sector rehabilitation, which became effective in November.  A
$90 million loan for privatization assistance, approved in
1992, became effective in December 1993.  The World Bank has
also proposed an additional $70 million loan for federal
employment assistance.  Disbursements in 1993 on a previously
approved import rehabilitation loan totalled $350 million.

    The international program of technical and humanitarian
assistance, begun in 1992, became increasingly active in 1993. 
The United States is the largest source of technical assistance
and funding.  The Group of Seven in 1993 established a support
implementation group (SIG) in Moscow and will open its office
in 1994.  The IMF, World Bank and European Bank for
Reconstruction and Development (EBRD), which opened offices in
Moscow in 1992, have active technical assistance programs and
provide funding in various areas.  The International Financial
Corporation has focused its assistance activities on the
privatization program.  The European Community has begun to
mobilize an assistance program, and individual countries have
established bilateral programs.

    Differences in income distribution have widened steadily in
the uneven transition to a market economy.  On the one hand, a
class of wealthy entrepreneurs has begun to emerge;  on the
other, many have experienced a decline in living standards,
although official unemployment levels have remained below one

  Much unemployment and under-employment remains hidden. 
Enterprises have increasingly reduced the work week and
compelled employees to take annual leave.  Some employees have
acquired second jobs to supplement reduced real wages.  The
government has sought to keep social welfare support in line
with the cost of living, but many pensioners have slipped below
the poverty line.  Welfare responsibilities jettisoned by
enterprises in the course of privatization have usually
devolved upon regional and local governments.

2.  Exchange Rate Policy

    Russia has a unified exchange rate which floats based upon
a daily Moscow interbank currency exchange auction where the 
central bank intervenes to smooth fluctuations.  After
declining rapidly in nominal terms through mid-June the ruble
held steady at about 1000/dollar until the siege of the
parliament.  The ensuing political turmoil caused a sharp
downward correction of about 20 percent, after which the rate
again stabilized.  In practice, the central bank exerts
considerable influence on the rate due to the continuing large
reserve accumulation resulting from surpluses in Russia's trade
accounts.  The ruble is convertible within Russia and CIS
countries which remain in the ruble zone.  Capital flight
remains a problem.  Exporters are required to convert into
rubles 50 percent of export earnings at the free market rate. 
From January 1994 commercial banks will be responsible for
monitoring the repatriation of export earnings.

    Without special permission it is illegal for Russian
companies or citizens to maintain bank accounts outside of
Russia for purposes other than operating expenses.  Licenses
are required for offshore accounts and can be difficult to
obtain.  Non-residents can open individual ruble accounts and
commercial ruble accounts for servicing import/exports
operations and for investment.  Both citizens and non-residents
can maintain domestic hard currency accounts.

3.  Structural Policies

    The Russian legal system is in a state of flux but
continues to make progress toward a market economy having
transparent pricing, tax and regulatory policies.

    Legal Framework:  Russia's rudimentary antitrust law was
supplemented in December by a new tax and anti-monopoly law
passed by presidential decree.  A similar November 1993 decree
implementing the law on protection of shareholders requires
larger companies to establish stock registries to record
ownership in the company.  Also in preparation are a brokerage
law facilitating trading of stocks through brokers rather than
through the company.  The government is working on a commercial
code.  One-third of Russian commercial banks have substantial
government ownership and the largest banks are still
government-owned.  Russia still lacks a corporatization law.

    Pricing policies:  Despite the continuing privatization of
larger enterprises, key sectors such as energy and transport
remain in state hands.  The Ministry of Economy, formerly
GOSPLAN, retains some of its former managerial functions for
certain sectors of the economy.  Centralized imports and import
subsidies were eliminated in 1993 on all items except a handful
of products, and the remainder are expected to be phased out in
1994.  In late 1993 the government reduced export duties and
curtailed the number of exports subject to quotas and
licensing.  State procurement plays a limited and declining
role for non-defense industries, and production subsidies have
been abolished in most sectors, including foodstuffs.  Energy
and rail transportation prices were decontrolled in 1993 and
have risen sharply.

    Tax Policies:  Russia's tax system, established in December
1991, has been rendered obsolescent by the de facto transfer of
substantial federal responsibilities to the regions, expected
to be codified in a new tax law in 1994.  All major taxes are
collected by a single federal agency and redistributed among
the regions through an ad hoc bargaining process which attempts
to accommodate this transfer of responsibilities.  A new tax
law in preparation is intended to reflect the increased
regional responsibilities by making their collections
independent of the center.  The value-added tax is imposed on
Russian and foreign firms conducting commercial activities in
Russia.  Placed on a sliding scale ranging between 25 and 35
percent by region in 1992, the tax was reduced to a uniform 20
percent in 1993.  Corporate profits are taxed at a rate of 32
percent.  A December 1993 presidential decree raised personal
income tax rates for 1994; income below five million rubles per
year will be taxed at 12 percent, income between five and ten
million rubles/year at 20 percent, and income over ten million
rubles/year at 30 percent.

    Regulatory Policies:  All enterprises above 100 million
rubles capitalization ($85,000 as of 12/93) must be registered
with the government, which can involve extensive delays. 
Exports of energy and several other raw materials require a
license, for which foreign investors are permitted to bid.  The
government has only recently begun to introduce auction tenders
for official procurements.  Noncompetitive bidding is sometimes
used to award contracts for very large government projects
involving natural resources.  Cases exist of tenders awarded to
U.S. companies being subsequently revoked by the government in
the interests of domestic competitors.  An established and
transparent set of regulations regarding bidding is lacking,
but a law on concessions for development of raw reserves is in

4.  Debt Management Policies

    Russia and the other former republics of the USSR agreed in
October 1991 to become "jointly and severally" liable for the
Soviet foreign debt.  Russia's share of the debt was set at 61
percent.  Russia subsequently reached agreement with the other
republics to manage or assume liability for their respective
share of the Soviet debt in exchange for their relinquishing
their respective claims on Soviet assets.

    Russia has succeeded in gaining significant temporary
relief from its debt burden during the transition to a market
economy.  An April 1993 agreement with government creditors
(Paris club) rescheduled virtually all of Russia's official
bilateral debt arrears and maturities falling due in 1993.  By
December 1993 Russia had reached bilateral agreements with most
major creditor governments to implement the April 1993 accord. 
The April accord requires that Russia obtain comparable debt
relief from its other main groups of creditors.  Negotiations
with London Club creditors to reschedule commercial bank
credits resulted in agreement in principle but stalled in late
1993 over the issue of Russia's refusal to waive sovereign
immunity.  Pending conclusion of an agreement, the Russian
government is setting aside money in the budget for debt
servicing payments to the banks.  Russia also has proposed
formation of a creditors club for rescheduling uninsured
supplier credits.

    The total external debt is estimated to be approximately
$72 billion dollars.  Servicing of the debt in 1993, after
rescheduling, was about $3 billion.  In order to ensure control
of contracting for new foreign lending, the Russian government
has formed an inter-ministerial committee to limit the amount
of borrowing.

5.  Significant Barriers to U.S. Exports 

    The 1992 U.S.-Russia Trade Agreement provides mutual
most-favored-nation status.  Russia remains subject to the
Jackson-Vanik Amendment which conditions extension of MFN
status upon conclusion of a bilateral commercial agreement and
compliance with, or waiver of, freedom of emigration
requirements found in the law.  In 1993 President Clinton
continued a waiver for Russia from the freedom of emigration
requirements of Jackson-Vanik, which has been continued
annually since first being issued for the Soviet Union in 1990.

    Russia is negotiating or has concluded limited free-trade
agreements with CIS states and former East European
satellites.  Some of these involve barter or guaranteed
delivery of specified commodities.  The U.S. Russia Business
Development Committee and its working commissions, established
in June 1992, provide a mechanism for resolving particular
trade problems on both sides.  Russia and the European Union
have been involved in the negotiation of a Partnership and
Cooperation Agreement which would liberalize trade between them.

    The June 1993 Customs Code, which offers 15 alternative
regimes for handling external trade, standardizes Russian
customs procedures in accordance with international norms.  The
Tariff Law promulgated in July 1993 establishes types of duties
and provides for establishing preferential tariffs on a
reciprocal basis.  Implementation of the new customs regime has
occurred gradually and unevenly, and is still subject to
arbitrary decisions.  In December 1993 the United States and
Russia implemented a 1990 Mutual Customs Assistance Agreement. 
The government plans to raise import duties across the board in
1994; although many duties will be below ten percent, the
expected weighted tariff will be 13-14 percent, with some
exceeding 25 percent.

    Inherited Soviet-era qualitative restrictions on imports
were initially limited to security and health requirements, but
Russia's July 1993 Consumer Protection Law stipulated official
certification (by Gosstandart) of imported products for
conformity to Russian technical, safety and quality standards. 
Certification is based on a combination of international and
Russian standards.  U.S. companies have complained of costly
procedures and arbitrary certification requirements.  A joint
Russian-U.S. communique of December 1993 pledges cooperation on
improving and simplifying certification, testing and quality
assurance of U.S. and Russian products in each other's
markets.  Russia is establishing reciprocal standardization
with the U.S. and other countries and acceptance of foreign
certification by accredited institutions.  Import licenses are
required on the normal range of dangerous and harmful materials
and goods.

    A November 1993 presidential decree freezing registered 
foreign bank activity and barring new entry of foreign banks
with less than 30 percent Russia ownership appears to conflict
with a September 1993 decree sheltering foreign investors from
adverse changes for three years and contradicts the foreign
banking law.  Under current law only 12 percent of the total
capital in the banking system can be foreign-owned.  The
Russian insurance industry is lobbying for similar protection,
and the government recently circulated proposed regulations
prohibiting foreign attorneys from counseling clients on
Russian legal matters.

6.  Export Subsidies Policies

    From July 1992 exports of oil, gas, precious metals and
other strategic raw materials were conducted by enterprises
specially licensed by the Russian government.  In 1993 a
quarter of these exports were re-centralized through
government-controlled foreign trade organizations and involved
domestic purchase below world prices and exemption from export

    Antidumping duties imposed by the U.S. Department of
Commerce on Russian uranium in early 1992 were suspended in
October 1992 in return for export restraints.  U.S. antidumping
duties remain in place on imports of Russian ferrosilicon,
titanium sponge, and urea.  A request for information under
Section 406(d) of the 1974 Trade Act has also been sent to
Russia regarding the production and export of potash.  A surge
of Russian aluminum exports to western markets contributed to
record low real aluminum prices and was the subject of
multilateral talks.

7.  Protection of U.S. Intellectual Property 

    In 1992-93 Russia enacted laws strengthening the protection
of patents, trademarks and appellations of origins,
semiconductors, computer programs, literary, artistic and
scientific works, and audio/visual recordings.

    The Patent Law, which accords with the norms of the World
Intellectual Property Organization, includes a grace period,
procedures for deferred examination, protection for chemical
and pharmaceutical products, and national treatment for foreign
patent holders.  Inventions are protected for 20 years,
industrial designs for ten years, and utility models for five
years.  One must wait four years before applying for a
compulsory license.

    The Law on Trademarks and Appellation of Origins introduces
for the first time in Russia protection of appellation of
origins and provides for automatic recognition of Soviet
trademarks upon presentation of the Soviet certificate of
registration.  The Law on Copyright and Neighboring Rights,
enacted in August 1993, protects all forms of artistic
creation, including audio/visual recordings and computer
programs as literary works for the lifetime of the author plus
50 years and is compatible with the Bern Convention.  The 
September 1992 Act on Topology of Integrated Microcircuits
protects semiconductor topographies for ten years from the date
of registration.

    Russia has acceded to obligations of the former Soviet
Union toward the Universal Copyright Convention, the Paris
Convention, the Patent Cooperation Treaty, and the Madrid
Agreement.  Further, under the unratified U.S.-Russian
Bilateral Investment Treaty, Russia has undertaken to protect
investors' intellectual property rights, and the bilateral
trade agreement obligates protection of the normal range of
literary, scientific and artistic works through legislation and
enforcement.  Russia does not belong to the Rome convention and
protects only sound recordings first produced in Russia.  Still
ahead are a comprehensive revision of the Russian criminal and
civil codes and of administrative regulations pertaining to
intellectual property rights; strengthened penalties; the
establishment of specialized courts, particularly a patent
court, with trained and experienced judges and attorneys, and
trained police and customs officers.  So far legal enforcement
of property rights has been a low priority of the Russian
government, as is evident in the widespread marketing of
pirated U.S. video-cassettes, recordings, books, computer
software, clothes and toys.

    The Russian Intellectual Property Agency, established in
1992 with direct accountability to the Russian president, was
given responsibility to develop and coordinate state IPR
policy, promote copyright protection, and collect and
distribute royalties.  It was replaced in October 1993 by the
revived Russian Authors Organization, a semi-official agency
combining the inherited supervisory functions with advocacy of
author's commercial interests.

8.  Worker Rights 

    a.   Right of Association

    The Russian Labor Code guarantees the right to join trade
unions.  The Federation of Independent Trade Unions of Russia
(FNPR), successor to the Soviet All-Union Central Council of
Trade Unions (AUCCTU), enjoyed a privileged position until a
September 1993 presidential decree transferred control of the
Social Insurance Fund from the FNPR to the government, thereby
neutralizing the key economic factor deterring workers from
joining other unions.  Unions may form federations and
participate in international bodies, and are independent of
political parties.

    The Russian Labor Code qualifies the right to strike with
several restrictions.  It requires first exhausting other means
of dispute resolution, prohibits strikes for political reasons
and bars them altogether in the transportation, communications,
energy and defense industries, and allows suppression of
strikes deemed threatening public health or having severe
social or economic consequences.

    The government does little to protect workers actively from
retribution.  FNPR officials generally collaborate with
enterprise management, while free union leaders and members 
face threats, intimidation and occasionally physical abuse,
often with the acquiescence of FNPR officials and local
politicians.  In the past year, free union officials have
scored moderate success in pursuing more aggressive judicial
defense of their rights.

    b.   Right to Organize and Bargain Collectively.

    Unions remain concentrated in the state sector, where
previously membership was mandatory.  Because of the
collaborative tradition of Soviet labor unions, collective
bargaining is still largely misunderstood on both sides. 
Recently Russian courts have begun compelling management
compliance with labor contracts.

    c.   Prohibition of Forced or Compulsory Labor.

    Prohibited by the Russian Labor Code but largely unenforced
or ineffective.

    d.   Minimum Age for Employment of Children.

    Regular employment of children under age 16 is prohibited,
although younger children may work in intern or apprenticeship
programs.  The Labor Code bars dangerous, nighttime and
overtime work for children under 18.

    e.   Acceptable Conditions of Work.

    Parliament sets the minimum wage, but given current
inflation and budget deficits, most workers receive less than
the minimum pension level.  The standard work week is forty
hours and the calendar week must contain one 24-hour rest
period.  Premium pay is required for overtime and holiday
work.  Minimum legal safety and health requirements continue to
be widely ignored with impunity.  Industrial death and injury
rates are very high, especially in heavy industries such as

    f.   Rights in Sectors with U.S. Investment.

    In the petroleum, food and telecommunications industries
where U.S. investment is significant, observance of worker
rights does not differ significantly from other sectors.  The
petroleum industry is highly unionized but the official union
remains predominant.  U.S. joint ventures in the
telecommunications and food industries are less unionized but
tend in some cases to enjoy better working conditions.

         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                 0
Total Manufacturing                                       D
    Food & Kindred Products                     0
    Chemicals and Allied Products               0
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                *
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         D
Wholesale Trade                                           2
Banking                                                   0
Finance and Insurance                                     0
Services                                                  3
Other Industries                                          0

TOTAL ALL INDUSTRIES                                     16

(D) -Suppressed to avoid disclosing data of individual companies
(*) -Less than $500,000

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis, unpublished data.

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