History of Russia - Russian Federation

Russian Federation

Although Yeltsin came to power on a wave of optimism, he never recovered his popularity after endorsing Yegor Gaidar's "shock therapy" of ending Soviet-era price controls, drastic cuts in state spending, and an open foreign trade regime in early 1992 (see Russian economic reform in the 1990s). The reforms immediately devastated the living standards of much of the population. In the 1990s Russia suffered an economic downturn that was, in some ways, more severe than the United States or Germany had undergone six decades earlier in the Great Depression. Hyperinflation hit the ruble, due to monetary overhang from the days of the planned economy.

Meanwhile, the profusion of small parties and their aversion to coherent alliances left the legislature chaotic. During 1993, Yeltsin's rift with the parliamentary leadership led to the September–October 1993 constitutional crisis. The crisis climaxed on 3 October, when Yeltsin chose a radical solution to settle his dispute with parliament: he called up tanks to shell the Russian White House, blasting out his opponents. As Yeltsin was taking the unconstitutional step of dissolving the legislature, Russia came close to a serious civil conflict. Yeltsin was then free to impose the current Russian constitution with strong presidential powers, which was approved by referendum in December 1993. The cohesion of the Russian Federation was also threatened when the republic of Chechnya attempted to break away, leading to the First and Second Chechen Wars.

Economic reforms also consolidated a semi-criminal oligarchy with roots in the old Soviet system. Advised by Western governments, the World Bank, and the International Monetary Fund, Russia embarked on the largest and fastest privatization that the world had ever seen in order to reform the fully nationalized Soviet economy. By mid-decade, retail, trade, services, and small industry was in private hands. Most big enterprises were acquired by their old managers, engendering a new rich (Russian tycoons) in league with criminal mafias or Western investors. That being said, there were corporate raiders such as Andrei Volgin engaged in hostile takeovers of corrupt corporations by the mid-1990s.

By the mid-1990s Russia had a system of multiparty electoral politics. But it was harder to establish a representative government because of two structural problems—the struggle between president and parliament and the anarchic party system.

Meanwhile, the central government had lost control of the localities, bureaucracy, and economic fiefdoms; tax revenues had collapsed. Still in deep depression by the mid-1990s, Russia's economy was hit further by the financial crash of 1998. After the 1998 financial crisis, Yeltsin was at the end of his political career. Just hours before the first day of 2000, Yeltsin made a surprise announcement of his resignation, leaving the government in the hands of the little-known Prime Minister Vladimir Putin, a former KGB official and head of the KGB's post-Soviet successor agency FSB. In 2000, the new acting president defeated his opponents in the presidential election on 26 March, and won a landslide 4 years later. International observers were alarmed by late 2004 moves to further tighten the presidency's control over parliament, civil society, and regional officeholders. In 2008 Dmitri Medvedev, a former Gazprom chairman and Putin's head of staff, was elected new President of Russia. However, Putin would take back Presidency 2012.

Nevertheless, reversion to a socialist command economy seemed almost impossible, meeting widespread relief in the West. Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. Russia is well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry.