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Russia has long been an economic titan among developing world countries. Russia qualifies as a high-income country but lacks the diversity of a modern developed economy as it relies heavily on oil and mineral extraction. Many countries in the Persian Gulf lack the same diversification, prohibiting them from ranking among the economies of developed nations despite high income per capita. Russia also has a large degree of state ownership in its economy due to its roots in communism. Much of the country’s agrarian and industrial sectors have undergone privatization in recent decades, however the government still holds majority stakes in defense, energy, and financial sectors.
Because Russia controls such a large physical territory, it is able to claim a vast majority of the world’s resources as its own. In fact, it is estimated that Russia contains a quarter of the world’s natural resources, whose value the World Bank estimates to be approximately $70 trillion US dollars. Russia’s global dominance in the energy sector is a major contributing factor to its superpower. The sub-continental power exports enough of its oil and natural gas to account for slightly more than a tenth of its total gross domestic product. Russia’s energy sector accounts for around three quarters of the nation’s total exports and approximately half of the federal government’s revenue. This strength proves supportive to the Russian economy well into the future as Russia is estimated to have the largest natural gas reserve on Earth, seconded by its vast wealth of petroleum.
Russia also supplements its energy chokehold on the world with a powerful arms industry. The Eurasian superpower designs and manufactures a range of military equipment including firearms, military equipment, ballistic missiles, and some of the worlds most advanced submarines. Russian exports totaled almost $16 billion (USD) in recent years, second only to the United States. It is worth noting that the AK-47, Russians claim to fame in the firearm sector, is favorited the world over as one of the most useful and dependable assault rifles on the planet. This article will cover the financial system of Russia, as well as a range of market information covering currency, futures, and stocks.
show moreRussia’s primary stock exchange, the Moscow Exchange was formed by a merger made up of two predecessors, the Moscow Interbank Currency Exchange (MICEX) and the Russian Trading System (RTS). The merger resulted in the Moscow Exchange (MICEX-RTS) as it is known today, but is more commonly called the Moscow Exchange. The previous exchanges existed for a few decades, however both lacked complete dominance over the other. Merging the two exchanges resulted in a single, more powerful entity evolving Moscow into a financial hub.
The securities exchange went public in 2013 and upon its initial public offering (IPO) raised over 15 billion rubles (approximately $500 million US dollars). At the time, this was considered the largest IPO ever held in Russia and drew vast demand from many international investors. It is important to note that the Russian Central Bank owned the largest percentage of ownership during its IPO, although federal law dictates that the bank must fully liquidate its stake in the exchange by the start of 2016.
The currency of Russia is one of the oldest currencies still used on the planet. It is actually the second oldest currency behind the Great British Pound (GBP) according to official record. The ruble as it’s called, is abbreviated RUB, and is traded on the foreign exchange market.
The ruble is most commonly traded against the euro (EUR/RUB) and the United States’ dollar (USD/RUB). However, the problem with trading the ruble is that the central bank’s monetary policy and additional oversight from a somewhat corrupt government has and can continue to result in extremely volatile swings, and at times, depreciation. Even the Russian government’s best attempts to stabilize the value of the currency have historically resulted in major losses for investors and banks alike.
The Ruble (RUB) is one of the longest standing currencies in the world, and has seen the rise and fall of several empires. It was symbol of communism when it was the legal tender of the USSR, but before that it was the official currency of the Russian Empire. Currently, the Russian Republic uses the same ruble, but some changes have occurred. Previously, the ruble was coded as SUR, but currently it is known as RUB. The currency has also been redenominated at a rate of 1000 to 1, only after the ruble lost over 50% of its value during an economic crisis in the 1990’s. This crisis was tied to Russia’s political instability, a fact that frequently overrides the currency’s tether to the value of the oil market.
Previously, when Russia was under the rule of the Soviets, there was more than one location that circulated the ruble. After the fall of the Soviet Union, only Moscow is allowed to print the Russian banknotes. Additionally, the mint in Moscow is the only place permitted to mint coins and has been doing so for over three centuries.
Russia’s most prevalent industries bolster the pillars of the Russian economy. As an energy dominant superpower, those companies that deal in petroleum and natural gas, and which are not controlled by the state, tend to be the strongest and most liquid companies traded on the Russian exchange. Both equities as well as bonds are important investment vehicles for Russian companies to raise capital. Additionally, the markets are important avenues for investors to raise their own capital.
Russia’s largest companies are listed on the stock exchange but also tracked by the two prominent Russian indexes. The MOEX is a ruble-denominated benchmark that is favored by domestic investors. The RTS however is dollar-denominated and is more often used by international traders and investors as it is calculated in US dollars, the most popular reserve currency of the world. The most powerful investment opportunities in this market, as previously discussed, may be found in the energy sector however military technology is also a hot commodity in the Russian market.
