Review 2023: Russia

Domestic policy in figures

According to the statement of Russian President Vladimir Putin, the main result of the outgoing year was a 3.5% growth of the Russian economy. This figure exceeded even the most optimistic predictions of the IMF: Russia's GDP was expected to increase by 2.2%. Unemployment in the country reached a historic low of 2.9%, and real wages increased by 8%. At the same time, the Russian government pursued a soft migration policy aimed at qualitative growth of migrants both to meet the needs of the labor market and to maintain the population. The country's financial stability is also evidenced by the reduction of the external debt from $ 46 billion to $ 32 billion. Meanwhile, the inflation rate remains high and will reach 7.5% by the end of the year. In order to bring the inflation rate back to last year's level, the Bank of Russia tightened its monetary policy by raising the key rate to 16% per annum. In addition, to ensure financial independence, the transformation of the financial market in terms of digitalization and the introduction of the "digital ruble" continued. Taking into account the measures taken, the Russian Ministry of Finance forecasts that annual inflation will fall to 4.0-4.5% in 2024.

2023 was characterized by high activity of Russian business in establishing import substitution processes. It was possible to increase the potential in industry (manufacturing industry grew by 7.5%), pharmaceuticals, production of machinery, electrical equipment, plastics, textiles, as well as computers, electronic and optical products. However, there is still a need for substitution of raw materials (13.8%), equipment and components (37-38%). Replacing foreign solutions with domestic ones remains as one of the main tasks in many spheres of the economy, for this purpose in 2023 the Ministry of Industry and Trade developed and adopted a plan to transfer state-owned companies of federal and regional levels of mining, metallurgy, rocket and space, defense, chemical and nuclear energy industries to Russian software. The plan includes a list of software types and sets the final 2024 target for the share of Russian software in all designated categories at 100%.

In order to minimize global geopolitical risks, Russia continues to face the task of increasing its technological sovereignty and independence from external supplies. For this purpose, the Russian Government has developed a plan to increase the level of R&D development in the defense and civilian spheres: 5 billion rubles has been allocated until 2028 for R&D aimed at designing innovative products. In addition, in 2024, financing of the national project "Unmanned Aviation Systems" will begin in order to implement the strategy for the development of unmanned aviation adopted in June. In the first year, the largest amount of funding 45.5 billion rubles is planned; the funds will go to developers and manufacturers to compensate their costs for R&D, certification, development of components, work on the integration of drones into a single airspace, etc.

In 2023, the final results of the national projects launched by the Russian President back in 2018 were summarized. Among the most useful for the Russian society were: "Health Care", "Safe Quality Roads", "Housing and Urban Environment". Some of the national projects are also operating on the territory of the Donetsk and Lugansk People's Republics, Kherson and Zaporozhye regions to stimulate the development and entry of the subjects into the general social and economic environment of the Russian Federation. The federal budget envisages over a trillion rubles for the integration of new regions, and the subjects themselves paid 170 million rubles to the RF budget by the end of 2023. Next year, on the instruction of the President of the Russian Federation, it is expected to extend preferential mortgages to secondary housing in the Donetsk and Lugansk People's Republics, Kherson and Zaporozhye regions, as well as to increase lift payments under the "Zemsky Doctor" program.

Foreign economic activity

Foreign economic activity continues to develop strongly, and Russia's successful cooperation with friendly countries in the EAEU, BRICS, CSTO and SCO formats has become a kind of response to Western sanctions. Trade turnover between Russia and China amounted to 18 trillion rubles for the year, and the Russian market became the leader in terms of the growth rate of Chinese exports, increasing by 57% year-on-year. In January - August 2023, the volume of trade between the EAEU and BRICS countries increased by 15% by the same period of 2022, the EAEU trade turnover with the African region only from January to September this year increased by 34%, and EAEU exports to the African region - by 40%. The potential of trade and economic partnership with African countries, China, Vietnam and India is expected to shape the demand market for mineral products, food, chemical goods, metals, machinery and equipment produced in the EAEU states next year.

At the same time, the number of settlements in national currencies is growing, which indicates a natural desire of countries to reduce their dependence on global financial giants and is in line with the principles of a multipolar world. Thus, at the end of 2023, the share of the Russian ruble and other currencies of friendly countries reached 76% in exports and 72% in imports, the combined use of the dollar and the euro does not exceed 25%. In 2024, this trend will strengthen, and by the end of next year it is expected that more than 80% of settlements will be in national currencies.

This year, the integration agenda has gained new significance for Russia. In the CSTO, for which the priority goal of the year was to increase the unity of member states and strengthen the organization's position in the system of international relations, there was some distancing on the part of Armenia and Kazakhstan. Against the background of contradictions between official Moscow and countries from the NATO bloc, Kazakhstan looked for new logistical routes for oil transportation to Europe and supported Azerbaijan in its desire to extend sovereignty over Nagorno-Karabakh. Kazakhstan's position did not suit Armenia's leaders, who counted on the full support of all CSTO members during military actions to defend Artsakh. Thus, as a sign of protest, the Armenian authorities ignored the joint CSTO exercises "Unbreakable Brotherhood" in Kyrgyzstan, refused to sign the joint declaration of the CSTO Collective Security Council, suspended the practice of conducting exercises on its territory until the end of 2023, and in September withdrew its representative to the organization. Many experts predicted Armenia's imminent withdrawal from the CSTO, but the state representatives themselves denied the negative forecast, noting the tight integration ties between Russia, Armenia and Belarus, the breakup of which could lead to an economic crisis in the country. Other outcomes of the CSTO year included the start of the work of the Biological Security Coordination Council, the strengthening of cooperation between special services and law enforcement agencies (in particular, the ongoing "Operation Mercenary"), the completion of the creation of a unified air defense system based on Russia's bilateral agreements with each of the organization's states, and the building up of partnerships with the SCO and the CIS.

On January 1, 2024, the CIS presidency will be handed over to Russia, which will work to strengthen cooperation in various areas, including economy, security, education and culture. Special attention will be paid to the preservation of the Russian language, which is the language of international communication on the Eurasian continent, as well as the preservation of accurate historical memory. For this purpose, the International Organization for the Russian Language was established with headquarters in Sochi. On June 8, 2023, the Agreement on Free Trade in Services, Establishment, Activities and Investment was signed, which extends the free trade regime within the Commonwealth to the services sector. According to the set of measures for the period until 2030, it will allow to create joint clusters in the field of mechanical engineering, form new high-tech industries, increase production and exports of competitive, innovative and knowledge-intensive products, as well as increase the share of settlements in national currencies.

Another important outcome of the year, which testifies to the construction of a new global world order, was the expansion of the BRICS association, the chairmanship of which will be taken over by Russia on January 1. The accession of 6 new members to the organization in the context of the Middle East crisis and local African conflicts has actually secured the title of a powerful structural unit opposing the Western coalitions and increased its legitimacy. According to experts, the potential aggregate economic power of the BRICS will amount to $67 trillion or more than 60% of the world economy. For comparison, since 2020 the BRICS countries "in a truncated format" have been overtaking the G7 in terms of their contribution to the growth of the world economy, and by the end of 2024 they are expected to overtake the G7 in virtually all major markets. In addition to joint growth, sustainable development, increased technological sovereignty, in a word, prospects, the association is expected to develop a new governance architecture, which will be built in the context of internal political instability of some new members, as well as the establishment of food and energy security, primarily for the countries of the African continent.

Cooperation with friendly countries is also growing on the basis of the Shanghai Cooperation Organization, which Iran joined in 2023. Russia's trade with SCO member countries grew by 30% to a record $263 billion in 2022, and by another 35% in January-April 2023. Russia and the SCO countries continue to develop initiatives in the field of carbon-free energy - Sangtudinskaya GES-1, Kamabarate-1, Mullalak GES. In June Belarus signed a memorandum of obligations in order to obtain the status of a member state, and the Republic is expected to join the SCO in 2024.

In the current geopolitical circumstances, Russia pays special attention to the development of international transportation corridors, as well as the construction of the relevant infrastructure that will make it possible to complete the reorientation of external flows, in particular exports of Russian energy resources, from the West to the East and South. The implementation of logistics projects in 2024 will contribute to the Russian presence in Africa and Latin America, which are prospective markets for the promotion of domestic products and services.

Russia's response to geopolitical crises

The year 2023 was characterized by a growing conflict potential in the world. Following the Hamas invasion of Israel, Russia made efforts for an immediate ceasefire in the Gaza Strip, noting that the only true solution to the conflict is the establishment of an independent Palestine with East Jerusalem as its capital under the 1947 UN Resolution. Russia twice prepared a draft resolution to the UN Security Council on the Palestinian-Israeli conflict calling for an immediate humanitarian ceasefire and condemning Hamas attacks in Israel and hostage-taking, but both were rejected. At the official level, it was noted that the cause of the crisis situation in the Middle East was the US policy, which did not seek to find a compromise for the parties, but only monopolized the settlement. Since the beginning of the conflict, the Russian side has delivered more than 370 tons of humanitarian aid to Gaza.

The Karabakh conflict between Azerbaijan and Armenia has lasted for many years, Russia has been appealing to the countries to cease fire and reach a compromise for 15 years. After signing a trilateral agreement to end the war in Nagorno-Karabakh in 2020, the Azerbaijani and Armenian sides stayed in the positions they had occupied, a number of districts came under Baku's control, and Russian peacekeepers were to be stationed along the line of contact and the Lachin corridor. During the Armenian-Azerbaijani border crisis in 2021, thanks to the efforts of the Russian side in resolving the acute phase of the conflict, the Azerbaijani and Armenian authorities also agreed to establish mechanisms for demarcation and delimitation of the border between the countries. However, on September 19, 2023, Azerbaijan announced local anti-terrorist measures in Karabakh aimed at disarming and withdrawing Armenian troops. A day later, with the mediation of Russian peacekeepers, a ceasefire was agreed upon; later, the head of Nagorno-Karabakh signed a decree on the cessation of the Republic's existence from January 1, 2024, which meant the de facto recognition of Nagorno-Karabakh as Azerbaijani. In October, the Russian Ministry of Defense changed the name of the zone of operation of peacekeepers in Nagorno-Karabakh to the zone of the Karabakh Economic Region of the Republic of Azerbaijan (KER), previously called the Nagorno-Karabakh conflict zone. Armenia's relations with Russia have traditionally been characterized by a high level of bilateral contacts at the highest political level and close economic and military cooperation within the CSTO, CIS and EAEU, while Russia also has long integration ties with Azerbaijan and is considered one of its main strategic partners.

An important geopolitical event of 2023 was the military coup in Niger, which, according to the Russian side, is an "anti-constitutional act" that requires national dialog to restore civil peace, law and order. In these circumstances, Russia offered its support and assistance in stabilizing the situation: with the mediation of Russian Deputy Defense Minister Yunus-Bek Yevkurov, it was decided to create an alliance of three states - Mali, Niger, Burkina Faso - which will carry out collective defense and provide mutual assistance for the benefit of the peoples of the Sahel.

The year 2023 was another step towards building a future world order in which the world will preserve its diversity and continue to develop multipolarly. The geopolitical crisis that has covered different parts of the globe in turn will naturally lead to the construction of a new model of international order. The global world economy is now undergoing a period of transformation, as evidenced by the slowdown in the pace of development both at the global level and at the national level. New centers of economic interests are appearing on the world map, as well as forces capable of finally challenging the status of the leaders of major powers. Russia and China are at the head of integration associations, which are replacing traditional pro-Western organizations that no longer respond to modern demands. In the future, it is predicted that BRICS will strengthen its global authority and expand as the main integration platform.

• Russia's GDP in 2023 showed growth of 3.5%, unemployment reached a historic low of 2.9%, but inflation expectations remain high - inflation is forecast to reach 7.5%.

• The Russian market has become the leader in terms of the growth rate of Chinese exports. Mutual trade turnover between Russia and China in 2023 amounted to 18 trillion rubles, with 95% of all trade transactions taking place in rubles and yuan.

• The combined economy of the BRICS countries after expansion will amount to more than 60% of the world economy. On January 1, 2024, Russia will take over the BRICS presidency. Today, the association is considered to be the strongest global union, an alternative to Western organizations.

• In the current geopolitical circumstances, Russia pays special attention to the development of international transportation corridors, which will allow the reorientation of external flows, particularly Russian energy exports, from the West to the East and South. The implementation of logistics projects in 2024 will help strengthen Russia's presence in Africa and Latin America.