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Russia is located in Northern Asia (the area west of the Urals is considered part of Europe), bordering the Arctic Ocean, between Europe and the North Pacific Ocean

Founded in the 12th century, the Principality of Muscovy, was able to emerge from over 200 years of Mongol domination (13th-15th centuries) and to gradually conquer and absorb surrounding principalities. In the early 17th century, a new Romanov Dynasty continued this policy of expansion across Siberia to the Pacific. Under PETER I (ruled 1682-1725), hegemony was extended to the Baltic Sea and the country was renamed the Russian Empire. During the 19th century, more territorial acquisitions were made in Europe and Asia. Defeat in the Russo-Japanese War of 1904-05 contributed to the Revolution of 1905, which resulted in the formation of a parliament and other reforms. Repeated devastating defeats of the Russian army in World War I led to widespread rioting in the major cities of the Russian Empire and to the overthrow in 1917 of the imperial household. The Communists under Vladimir LENIN seized power soon after and formed the USSR. The brutal rule of Iosif STALIN (1928-53) strengthened Communist rule and Russian dominance of the Soviet Union at a cost of tens of millions of lives. The Soviet economy and society stagnated in the following decades until General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernize Communism, but his initiatives inadvertently released forces that by December 1991 splintered the USSR into Russia and 14 other independent republics. Since then, Russia has shifted its post-Soviet democratic ambitions in favor of a centralized semi-authoritarian state whose legitimacy is buttressed, in part, by carefully managed national elections, former President PUTIN's genuine popularity, and the prudent management of Russia's windfall energy wealth. Russia has severely disabled a Chechen rebel movement, although violence still occurs throughout the North Caucasus.

Russia ended 2008 with its tenth straight year of growth, averaging 7% annually since the financial crisis of 1998. Although the Russian Government has laid out plans to diversify the economy, energy and other raw materials still dominate Russian exports. Over the last six years, fixed capital investment growth and personal income growth have averaged above 10%, but both grew at slower rates in 2008. During the past decade, poverty has declined steadily and the middle class has continued to expand. Russia has also improved its international financial position, running surpluses since 2000. The government saved these surpluses in two sovereign wealth funds, together valued at over $200 billion: a reserve fund to support budgetary expenditures in case of a fall in the price of oil and a national welfare fund to help fund pensions and infrastructure development. Foreign debt is approximately one-third of GDP. The state component of foreign debt has declined, but commercial debt to foreigners has risen strongly. In 2008, Russia's GDP grew an estimated 6.0%, led by non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports. The economy slowed significantly in the second half of the year due to the global financial crisis and a steep fall in the price of oil. Oil export earnings had allowed Russia to increase its foreign reserves, the world's third largest, from $12 billion in 1999 to almost $600 billion in August, but a 70% drop in the price of oil since mid-July and central bank intervention to defend the ruble during the last quarter of the year, reduced reserves to around $435 billion. Investor concerns over the Russia-Georgia conflict, corporate governance issues, and the global financial crisis caused the Russian stock market to fall by roughly 70%. The global crisis also affected Russia's banking system, which faced liquidity problems against short-term external repayment obligations. In response to these issues, Moscow initiated a larger than $200 billion rescue plan designed to increase liquidity in the financial sector, to help firms refinance foreign debt, and to support the stock market. The government also unveiled a $20 billion tax cut plan and other fiscal supports for society and industry. In the first year of his term, President MEDVEDEV outlined a number of economic priorities for Russia including improving infrastructure, innovation, investment, and institutions; reducing the state's role in the economy; reforming the tax system and banking sector; developing one of the biggest financial centers in the world, combating corruption, and improving the judiciary. Russia's infrastructure requires large investments and must be replaced or modernized if the country is to achieve broad-based economic growth. Corruption and lack of trust in institutions continues to dampen domestic and foreign investor sentiment. The banking system, while increasing consumer lending and growing at a high rate, is still small relative to the banking sectors of Russia's emerging market peers. Russia has made little progress in building the rule of law, the bedrock of a modern market economy. Moscow continues to seek accession to the WTO and has made some progress but its timeline for entry into the organization continued to slip.