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. 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. 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 struggled in its efforts to build a democratic political system and market economy to replace the strict social, political, and economic controls of the Communist period.

While some progress has been made on the economic front, recent years have seen a recentralization of power under Vladimir PUTIN and the erosion of nascent democratic institutions. A determined guerrilla conflict still plagues Russia in Chechnya and threatens to destabilize the North Caucasus region.

formidable obstacles of climate, terrain, and distance hinder exploitation of natural resources

Russian Empire, Russian Soviet Federative Socialist Republic

Real fixed capital investments have averaged gains greater than 10% over the last five years, and real personal incomes have realized average increases over 12%. During this time, poverty has declined steadily and the middle class has continued to expand. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 31%.

Strong oil export earnings have allowed Russia to increase its foreign reserves from only $12 billion to some $180 billion at yearend 2005. These achievements, along with a renewed government effort to advance structural reforms, have raised business and investor confidence in Russia's economic prospects. Nevertheless, serious problems persist. Economic growth slowed to 5.9% for 2005 while inflation remains high.

Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth.

Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, and widespread lack of trust in institutions. In addition, a string of investigations launched against a major Russian oil company, culminating with the arrest of its CEO in the fall of 2003 and the acquisition of the company by a state owned firm, have raised concerns by some observers that President PUTIN is granting more influence to forces within his government that desire to reassert state control over the economy.

State control has increased in the past year with a number of large acquisitions. Most fundamentally, Russia has made little progress in building the rule of law, the bedrock of a modern market economy.

machinery and equipment, consumer goods, medicines, meat, sugar, semifinished metal products

the sovereignty dispute over the islands of Etorofu, Kunashiri, Shikotan, and the Habomai group, known in Japan as the "Northern Territories" and in Russia as the "Southern Kurils," occupied by the Soviet Union in 1945, now administered by Russia, and claimed by Japan, remains the primary sticking point to signing a peace treaty formally ending World War II hostilities;

Russia and Georgia agree on delimiting all but small, strategic segments of the land boundary and the maritime boundary; OSCE observers monitor volatile areas such as the Pankisi Gorge in the Akhmeti region and the Kodori Gorge in Abkhazia;

Azerbaijan, Kazakhstan, and Russia signed equidistance boundaries in the Caspian seabed but the littoral states have no consensus on dividing the water column;

Russia and Norway dispute their maritime limits in the Barents Sea and Russia's fishing rights beyond Svalbard's territorial limits within the Svalbard Treaty zone;

various groups in Finland advocate restoration of Karelia and other areas ceded to the Soviet Union following the Second World War but the Finnish Government asserts no territorial demands;

in May 2005, Russia recalled its signatures to the 1996 border agreements with Estonia (1996) and Latvia (1997), when the two Baltic states announced issuance of unilateral declarations referencing Soviet occupation and ensuing territorial losses;

Russia demands better treatment of ethnic Russians in Estonia and Latvia; Estonian citizen groups continue to press for realignment of the boundary based on the 1920 Tartu Peace Treaty that would bring the now divided ethnic Setu people and parts of the Narva region within Estonia; Lithuania and Russia committed to demarcating their boundary in 2006 in accordance with the land and maritime treaty ratified by Russia in May 2003 and by Lithuania in 1999;

Lithuania operates a simplified transit regime for Russian nationals traveling from the Kaliningrad coastal exclave into Russia, while still conforming, as a member state that forms part of the EU's external border, to strict Schengen border rules;

delimitation of land boundary with Ukraine is complete, but states have renewed discussions on demarcation; the dispute over the maritime boundary between Russia and Ukraine through the Kerch Strait and Sea of Azov remains unresolved despite a December 2003 framework agreement and on-going expert-level discussions;

discussions toward economic and political union with Belarus advance slowly;

Kazakhstan and Russia boundary delimitation ratified November 2005 and demarcation is underway;

Russian Duma has not yet ratified 1990 Maritime Boundary Agreement with the US in the Bering Sea