**COUNTRY COMMERCIAL GUIDE--RUSSIANFEDERATION**

**FISCAL YEAR  2000**

 

****

**III. POLITICAL ENVIRONMENT**

 

****

**Bilateral Relationship with the UnitedStates**

U.S.relations with Russia have evolved through various phases since the break-up ofthe Soviet Union, and numerous summits and Binational Commission meetings havebuilt a substantial U.S.-Russia agenda of issues for bilateralcooperation.  The last bilateralsummit was held in Moscow in September 1998, and Presidents Clinton and Yeltsinmet most recently on the margins of the June 1999 G-8 Summit in Cologne.  In addition to regional crisisresolution, such bilateral talks have been focused on issues such as armscontrol, cooperation to prevent proliferation of weapons of mass destructionand the means for their delivery, combatting organized crime, counterterrorism,and the environment.  Sharpdisagreement between Russia and NATO in spring 1999 burdened the U.S.-Russiarelationship, but both joined in efforts to bring military actions inYugoslavia to an end and to work out means of Russian participation in theNATO-led international peacekeeping force for Kosovo.  

 

The U.S.continues to support Russian efforts to build a democratic society and marketeconomy, and to integrate Russia more broadly and firmly into the internationalcommunity.  U.S. assistance andsupport for international financial institutions' engagement with Russia alsocontinue.  The United States alsocontinues to take steps to clear from the books Cold-War-era legislationlimiting contacts with Russia.

 

**Major Political Issues Affecting theBusiness Climate**

 

Russia hasonly a seven-year history of free elections, and democratic institutions arestill fragile.  The July 1996presidential election, the first free nationwide election of a head of state inRussia's 1,000-year history, helped to reassure investors about Russia'spolitical stability.  Nevertheless,other political factors, including the legal and judicial climate, affect thebusiness environment in Russia. And the approach of Russia’s next round of elections for its nationalParliament and President contribute to uncertainties for the next twelvemonths.  Although Russian law nowincludes a Civil Code (which includes a commercial code) and a Criminal Code,key amendments are needed to improve the business environment.  

 

Protectionistelements in the government and Federal Assembly have risen in response to abroad but unfounded belief that free trade and foreign business activity in thepost-Soviet years is a major cause of the nation’s industrial decline.  This has led some politicians toadvocate limits on foreign share holdings or property ownership, or anincreased tax burden on foreign businesses.

 

**Political System, Elections, andOrientation of Major Parties**

 

As outlinedin the constitution adopted in December 1993, the Russian Federation isgoverned by a political system modeled after many in the West.  The federal system is composed of threebranches:  executive, legislativeand judicial. The Federation is composed of 89 "subjects," includingregions, ethnically-based autonomous republics, territories and the cities ofMoscow and St. Petersburg.  These"subjects" are granted some autonomy over internal economic andpolitical issues, but there is considerable ambiguity in the “power-sharing”agreements which the central government has signed and continues to negotiatewith many Federation subjects.

 

**Executive Branch:** Under the constitution, the executive branch is led by the President,who is elected for a four-year term and may serve two terms.  President Yeltsin's term expires in2000, and elections are scheduled for June 2000.  He has the right to choose the Prime Minister (currentlySergei Stepashin), with the approval of the State Duma (the lower house of thelegislature).  The President, uponthe recommendation of the Prime Minister, appoints Ministers, who areresponsible for the execution of legislation and decrees in their respectivefields.

 

**Judicial Branch: **Thetop levels of the judicial branch consist of the Constitutional Court, whichreviews the constitutionality of federal legislation; the Supreme Court, whichis the highest civil and criminal judiciary body; and the Supreme ArbitrationCourt which resolves economic disputes between subjects of the Federation.  The Supreme Court and SupremeArbitration Court preside over a federal system of lower criminal and civilcourts.  The Constitutional Courtheld its first session in the spring of 1995.

 

**Legislative Branch:** The legislature consists of a two-chamber Federal Assembly, firstelected in December 1993.  Theupper house, the Federation Council, was reformed in January 1996 and is nolonger directly elected.  Rather,it consists ex-officio of the heads of both the executive and legislativebranches of each subject territory of the Russian Federation.  The Federation Council reviewslegislation passed by the lower house, including the federal budget andinternational treaties, and adopts its own resolutions.  The lower house, or State Duma,consists of 450 deputies, half selected on the basis of single-mandategeographic districts and half on the basis of party lists.  The Duma passes federal laws and adoptsresolutions.  Duma members areelected to four-year terms, although under rare constitutional circumstancesthe President can dismiss the Duma and call early elections.  The last nationwide Duma elections wereheld in December 1995, with the next national Duma elections planned forDecember 1999. 

 

**Political Parties:** Seven parties and factions arerepresented in the Duma.  The reconstitutedCommunist Party, headed by Gennadiy Zyuganov, is the largest faction in thelower house.  On most issues it issupported by the smaller "People's Power" faction.  The "Agrarian Party" also is allied closely with thecommunists and represents Russia's agricultural establishment, advocatingstrong government support for the farm sector.  Reformist forces in the Federal Assembly are led by GrigoriyYavlinsky's "Yabloko" party, which supports free markets but isinclined to use government funds to ensure a strong social safety net.  Centrist groups, some of which advocatea slower approach to reform, include "Our Home is Russia" (founded byformer Prime Minister Chernomyrdin) and "Russia's Regions," a loosegrouping of centrist politicians. The "Liberal Democratic Party of Russia" is a right-wing nationalistparty led by Vladimir Zhirinovskiy (although its members have not consistentlyvoted as a bloc on key issues). The communists and their allies hold a near majority on mostissues.