Third, this dependence cripples its capacity to become again a credible, autonomous military power in conventional warfare. Thus, in the aftermath of the demise of the Soviet Union, the world's third largest industrial power has become the world's largest industrial wreckage. 3.The limits of international trade and foreign direct investment Russia's external trade has somewhat recovered in the 1994-96 period, after a dramatic decline that found its lowest point in 1993. Overall, the structure of trade reflects the persistence of an economy of survival, depleting natural and energy resources for export, and using the earnings for buying food, essential machinery and equipment items, and, lately, specialty consumer goods. However, even more troubling than the low volume of foreign investment is the character of this investment, essentially concentrated in buying assets, or stocks, at a bargain price, hoping for its future revaluation.
Portfolio investment aims more at financial gains than at reconstructing the Russian economy.
Russian interests, and particularly company managers and government apparatchiki who presided over the privatization process, kept the most valuable property under their control, yet devalued stocks of privatized companies in order to offer substantial profits to foreign partners in exchange for instant cash, most often kept in bank accounts abroad. Foreign direct investment in production is proceeding with extraordinary precautions in the situation of legal uncertainty, bureaucratic arbitrarieness, and safety concerns that characterize Russia's wild capitalism. The huge gas reserves, and still important oil fields in Western Siberia, appear to offer little attraction to foreign investment because of the need to rely on unpredictable government controls for production and transportation, and because of obscure conditions under which deals are made in the industry. In other words, foreign capital, for understandable reasons, aims at taking advantage of Russia's energy and natural resources, while being as little involved as possible in the Russian economy. On the other hand, Russian government and Russian companies strategy seems to be the attraction of foreign capital to prepackaged deals, without relinquishing control.