Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy to a more market-based and globally-integrated economy.
Economic reforms in the 1990s privatized most industry, with notable exceptions in the energy and defense-related sectors. The protection of property rights is still weak and the private sector remains subject to heavy state interference.
In 2011, Russia became the world's leading oil producer, surpassing Saudi Arabia; Russia is the second-largest producer of natural gas; Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the eighth-largest crude oil reserves.
Russia is also a top exporter of metals such as steel and primary aluminum. Russia's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.
The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors, but with few visible results so far.
The economy had averaged 7% growth in the decade following the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class.
The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up.
According to the World Bank the government's anti-crisis package in 2008-09 amounted to roughly 6.7% of GDP.
The economic decline bottomed out in mid-2009 and the economy began to grow again in the third quarter of 2009.
High oil prices buoyed Russian growth in 2011-12 and helped Russia reduce the budget deficit inherited from 2008-09.
Russia has reduced unemployment to a record low and has lowered inflation below double digit rates.
Russia joined the World Trade Organization in 2012, which will reduce trade barriers in Russia for foreign goods and services and help open foreign markets to Russian goods and services.
At the same time, Russia has sought to cement economic ties with countries in the former Soviet space through a Customs Union with Belarus and Kazakhstan, and, in the next several years, through the creation of a new Russia-led economic bloc called the Eurasian Economic Union.
Russia has had difficulty attracting foreign direct investment and has experienced large capital outflows in the past several years, leading to official programs to improve Russia's international rankings for its investment climate.
Russia's adoption of a new oil-price-based fiscal rule in 2012 and a more flexible exchange rate policy have improved its ability to deal with external shocks, including volatile oil prices.
Russia's long-term challenges also include a shrinking workforce, rampant corruption, and underinvestment in infrastructure.