The Challenges impacted the Russia Trade Policy...121.1 COVID Pandemic...121.2 Rising Global Protectionism and Discrimination...131.3 Russa Trade Boomed after Invading with Ukraine...132
Overview about Russia
Russia is bounded to the north and east by the Arctic and Pacific oceans, and it has small frontages in the northwest on the Baltic Sea at St Petersburg and at the detached Russian oblast (region) of Kaliningrad (a part of what was once East Prussia annexed in 1945), which also abuts Poland and Lithuania To the south Russia borders North Korea, China, Mongolia, and Kazakhstan, Azerbaijan, and Georgia To the southwest and west it borders Ukraine, Belarus, Latvia, and Estonia, as well as Finland and Norway.
(Source: Encyclopadia,2023) Figure 1 The Russia’s Geographic Location
Since its first (and the last) WTO Trade Policy Review (TPR), the Russian Federation has maintained the course of economic diversification and increasing investment attractiveness of the domestic market, improving legislative regulation, supporting and developing the multilateral trading system, countering trade protectionism (inter alia in the form of unilateral trade restrictions),as well as effectively participating in regional integration processes together with further developing of the Eurasian Economic Union (EAEU) (The New York Times,2022)
The global recession and pandemic significantly impacted global economies, leading to economic slowdown and disruption in production chains Sanitary restrictions further exacerbated the decline in economic activity, profoundly affecting energy markets The contraction gradually cascaded into most economic sectors, paralleling the repercussions experienced during the 2009 financial crisis, notably impacting Russia's foreign trade.
International trade, however, continues to have a significant impact on Russia’s economic development Despite a relatively low share of net exports (calculated as a difference between exports and imports) in the structure of GDP, this component significantly contributes to the dynamics of gross output Open and non-discriminatory trade, favourable conditions for capital flows and technology, as well as the stability and predictability of the universal rules of international trade lie at the core of the sustainability of Russia’s economic development.
Demographic Factors and National Resources
Demographic Factors
Russia's population growth rate plummeted in the 1990s due to a decline in fertility rates, mirroring trends in Japan and Western Europe Simultaneously, life expectancy fell sharply due to healthcare system deficiencies, poor nutrition, high smoking and alcoholism rates, and environmental pollution.
Declines in life expectancy were more pronounced among men and resulted in a growing gap between the number of men and women in the country Higher rates of natural increase (population growth resulting from more births than deaths) continue among some minority groups, particularly those of Islamic background Until the 1990s migration from the European sector to Siberia was the primary cause of regional variations in population growth rates For example, in the 1980s, when Russia’s population increased by about 7 percent, growth exceeded 15 percent in much of Siberia but was less than 2 percent in parts of western Russia During the 1990s, however, eastern Siberia (at least according to official statistics) suffered a dramatic population decline, a result of substantial outmigrations caused by the phaseout of heavy government subsidies, upon which it was heavily dependent.
The long-declining Russian birth rate has led to a progressive aging of the population In the early 21st century, for example, roughly one-sixth of the population of Russia was below age 15, while the proportion of those age 60 and above topped one-fifth The proportion of children was generally higher, and that of the elderly lower, among the non-Russian ethnic groups, which have maintained a somewhat higher birth rate An aging population and the drop in fertility rates led many demographers to foresee a long-term labour shortage.
National Resources
Russia has enormous energy resources and significant deposits of many different minerals Most, if not all, of the raw materials required by modern industry are found within its borders Its coal reserves are particularly extensive The biggest fields lie in the remote Tunguska and Lena basins of East Siberia and the Far East, but these are largely untapped, and the bulk of output comes from more southerly fields along the Trans- Siberian Railroad About three-fourths of Russia’s coal is produced in Siberia—some two-fifths from the Kuznetsk Basin alone and the remainder from the Kansk-
Achinsk, Cheremkhovo, and South Yakut basins and numerous smaller sources The production of hard (anthracite) coal in European Russia takes place mainly in the eastern Donets Basin and, in the Arctic, in the Pechora Basin around Vorkuta.
Privatization of the coal industry began in the 1990s, and by the early 21st century some three-fifths of overall coal production was coming from privatized mines However, the removal of state subsidies also forced the closure of many unprofitable mines The most severe cuts in coal output occurred in the Central and Ural economic regions and in Rostov province of the North Caucasus region Coal mines in regions with access to large reserves of oil and natural gas fared better.
(Source: Britannica,2020) Fugure 2 Oil Well and Gas pipelines from Russia to Europe
Russia is among the world’s leading producers of , oil extracting about one-fifth of the global total It also is responsible for more than one-fourth of the world’s total natural gas output The great bulk of oil and natural gas comes from the huge fields that underlie the northern part of the West Siberia region Another significant source of reserves is the Volga-Ural zone, and the remainder is derived mainly from the Komi-Ukhta field (North region); the North Caucasus region, once the Soviet Union’s leading producer, is now of little importance Extensive pipeline systems link production sites to all regions of the country, the neighbouring former Soviet republics, and, across the western frontier, numerous European countries.
(Source Britannica,2020) Figure3 Russia: Breakdown of renewable energy by source
There are some 600 large thermal power plants, more than 100 hydroelectric stations, and several nuclear power plants that generate electricity About three-fourths of electricity is generated in thermal stations; some two-thirds of thermal generation is from oil and gas The remaining power output is produced by hydroelectric and nuclear plants Most of the hydroelectricity comes from huge stations on the Volga, Kama, Ob, Yenisey, Angara, and Zeya rivers Nuclear power production expanded rapidly before development was checked by the Chernobyl accident in Ukraine in 1986 Much of Siberia’s electricity output is transmitted to the European region along high-voltage lines.
Russia's iron ore industry is significant, with major deposits in the Kursk Magnetic Anomaly, Kola Peninsula, Urals, and Siberia These regions account for a large portion of Russia's iron ore production Steel production is also widespread in Russia, with substantial steel-producing plants in the Urals, Central Black Earth region, and other economic regions.
Kuznetsk Basin Russia produces about one-sixth of the world’s iron ore and between one-tenth and one-fifth of all nonferrous, rare, and precious metals.
Nonferrous metals are available in great variety from many districts, but by far the most important are those of the Ural region, which is Russia’s main centre of nonferrous metallurgy Russia is a major producer of cobalt, chrome, copper, gold, lead, manganese, nickel, platinum, tungsten, vanadium, and zinc The country produces much of its aluminum from plants powered by the Siberian hydroelectric stations, but bauxite deposits are relatively meagre.
SWOT Analysis of Russia
Russia has a significant military force at its disposal, second only to China and the United
States Russia has nuclear weapons in addition to having the most modern missiles and armaments for its air force and navy The rest of the world would suffer greatly if any of these three nations engaged in war.
High Inflation High inflation has affected the purchasing power of Russians with little savings, and has caused headaches for the authorities in recent months (Reuters,2023)
Western sanctions have the potential to push up the prices of many goods in Russia even higher, especially as the Russian ruble has
Taking advantage of economic streams.
Much of the world's mineral, gas, and oil resources come from Russia The price of these resources is very prone to demand, which is both a strength and a weakness The relations between
Russia and other nations have an impact on demand as well The inhabitants are looking to new industries, particularly the IT business, because the market is so unstable The majority of the globe is embracing new technology, therefore it's a wise choice To sustain this technology, new employment are required, and
Russians are in need of new jobs. lost about 40% of its value since the start of this year, making any goods that are not sold. Russian imports become more expensive for consumers.
The Central Bank of Russia has more than doubled interest rates to 20% and the government has implemented supportive measures.
"The sharp depreciation of the ruble and the imposition of sanctions by other countries on Russia will significantly increase inflation in the country in the coming months (Capital Economic,2022)
Profit from the entertainment value.
One of Russia's numerous assets is its entertainment industry That can turn into an additional source of income for Russians
Particularly in Moscow and St Petersburg, two of the most vibrant cities, tourism may rise
These two places have the potential to gain popularity abroad and develop into desirable tourist destinations for visitors from abroad.
More technology, less fossil fuels.
For Russians, the expanding IT market is of interest High-tech parks are currently available, but that is just the beginning The cost might be
Russia is not infallible, despite having one of the biggest militaries, as indicated in the article's "strengths" section The militaries of China and the United States are larger, but they also possess nuclear weapons These two nations are at odds with one another because they possess greater strength than Russia in many aspects Other nations see Russia as a danger, and if they ever did something dubious, it might not be good for Russia.
Decreased birth rates. prohibitive for the majority of people because the hardware must be imported Nobody knows when or if the Russian government will actually make the necessary investments in the technology If the government does turn its focus to the technological landscape, it will create new prospects and job openings.
The lowest birth rates in more than 20 years have been recorded in Russia In 2016, the birth rate was higher than that of Japan but lower than that of the United States Between Japan and Russia, there is hardly any distinction This hazard currently exhibits no evidence of self-healing.
Russia possesses a number of advantages, including strong military capabilities, resilient citizens, and access to minerals and natural resources that are essential to many regions of the world The government is big and corrupt, and the populace feels they can't be open about their emotions, which are two of their major vulnerabilities.
Despite Russia having the ideal opportunity to expand its technology market, new industries cannot flourish without government support One threat is the over-reliance on the government, but there are others as well, including the dropping birthrate and the tense ties with neighboring nations that influence Russia.
Trade Police and Their Impacts
The Challenges impacted the Russia Trade Policy
Russia saw a substantial halt in economic activity during the shutdown, much like other nations In comparison to the same periods in 2019, Russia's GDP fell by 7.8% in the second quarter of 2020, 3.5% in the third quarter, and 1.8% in the fourth Sectors of the economy driven by demand experienced the most decline Nonetheless, the rate of contraction in fundamental industries was more modest (apart from trade).
Because of a previously established safety margin generated by steady and balanced macroeconomic policies, the Russian economy has been able to adapt to foreign shocks The effects of the epidemic have been lessened by actions such enacting a fiscal rule, keeping inflation at the desired level, fostering banking sector stability, and limiting reliance on outside sources The current account surplus decreased in 2020 as a result of lower exports and oil prices, however this was somewhat offset by lower imports By sales of foreign currency in accordance with the budget norm, the Bank of Russia has kept the domestic foreign exchange market in balance The economic recovery has been facilitated by measures taken by the government and the Bank of Russia, including transitioning to a soft monetary policy
In response to the COVID-19 pandemic, the Russian Government and Eurasian Economic Commission implemented policies to mitigate its impact Among these measures was the introduction of a duty-free system for importing components and materials essential for producing pharmaceuticals, disinfectants, medicines, medical equipment, and personal protective equipment This initiative aimed to facilitate the supply of critical items to combat the pandemic.
2020 Moreover, some products are not subject to value-added tax And in order to maintain an uninterrupted and stable supply level of mass-produced goods The Russian Federation adopted a number of suggestions about conformity assessment for applicants and product certification organizations for the time period of 15 March - 31 December
1.2 Rising Global Protectionism and Discrimination
Russia faces challenges in its economic development due to protectionist pressures Despite its potential, the country must address bilateral and global obstacles to fully realize its international economic presence.
As a result of the surplus global steel production capacity, Russia, one of the top manufacturers of steel, continues to have significant issues Even before the pandemic in
2020, steel consumption fell by 1.7%, despite significant progress being made in decreasing the global overcapacity during the Global Overcapacity Forum in 2016–2019 Capacity growth has now restarted The OECD predicts that the long-term demand for steel will be equivalent to 1% a year At the same time, imports of steel goods are nevertheless subject to growing limitations.
Individual economies have continued to impose sanctions on Russia in the framework of the bilateral relationship A significant problem is the politization of international commerce and economic interactions The replacement of WTO principles with other
"rules," together with unfair competition tactics, protectionist policies, trade wars, and unilateral penalties, have all impeded the inclusive expansion of the global economy All of this has caused the global economic climate to become more fragmented and badly impacted socio-economic growth Some of these actions have forced the disruption of well-established supply and manufacturing networks, necessitating the creation of import substitution strategies based on indigenous supply.
1.3 Russa Trade Boomed after Invading with Ukraine
Countries vowed to sever economic ties with Russia and imposed sanctions that were intended to cripple its economy after it invaded Ukraine But as one of the world’s most important producers of oil, gas and raw materials, Russia has had longstanding and lucrative trade partnerships Breaking those ties is not easy.
In 2020, Russia imported $220 billion of products from the rest of the world, including cars and car parts, medicine and computers, buying heavily from China, Germany, Korea and elsewhere.
(Source: The New York Times, 2022)
Figure 4 The imports of Russia before Invasion
Figure 5 The Imports of Russia after Invasion
The volume of its imports has since plunged as sanctions and trade limits went into effect, according to a New York Times analysis of trade data But a few countries, including China and Turkey, have deepened their relationships with Russia since the war began.
Many countries have found living without Russian raw materials incredibly difficult.More than two-thirds of Russia’s exports by value before the war were oil, gas and key metals and minerals, which help to power cars, warm homes and supply factories all over the globe.
(Source: The New York Times, 2022)
Figure 6 The Exports of Russia before Invasion
That has led to a frustrating reality for Western officials who had hoped to undercut Russia’s war effort by punishing its economy: The value of its exports actually grew after it invaded Ukraine, The Times analysis shows, even in many countries that have taken an active role in opposing Russia.
(Source: The New York Times, 2022)
Fugure 7 The Exports of Russia after Invasion
Russia’s relationship with the world is continuing to evolve rapidly To assess the global shifts, The Times analyzed years of country-level trade data compiled by the Observatory of Economic Complexity, an online data platform Because the data is published with a lag, the picture it provides is inherently backward looking Russia’s ability to trade with the rest of the world could be further curtailed in the coming months as the West introduces new restrictions.
But so far, the data underscores how deeply intertwined Russia is with the global economy, allowing Moscow to generate substantial sums of money as it enters its ninth month of war Attempts by Western nations to use sanctions and other measures to cripple Russia’s economy have so far had limited effects.
“It’s very difficult to live without Russian resources,” said Sergey Aleksashenko, the former deputy finance minister of Russia and deputy chairman of its central bank “There is no substitute.”
As it drags on, the war, and the world’s response to it, are bringing about a remarkable change in international trade flows Food is in short supply in many countries that rely on wheat and other staples grown outside their borders Prices for fuel and other products have risen at a time of record inflation And Russia’s long-standing economic ties with Europe are gradually being unknotted, and new alliances are forming as goods are rerouted to other countries, the data shows.
Liberalization and Facilitation of Trade in Goods
As part of its WTO accession, Russia agreed to bind all 11,170 tariff lines in its tariff schedule and as of January 1, 2020, Russia had implemented all of those bindings. Further, Russia has completed the process of joining the ITA, eliminating its tariffs on computers, semiconductors, and other information technology products consistent with its ITA obligations As a result, Russia’s simple average final bound rate for all goods is approximately 7.6 percent; 7.1 percent for industrial goods and 10.8 percent for agricultural goods Russia’s simple average applied tariff rate for all goods is approximately 6.6 percent, 6.1 percent for industrial goods and 9.7 percent for agricultural goods Russia cannot legally apply EAEU CET tariffs above its WTO bound tariff rates It should be noted, however, that although Russia had lowered its tariff rates, it continues to enact numerous trade barriers and import bans that prevent the United States from accessing a large share of the Russian market
Ten years after accession, the vast majority of Russia’s MFN applied rates are lower than their final bound rates.11 For agricultural goods, over 47 percent of Russia’s final bound tariff rates are equal to or less than 5 percent, whereas over 50 percent of Russia’s MFN applied rates on agricultural products are 5 percent or less, accounting for over 50 percent of agricultural imports With regard to industrial goods, nearly 55 percent of Russia’s final bound tariff rates are equal to or less than 5 percent, whereas nearly 60 percent of Russia’s MFN applied rates are equal to or less than 5 percent, accounting for over 67 percent of industrial imports
U.S total goods imports from Russia for the first seven months of 2022 (January-July) declined 32 percent to $11.6 billion Imports of mineral fuels from Russia remained the largest category, accounting for approximately 43 percent of total imports (compared to
60 percent in first seven months of 2021), but declined 50 percent from the first seven months of 2021; the next largest category of imports (accounting for approximately 10 percent) was precious stones and metals (especially platinum) and declined more than 37 percent U.S goods exports to Russia rose slightly in 2021 to $6.4 billion, following a general decline since 2013 ($11.1 billion) In the first seven months of 2022, however, U.S goods exports to Russia decreased 65 percent to $1.3 billion.12 These sharp declines in both imports and exports are likely due to the imposition of sanctions and export controls by the United States
Despite meeting scheduled tariff bindings outlined by the World Trade Organization (WTO), concerns remain regarding Russia's compliance with its Most-Favored-Nation (MFN) obligations Specifically, Russia has not clarified whether the ad valorem equivalent of specific duties imposed on certain goods falls within the WTO's ad valorem bound duty rate This lack of clarity raises concerns about the potential implications for trade and the adherence to international commitments.
Of greatest concern, however, was Russia’s decision in July 2018 to adopt tariffs ranging from 25 percent to 40 percent on various industrial products imported from the United States, in retaliation against the U.S decision to adjust U.S imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of 1962, as amended. The United States has, over the years, urged Russia to work with the United States to address the common problem of excess capacity in the global steel and aluminum sectors, rather than engage in unjustified retaliation designed to punish American workers and companies The United States will take all necessary actions to protect U.S interests in the face of such retaliation In this regard, on August 27, 2018, the United States launched dispute settlement proceedings against Russia at the WTO Following unsuccessful consultations in November 2018, a WTO dispute panel was established on December 18,
2018 and composed on January 25, 2019 Following a delay due to the COVID-19 pandemic, the panel expects to issue its final report “no earlier than the last quarter of 2022.”
Upon becoming a WTO Member, Russia agreed to comply with Article VIII of the GATT
1994, which requires that fees and charges imposed on or in connection with importation(other than tariffs) be limited to the approximate cost of the service provided Russia amended its system of customs clearance fees to reduce those fees and establish fixed minimum and maximum fees for customs clearance of goods using electronic format or other simplified procedures for filing customs declarations Russia’s implementation of these commitments is currently reflected in Article 47 of the EAEU Customs Code, which limits the amount of customs fees to the approximate cost of the service rendered. U.S officials are not currently aware of any areas of concern with respect to Russia’s implementation of these commitments since becoming a WTO Member.
The WTO Agreement on Implementation of Article VII of the GATT 1994 (“Customs Valuation Agreement” or CVA) is designed to ensure that determinations of the customs value for the application of duty rates to imported goods are conducted in a neutral and uniform manner, precluding the use of arbitrary or fictitious customs values Adherence to the CVA is an 9 important issue for U.S exporters, particularly to ensure that market access opportunities provided through tariff reductions are not negated by unwarranted and unreasonable increases in the customs value of goods to which tariffs are applied. Russia agreed to implement its obligations under the CVA, including the interpretative notes, upon accession to the WTO, without any transition period In addition, Russia took a specific commitment in the WPR, inter alia, not to use reference prices or fixed valuation schedules as a means for determining customs value and to provide for the right to appeal decisions that were based on a minimum value, fixed valuation schedule, or reference price rather than on the CVA principles and methods incorporated into Russian law.
Russia and its EAEU partners have integrated the CVA’s basic provisions into the EAEU legal framework Specifically, the hierarchy of the six methods of customs valuation in the CVA, as well as most, but not all, of the provisions of the interpretative notes, are reflected in Russia’s domestic law and implemented by reference in the EAEU CustomsCode However, U.S stakeholders report that Russia continues to lack clear regulations governing customs valuation, creating uncertainty and additional paperwork In response to these concerns, the United States has raised questions in the WTO Committee on Customs Valuation and will, as appropriate, continue to seek clarification as to where in Russia’s, or the EAEU’s, legislation certain commitments of the CVA can be found The United States will continue to meet with and solicit information from U.S stakeholders concerning Russia’s valuation practices and will work, as appropriate, with Russia’s Federal Customs Service (FCS) to ensure full implementation of Russia’s commitments on customs valuation.
The Trade Facilitation Agreement (TFA) entered into force February 22, 2017 The TFA builds on earlier related provisions in the GATT and further expedites the movement, release, and clearance of goods, including goods in transit It is the first WTO agreement in which WTO Members can determine their own implementation schedules and in which progress in implementation is linked explicitly to capacity Developed countries, including Russia,committed to implement the TFA immediately upon its entry into force. Russia ratified the TFA on April 22, 2016, and has implemented its commitments
In 2019, Russia began to implement pilot programs in selected industry sectors of a mandatory labeling system (the labeling regime) that requires the application of an encrypted label to products in an ever-widening list of industry sectors Data on the progress of a product through the chain of commerce are provided to a public-privateRussian company, the Center for the Development of Advanced Technologies (CRPT),allowing it to monitor/track goods through Russia’s entire distribution chain (i.e., from production/import to the final retail customer) In 2021, the Russian government continued to expand the universe of products covered by the labeling regime, even as it postponed implementation deadlines for some products (with longer deadlines sometimes granted to domestic products than to imported products); in 2022, the Russian government suspended application of the regime for some products Stakeholders have reported that customs clearance of products subject to the mandatory labeling requirement is more complex and time-consuming; moreover, the mandatory labeling requirement diminishes the flexibility and benefits Russia had offered under its Authorized Economic Operator Status These additional steps and costs impose particular burdens on small and medium-sized enterprises
Even though Russia has suspended the application of the track and trace system for some products in 2022, the United States remains concerned that implementation of the regime creates additional burdens at the border, contrary to the goals of the TFA The United States will continue to monitor the impact of the regime on U.S exports, and, as appropriate, raise concerns with Russia
As part of its WTO accession, Russia pledged to reduce or eliminate export duties on numerous products, including ferrous scrap and copper cathode It committed to bound tariff levels on remaining export-tariffed products and adhere to GATT 1994 Article XI, which generally prohibits WTO members from maintaining export restrictions (aside from duties, taxes, and similar charges) except when justified under specific WTO provisions In line with this commitment, Russia lifted its 2010 grain export ban and affirmed that any export restraints imposed to secure essential materials for domestic producers would not enhance exports or protect the respective processing industry.
Prior to WTO accession, Russia amended its national regulations to replace the export licensing regime for precious stones, diamonds, and metals with an automatic licensing regime in order to reduce the number of goods subject to export licensing and to remove export bans and other quantitative restrictions on the export of certain types of goods In addition, Russia eliminated restrictions on the export of raw materials for pharmaceuticals and reduced the number of pharmaceuticals subject to export licensing.Also, consistent with the commitments on ferrous scrap and copper cathode described in the WPR, Russia reduced its export duties on those products as provided in its tariff schedule (but has since raised some export duties, as discussed below.)
In 2022, Russia implemented restrictive export policies, reversing its previous liberalization efforts These restrictions target a range of products, including over 200 industrial items (technology, communication, medical equipment, vehicles, agricultural machinery, electrical equipment) and agricultural commodities (sunflower seeds, soybeans, white sugar, rice, rapeseed, millet, buckwheat, flour, barley, rye, corn, onions, garlic, turnips, sunflower oil, fish products) Non-agricultural products, such as specific types of lumber, ferrous waste and scrap, and tungsten waste and scrap, are also affected by these restrictions.
Promoting Trade and Investment
Russia's economy is heavily dependent on the oil industry, which also contributes significantly to export revenue The government controls this industry through a number of laws, including license restrictions, export tariffs, and tax incentives The policy's main goals are to expand output, increase exports, and guarantee the security of energy supply. With investments in infrastructure and technology, Russia has taken steps to increase the effectiveness of its oil and gas industry.(Frue, 2019).
The government has recently focused on the agriculture industry in Russia To increase local production and lessen the nation's reliance on food imports, the government has implemented new regulations Increasing agricultural exports, enhancing food security, and promoting rural development are some of the goals of the strategy To increase agricultural production, the government invests in R&D, gives tax incentives to agribusinesses, and provides subsidies to farmers Notwithstanding these initiatives, the industry still confronts formidable obstacles including low productivity, poor infrastructure, and restricted access to financing.(Frue, 2019).
Russia's tech industry has flourished due to government investments in R&D, with the aim of enhancing the nation's technological capabilities, creating high-paying jobs, and promoting exports The government has implemented measures such as infrastructure development, innovation hubs, and tax incentives to support the sector's growth Despite these efforts, the industry faces challenges including limited financing, talent loss, and insufficient infrastructure.
Figure 8 Trade in services (% of GDP) - Russian Federation
In 2020, Russia's services trade contributed significantly to its economy, accounting for approximately 7.6% of its GDP, as estimated by the World Bank and the IMF However, in the global context, Russia holds a modest share of worldwide merchandise exports, representing only 1.9% of the total in 2020, as reported by Statista.
It's crucial to remember nevertheless that recent political changes have had an impact on Russia's trading environment Russian exporters' opinions of the Russian market have changed as a result of Russia's full-scale invasion of Ukraine in February 2022.(Trade, 2022) While exporting to Russia, the United States encounters a number of tariffs and non-tariff trade obstacles, and the state regulates international commerce through customs and tariff agencies (Administration, 2021).
Russia continues to develop the integration in the Eurasian region and is a member of the Eurasian Economic Union (EEU) (Vasiliev, 2021) Moreover, it has been attempting to raise the standard and competitiveness of its exports, take part in the creation of global trade regulations, and enhance its reputation as a full-fledged player in global commerce.
Regarding current commercial ties, there has been an increase in Russia's trade with China, with a 25.9% growth in the first two months of 2023 (Briefing, 2023).
The Negotiations between Russia and Others
Russia applied to join the General Agreement on Tariffs and Trade 1947 (GATT 1947) in
1993 and finally became a member of the World Trade Organization (WTO) on August
Amidst participation in the WTO, Russia has exhibited a lack of commitment to market-oriented trade and economic reform Following the 2022 invasion of Ukraine, Russia's WTO interventions have been confrontational, leading to the US suspending engagement and coordinating with members to isolate Russia economically Prior to the conflict, Russia's trade profile featured notable imports and exports.
In the USTR (United States Trade Representative) report in 2021, there are still some trade issues that the United States is concerned about regarding Russia This includes Russia imposing tariffs on some industrial products imported from the United States and a lack of clear customs valuation regulations Additionally, Russia has applied some trade protection measures to limit the import of agricultural and food products from abroad However, these regulations are being discussed at the WTO and are managed by the WTO working group on trade policy in the agricultural sector.
According to the WTO's Trade and Development Committee (T&D) report, Russia has fulfilled some of its export commitments after joining the organization, including reducing export limits on timber and providing information related to exports
However, Russia still limits its export activities for certain products, including fruits and vegetables, while imposing trade defense measures such as import bans or restrictions on many of its export items that have caused controversy and may violate WTO regulations
In addition, Russia has also imposed some trade defense measures to mitigate the impact of other trade defense measures, but this has also caused controversy and may violate WTO regulations.
Russia is the largest economy in the EAEU and is the driving force behind the organization As such, it has the strongest economic ties with the other member states In terms of imports and exports, Russia is a major trading partner for all other EAEU member states.
Over 80% of the EAEU's internal trade involves Russia As such, Russia's chairmanship of the EAEU in 2023 will be an important opportunity for the country to shape the organization's agenda and priorities (Russia Briefing, 2023)
In response to economic sanctions imposed by the West, Russia has prioritized enhancing its economic ties with partners within the Eurasian Economic Union (EAEU) This strategy has prompted Russia to establish more ambitious goals for the EAEU, including fostering a shared digital economy and establishing a unified energy market.
Figure 9 The chart shows the percentage of trading partners of Russia 2022
China is the main trade partner of Russia topping the charts with 14.6% The trade relationship between China and Russia is growing, with Russia providing strategic exports such as energy, metals, and fertilizer to China China is increasingly turning toRussia for crude oil, natural gas, and coal, and could become a more important customer for Russian wheat and fertilizer in the face of shortages After Russia's 2022 invasion ofUkraine, China lifted import restrictions on Russian wheat, which could deepen bilateral ties further However, disruptions in Ukraine's agricultural sector could impact China's access to key agricultural products and China is seeking alternative suppliers to diversify away from U.S exports China's significant buying power could potentially crowd out other countries seeking scarce food and energy resources
Figure 10 Russia as Share of China’s Imports
The Future Outlook of Russia
The extent of "Russia's coming economic recession" depends on three factors: whether there is a global crisis, whether the US and the West will escalate sanctions on Russia, and whether the government will Whether the Russian government's economic policy shifts from "stable" to "stimulating".
Despite US and Western sanctions, Russia's economy has stabilized, though uncertainty remains While initial sanctions negatively impacted the economy, Russia has leveraged export activity, particularly in oil and gas and defense, to offset their impact, resulting in a stable economy However, concerns regarding the potential depletion of these resources persist, contributing to the ongoing uncertainty surrounding Russia's economic future.
Economists from the Institute of Economic Forecasts of the Russian Academy of Sciences have explained the reason for the "unexpected economic performance" in 2022(The New York Times,2022) It is because a number of developing countries have become competitors Russia's more reliable commercial partner, filling the market in areas such as agriculture, pharmaceuticals, military industry, fuel and energy complexes after the West withdrew, thereby degrading reduce the damage caused by sanctions to the Russian economy.
The possibility of a slowdown in global economic growth, including in Europe and the
US, will increase; The decline in demand will expose Russia's energy and raw materials exports to the risk of falling output and prices.
On December 5, 2022, the European Union (EU) order to impose a ceiling price on crude oil exported by sea from Russia took effect (The New York Time,2022) Accordingly, if oil prices exceed 60 USD/barrel, EU countries will ban relevant entities from providing insurance, financial and other services to Russian oil transportation.
At about the same time, the Russian ruble fell sharply against major currencies, from 61 rubles to 1 USD on November 30, 2022 to 72 rubles to 1 USD, a rate of 18% devaluation (Worldbank,2022) The reason is largely due to the fear that the sanctions of the US and
Western countries on Russian crude oil and the ceiling price will affect the country's oil export revenue in the future.
In the case of North Sea Brent crude oil priced at about 80 USD/barrel, Russia's Ural oil price is now close to 50 USD/barrel As an important pillar of the Russian economy, more than half of Russia's total income comes from oil and gas, so the Russian economy in
2023 will still be under pressure due to sanctions.
Russia's macroeconomic outlook is not only affected by external sanctions, but also has a lot to do with the direction of its economic policy The Russian government has not been able to play an important role in stimulating economic growth, because the focus of budget spending is shifting from socio-economic to national security Although this policy can avoid the risk of socio-economic instability, it will be difficult to create an impetus for growth.