International economic relations of Russia

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Transcript International economic relations of Russia

International economic relations
of Russia
Svetlana Ledyaeva
Learning outcomes
International economic relations of Soviet Union
Recent developments in Russia`s foreign trade
Foreign invetsment in and out of Russia
Russia and international organizations
History: Soviet Union. Comecon (3)
Comecon: Council for Mutual Economic Assistance.
Comecon’s members were the Soviet Union, Bulgaria, Czechoslovakia,
Hungary, Poland, Romania, Albania, Eastern Germany, Mongolia, Yugoslavia,
Cuba, Vietnam.
Comecon was formed under the aegis/headship of the Soviet Union in 1949 in
response to the formation of the Committee of European Economic
Cooperation in Western Europe in 1948.
Between 1949 and 1953 Comecon’s activities were restricted chiefly to the
registration of bilateral trade and credit agreements among member countries.
After 1953 the Soviet Union and Comecon began to promote industrial
specialization among the member countries.
Comecon’s successes (4)
The organization of Eastern Europe’s railroad grid and of its electricpower grid.
The creation of the International Bank for Economic
Cooperation (1963) to finance investment projects jointly
undertaken by two or more members.
The construction of the “Friendship” oil pipeline, which made oil
from the Soviet Union’s Volga region available to the countries of
Eastern Europe.
Aid to Third World: 85% to Cuba, Mongolia and Vietnam.
Comecon`s end (5)
In 1991, Comecon was renamed into the Organization for International
Economic Cooperation.
Each nation was deemed free to seek its own trade outlets.
Members were reduced to a weak pledge to “coordinate” policies on
quotas, tariffs, international payments, and relations with other
international bodies.
International trade of Russia
***
History: Soviet Union trade (7)
Trade has traditionally played only a minor role in the Soviet economy.
In 1985 exports and imports each accounted for only 4 percent of the
Soviet gross national product.
2013: exp/GDP=28%; imp/GDP=22.5%
The Soviet Union conducted the bulk of its foreign economic activities
with communist countries, particularly those of Eastern Europe.
In 1988 Soviet trade with socialist countries amounted to 62 percent of
total Soviet foreign trade.
History: Soviet Union trade (8)
The manner in which the Soviet Union transacted trade varied
from one trade partner to another.
Soviet trade with the West, except Finland, and most Third World
countries was conducted with hard currency (freely convertible).
Barter, counter trade, industrial cooperation, or bilateral clearing
agreements were much preferred: Finland, members of Comecon,
China, Yugoslavia, and a number of Third World countries.
Export and import dynamics in Russia,
1996-2015, billion USD (9)
600.0
500.0
400.0
Russian export, billion USD
300.0
Russian import, billion USD
200.0
100.0
0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Export structure by country, 20082012, % (10)
13%
21%
7%
1%
1%
1%
1%
7%
2%
2%
6%
3%
5%
3%
5%
3%
3%
3%
4%
3%
5%
Netherlands
Italy
Germany
China
Ukraine
Turkey
Belorussia
Poland
UK
USA
Finland
Kazakhstan
Japan
France
South Korea
Switzerland
Hungary
India
Czech Republic
Belgium
Others
Export structure by country, 2014, %
(11)
Netherlands
China
13.4
Italy
Germany
Japan
34.2
7.5
Rep. of Korea
Belarus
Poland
5.8
Turkey
Kazakhstan
Latvia
5.0
Ukraine
Finland
4.0
1.0
1.1
1.5
3.6
1.9
1.9
2.1
3.3
2.3
2.5
2.8
3.0
3.2
USA
Belgium
United Kingdom
Singapore
Hungary
Other
Export structure by country 2015,%
(12)
11.7
8.2
34.5
4.7
4.6
4.2
0.8
0.9
0.9
1.3
3.8
3.6
1.3
1.8
1.9 1.9 2.1
2.4 2.8 3.0
3.4
Netherlands
China
Italy
Germany
Japan
Rep. of Korea
Belarus
Turkey
Kazakhstan
Poland
USA
Ukraine
Latvia
Finland
Belgium
India
United Kingdom
Egypt
France
Spain
Others
Import structure by country, 20082012, % (13)
15%
24%
12%
1%
2%
2%
2%
6%
2%
2%
2%
2%
5%
China
Germany
Ukraine
Japan
Italy
France
Belorussia
USA
Thailand
Poland
UK
Kazakhstan
Finland
Netherlands
Singapore
South Korea
Brazil
Switzerland
Spain
Others
4%
2%
2%
4%
3% 3%
4%
Import structure by country, 2014, %
(14)
15.40
0.96
1.00
1.13
17.74
Germany
USA
Italy
Belarus
Japan
Ukraine
France
Rep. of Korea
United Kingdom
Kazakhstan
Poland
Turkey
Netherlands
Czech Rep.
Finland
Spain
Brazil
Belgium
Austria
Switzerland
Sweden
India
Slovakia
Hungary
Others
1.11
1.14
1.25
China
1.18
11.49
1.38
1.51
1.59
1.71
1.84
2.32
6.49
2.47
2.50
4.42
2.71
4.30
3.13
3.68
3.74
3.81
Import structure by country 2015, %
(15)
China
Germany
USA
Belarus
19.26
Italy
24.48
Japan
Ukraine
France
Rep. of Korea
1.12
1.32
10.39
1.24
Kazakhstan
Turkey
Poland
1.47
1.50
1.60
1.60
2.02
2.10
2.23
United Kingdom
6.29
Brazil
Netherlands
Spain
4.37
4.34
2.34
2.48
3.04 3.09 3.73
Czechia
Finland
India
Viet Nam
Others
Industrial structure of export, 20092014 (16)
0.9
0.3
0.2
Mineral fuels, lubricants and related materials
3.2
2.3
3.4
Manufactured goods classified chiefly by material
4.4
Commodities and transactions not classified
elsewhere in the SITC
6.5
Chemicals and related products, n.e.s.
Machinery and transport equipment
Crude materials, inedible, except fuels
10.7
Food and live animals
68.1
Miscellaneous manufactured articles
Animal and vegetable oils, fats and waxes
Beverages and tobacco
Industrial structure of import, 20092014, % (17)
1.5 1.3
0.6
2.7
Machinery and transport equipment
4.0
Chemicals and related products, n.e.s.
11.0
Manufactured goods classified chiefly by material
Miscellaneous manufactured articles
42.9
Food and live animals
Commodities and transactions not classified
elsewhere in the SITC
11.3
Crude materials, inedible, except fuels
Beverages and tobacco
Mineral fuels, lubricants and related materials
12.3
Animal and vegetable oils, fats and waxes
12.5
Share in the world export, %, 2015, top
20 countries (18)
16.00
14.80
14.00
12.00
10.00
9.75
8.62
8.00
6.00
4.05
4.00
2.00
0.00
3.42 3.31 3.20 3.06 3.02
2.97 2.65 2.58
2.47 2.25 2.23
1.89 1.82 1.80 1.71
1.37
Russian Federation
Poland
Australia
Thailand
Turkey
Other Asia, nes
Switzerland
Singapore
Spain
Belgium
India
Mexico
Italy
Netherlands
2.0
Canada
4.1 4.0 3.6 3.6
Rep. of Korea
China, Hong Kong SAR
France
4.0
Japan
6.0
United Kingdom
8.0
Germany
12.0
China
16.0
USA
Share in the world import, %, 2015,
top 23 countries (19)
14.9
14.0
10.9
10.0
6.8
2.8 2.7 2.7 2.6 2.6 2.5 2.4
2.0 1.9 1.6 1.5 1.3 1.3 1.3
1.2 1.2
0.0
Russia in the world trade by sector
(20)
800.00
688.18
700.00
600.00
500.00
400.00
300.00
469.96
382.91
200.00
Russian Federation
Export of services, billion USD, 2014
823.2
1000.0
0.00
China
2046.1
1500.0
62.54
100.00
2500.0
2000.0
119.18
210.59
Export of manufacturing sector, billion
USD, 2015
USA
Import of services, billion USD, 2014
67.7
500.0
0.0
China
Export of mineral fuels, lubricants and related
materials, billion USD, 2015
300.00
200.00
100.00
0.00
216.10
106.01
27.94
China
Russian
Federation
USA
Russia
USA
Map of world dominance relations (21)
http://www.economicswebinstitute.org/essays/tradehierarchy.htm Valentino Piana (2004)
World dominance relations (22)
Russia is dominant for: Bulgaria, Finland, Poland.
B (Russia) is very important to countries X, but the reverse is not
true.
Russia is dominated by: China, Germany and
USA.
Countries X are very important to B (Russia) and can afford to
ignore it.
Trade between Russia and EU
(Benkovskis et al. 2014) (23)
Russia is the EU's fourth most important trading partner
(excluding intra-EU trade).
The EU represents the most important export destination for
Russian goods.
Intra-EU trade included, Russia accounted for 2.5% of the total
exports of the EU27 countries in 2011 which amounted to
0.8% of the EU27 GDP.
For which countries Russia is the most important
export destination?
(Benkovskis et al. 2014) (24)
% of export to GDP: 0.8% for EU27.
Top 3 – Baltic states: Lithuania - 11% of GDP; Latvia
and Estonia - 8%.
From 2% to 3%: Slovakia, Finland, Slovenia,
Hungary, the Czech Republic and Poland.
For which EU countries import from
Russia is important? (25)
(Benkovskis et al. 2014)
Import to EU from Russia: 1.5% of EU GDP in 2011.
Again, some Member States posted much higher figures: Lithuania (23.6%
of GDP), Bulgaria (10.7%), Slovakia (9.0%), Estonia (7.7%), Hungary (6.4%)
and Finland (5.9%).
On the import side, the importance of Russia for the EU Member States is
very much concentrated in the raw material sectors.
However, for the following eight EU Member States, Russia's importance
as a destination for their exports exceeds its importance as a source of
imports: Austria, Denmark, Estonia, Ireland, Latvia, Luxembourg and
Slovenia.
Trade between Russia and EU (26)
EU imports: Russia is N1: Fuels and mining
products; Fuels; Petroleum and petroleum
products; other fuels; non ferrous metals; iron and
steel; N3: Raw materials.
EU exports: Russia is N2: Agricultural products;
Food; Office and telecommunication equipment;
Clothing; N3: Fish; Chemicals; Machinery and
transport equipment; personal and household
goods.
Indirect trade linkages between Russia
and EU (27)
The role of one country's inputs in another country's output  value added in export.
Dependence of EU on Russia`s value added:
Lithuania shows the highest dependence on Russia's value added (6.8% of the final domestic
demand). It is followed by Bulgaria, Hungary, Finland and Latvia. Average EU27 – 1.1%.
Industries (top 3): 1) coke, refine petroleum and nuclear fuel; 2) electricity, gas and water supply;
3) air transport.
Dependence of Russia on EU value added:
The EU's value added is considerably more important in Russia's final domestic use than vice
versa. However! The Baltic States being notably more dependent on Russia's value added than
vice versa. Average EU27 – 8%.
Germany is the most important EU27 counterpart for Russia's final users: 2.3%. It is followed by
Italy, France, the UK and Poland.
Industries (top 3): 1) Transport equipment; 2) Rubber and plastic; 3) Machinery.
Trade between Russia and EU: General
conclusions (28)
EU is more dependent on import from Russia than on export to Russia.
The importance of Russia as a trading partner differs greatly across individual EU
Member States. Also strong differences between individual industries. 
The importance of Russia for the EU is highly concentrated both geographically
and sectorally.
The Russian economy emerges as being more dependent on the EU's value added
than vice versa:
value added content of export: the share of the EU in Russia's final domestic use:
8%; of Russia in EU – only 1.1%.
Taking into account the full extent of intermediate linkages, both Russia and the
EU would suffer to some extent from potential trade disruptions.
Trade intensity index with Russia in
selected countries (29)
Whether the value of trade between two
countries is greater or smaller than would be
expected on the basis of their importance in
world trade. Above one – greater; below one smaller
70.0
62.8
60.0
50.0
40.0
30.0
26.5
20.6
20.0
10.0
0.0
23.0
14.3
12.0
10.2
10.0
9.2 6.4
6.6 5.2
6.1
4.2
4.0 3.8
1.91.21.2 1.80.8 2.20.4
1.8
0.40.4
2000-2002
2011-2013
Foreign investment in Russia
***
History: Foreign Investment of Soviet
Union (31)
From the late 1920s to the late 1980s, the Soviet government
prohibited foreign investment because it would have
undermined the state's decision-making prerogatives on
investment, production, and consumption.
In the light of “perestroika” economic reforms in the late 1980s
limited foreign investment has been permitted in the form of
joint ventures in the Soviet Union.
In 1991 Foreign Investment Law permitted foreign investment in
most sectors and in all the forms available in the Russian
economy.
Motivation for Foreign Direct
Investment into Russia (32)
• Huge natural resources
• Vast market potential
• Low production costs (cheaper labor costs,
e.g.)
When weighing risks vs opportunities to enter the
Russian market, what risks should top the list? (33)
Grayling’s first annual Foreign Investment Survey, 2013: 42 CEOs of large
international companies operating in Russia.
5
Unpredictable regulatory
changes
14
50
31
Increased and sometimes unfair
competition from Russian
industry champions
Corruption
Political risks: changes in the
government/political
environment
Restrictions on foreign ownership (34)
--In April 2008, the Russian parliament passed a law on the "Procedure
for Foreign Investments in Companies of Strategic Significance for the
Defence and Security of the State“.
--Restricts investments by foreign investors in companies that are
deemed to be strategic:
Forty-two sectors of the Russian economy, including oil, natural gas,
nuclear energy, natural monopolies, strategic mineral, aviation, space,
fishing, media, arms production and other defence-related industries.
--Foreign investors need a permission for controlling stake in
companies operating in these sectors (from a committee led by the
prime minister).
Ernst & Young’s attractiveness survey,
Russia 2013 (35)
--Jobs created by FDI projects increased by 60% in 2013, indicating a large
increase in average project size.
-- Manufacturing generated by far the most FDI projects (47%) and jobs (98%).
-- The automotive sector received the most FDI projects, and also accounted for
the largest share of jobs created by FDI.
--Companies from the US, Germany and France were the top investors in Russia in
2013.
--While Moscow and St. Petersburg attracted the largest number of FDI projects,
Kaluga and Nizhny Novgorod are also emerging as major investment sites.
Ernst & Young’s attractiveness survey,
Russia 2013 (36)
--In the past decade, the average ROE (return on equity) of
companies working in Russia was 20.7%. It outpace the growth
rate in developed markets, but it is also 1.5 to 2 times more than
the other BRICS countries (China: 14.3%, India: 12.7%) and
Mexico (10.3%).
--Russia is the sixth most attractive region for investment in the
world, in particular, 20% of the respondents named is as the
most attractive destination in the world (after China (43%),
Western Europe (37%), North America (29%), CEE (28%), Brazil
(26%)).
Ernst & Young’s attractiveness survey,
Russia 2013 (37)
--Investors consider China to be Russia’s chief competitor for FDI
attractiveness.
--China advantages over Russia: population size, business
environment and its enduring image as a low-cost production base.
--Russia’s strength lies in its higher purchasing power and welleducated population.
--Sergei Belyakov, Deputy Minister of Economic Development of the
Russian Federation: “Russia`s other advantage is its lucrative
geopolitical and geographic position. This is beneficial for deploying
production facilities that focus not only on the domestic market,
but also on Europe and Asia.”
Inward foreign investment dynamics
by type, million USD, Rosstat data (38)
250000
200000
150000
Foreign investment, total
Direct investment
Portfolio investment
Other investment
100000
50000
0
2000
2005
2007
2008
2009
2010
2011
2012
2013
Foreign direct investment, net inflows
into Russia (BoP, billion current US$),
World Bank Data (39)
80.00
74.78
70.00
69.22
60.00
55.87
55.08
50.59
50.00
43.17
40.00
37.59
36.58
30.00
22.03
15.51
20.00
15.40
10.00
0.00
7.93
2.58
1.16 1.21 0.69 2.07
1992
1993
1994
1995
1996
4.86
1997
6.48
2.76 3.31 2.68 2.85 3.47
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Inward FDI in Russia by source country
(40)
Inward FDI, %, 2014
Inward FDI, %, 2012
Cyprus
Netherlands
Cyprus
34
34
Netherlands
Bahamas
Brit Virgin
Islands
Bermuda
Bermuda
Germany
4
5
8
15
30
35
Others
6
12
6
10
Luxembourg
Others
Outward FDI in Russia by source
country (41)
Outward FDI, %, 2014
25
31
Outward FDI, %, 2012
Cyprus
Cyprus
Brit Virgin
Islands
Netherlands
Netherlands
30
37
Austria
5
12
14
12
Switzerland
3
Switzerland
Others
Brit Virgin
Islands
3
11
16
United
States
Others
Industrial structure of FDI stock in
Russia, 2012 (42)
FDI stock share
3
18
3
16
14
3
5
6
9
13
10
Real estate operations, lease and services provision
Extraction of resources
Financial activities
Wholesale and retail trade; repair of vehicles, motorcycles, household goods and personal items
Metallurgical production and finished metal products manufacturing
Food manufacturing including beverages and tobacco
Construction
Electricity, gas and water manufacturing and distribution
Transport
Transport vehicles and equipment manufacturing
Other
Inward FDI in selected countries,
million USD (44)
80000
70000
60000
50000
40000
30000
20000
10000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-10000
Belarus
Czech Republic
Estonia
Lithuania
Latvia
Moldova
Poland
Romania
Russian Federation
Serbia
Slovak Republic
Slovenia
Ukraine
2012
2013
2014
FDI per capita in selected countries, USD (45)
3000
2500
2000
1500
1000
500
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-500
Belarus
Czech Republic
Estonia
Lithuania
Latvia
Moldova
Poland
Romania
Russian Federation
Serbia
Slovak Republic
Slovenia
Ukraine
2012
2013
2014
FDI in Russian Federal districts, balance of
payments` statistics, million USD (46)
80000
69219
70000
60000
55084
50588
50000
43350 43084
38328
40000
30000
22857
20000
7950
12486
10000
1189
335
7007
5176
1012
512
168
46
101
1709
19 142
10914
6172
3059
563
7341
1510 2310
950
3940
1392
0
Russia
Central FD
North-Western FD
Souther FD
-47
North-Caucasus
FD
-609Volga FD
Ural FD
Siberia FD
-3834
-10000
-909
-1866
2011
2012
2013
2014
Far Eastern FD
FDI in Russian regions, balance of
payments, million USD (47)
Moscow
Tyumen region without
autonomous okrugs
Saint-Petersburg
Moscow region
Sakhalin region
Lipets region
Vologda region
Amur region
Chelyabinsk region
Krasnoyarsk region
Nizhni Novgorod region
Sverdlovsk region
Kostroma region
Belgorod region
Tomsk region
2011
38 236
5 399
5 576
2 377
-601
761
1 588
691
-90
949
436
-2 263
201
-127
660
2012
37 602
2013
39 610
20112014 2014
11 030 126 478
5 623
2 961
1 056
943
1 026
494
251
639
328
4 624
240
-29
238
11 068
6 419
866
1 781
856
268
596
728
981
630
-359
291
1 600
81
6 813
-1 341
750
2 997
433
-74
707
987
-741
315
-457
720
-3
146
25 997
16 277
6 954
5 233
2 993
2 808
2 488
1 876
1 828
1 709
1 545
1 452
1 441
1 125
Russia and international economic
organizations (IEO)
Russia and IMF, World Bank and WTO (49)
• Working relations between IEO started actually in 1992 with the
country's admittance to the IMF and the World Bank.
• The country's IMF quota is SDR 5,945.4 million (2.5% of the
Fund's total quota; 2.39% of votes), which does not allow Russia
to influence the process of decision making in the framework of
IMF.
The largest: USA - 42,122.4 million SDR; 16.75% of votes
http://www.imf.org/external/np/sec/memdir/members.aspx
• World Bank: 1993-2002 period: World Bank actually invested
more than 8 USD billion.
• Russia has become a fully-fledged WTO member in midsummer 2012.
Russia and WTO (50)
The first Trade Policy Review of Russia as a WTO member was held on 28 and
30 September 2016.
Russia has held an active position within the WTO since joining it in 2012.
However, a number of issues have remained, such as
the compliance of its import substitution policy with WTO rules,
a lack of transparency in the functioning of the Eurasian Economic Union,
subsidizing of the energy sector and the dominant role of the state-owned
companies in the country.
In addition, after only four years of Russia’s WTO membership, the WTO Dispute
Settlement Body has ruled that Russia has violated a number of its accession
commitments.
Russia and OECD. G8 and G20 groups (51)
• In 1994, the Declaration of Cooperation between OECD and Russia was
signed in order to improve the political dialogue and to help Russia build
up a market-oriented economy.
• Since the summer of 1999, Russia has been granted the status of observer
in a number of OECD working bodies.
• On 30 November 2007, the OECD Council approved the roadmap to
accession for the Russian Federation.
• Russia has taken on important regional and global roles through its
memberships in the Group of 8 and the Group of 20.
Russia is becoming a significant provider of crisis
response funds and development assistance (2011).
• Due to Russia-Ukraine crisis Russia is dropped out from Group of 8.
Russia and Asia-Pacific Economic Cooperation
(52)
• Asia-Pacific Economic Cooperation: seeks to promote free trade
and economic cooperation throughout the Asia-Pacific region.
Russia is its member from 1998.
Russia is a member of the Commonwealth of
Independent States (CIS) (53)