International Trade in Russia

News Related to International Trade in Russia

Business outline for Russia

Main Industry Sectors

Russia has a wealth of natural resources. It is the leading producer of natural gas and the second producer of oil in the world, as well as being one of the main producers and exporters of diamonds, nickel and platinum.
Despite its surface area, Russia has a relatively small amount of land suitable for agriculture because of unfavorable climatic conditions. The country nevertheless owns 10% of the global agricultural lands. The northern regions of the country concentrate mainly on livestock and the southern regions as well as western Siberia produce cereals.
Industry represents more than a third of Russia's GDP and employs up to 30% of the population. The country inherited most of the Soviet Union's industrial bases. The most well developed sectors are chemicals, metallurgy, mechanical construction and defense sectors.
The service sector employs more than 60% of the population and generates slightly under 60% of the GDP. After the 1998 financial crises, the banking sector has not yet undergone a complete restructuring. Given the size of the country, the transport, communications and also trade sectors are particularly significant.

Economic Overview

Russia was hit hard by the international financial crisis and in 2009 reached a record recession since the fall of the Soviet block (-7.9%). The recovery in 2010 was strong (4% growth according to estimates), driven by fuel exports and domestic demand stimulated by the increase in salaries. Growth should continue to strengthen in 2011-2012.

Economic recovery justifies the end of exceptional measures to combat the crisis. The government's priority, announced as part of a Five Year Plan, is to support the agricultural sector in order to achieve food self-sufficiency. In order to free itself of its dependency on hydrocarbons, a change of the economic model is imperative. Tax reductions have been planned for the next few years, in order to favor the diversification of the economy through investment while, regaining some balance. A stabilization fund has been set up to modernize infrastructures, the education and health systems, as well as agriculture. Cuts in public spending and a strengthening of the supervision of the banking system are also planned. The main threats to growth are linked to controlling inflation, which remains high and in the long term, to the drop in population.

The unemployment rate, which dropped in the recent years, has risen as an effect of the crisis and is now estimated at 7.5% for 2010. Disparities are still marked, particularly between big cities and rural areas. Despite the appearance in towns of a middle class, the poverty rate is still at 16%.

FDI in Figures

Even though FDI flow increased considerably at the beginning of the millennium years (tripled between 2002 and 2007), its level (1.5% of the GDP) remains relatively low in terms of growth of the country and of the Russian economy's potential. They dried up due to the global crisis and have been recovering slowly since 2010. This trend should continue.
The low FDI performance reflects an investment climate which is still widely perceived as unfavorable abroad. Although, over the last few years, Russia has implemented positive economic reforms, the state's administrative problems and the uncertainties of the rule of law remain significant.

FDI Government Measures

The establishment of investment assistance in Russia is still in its infancy, despite many declarations of intent. The government prefers to improve the general investment climate by tax reductions and economic reforms.
Since May 2008, majority foreign ownership is subject to authorization in many sectors, particularly those linked to raw materials, heavy industry and aerospace.

Country Strong Points

Significant natural resources, investment potential largely under-utilized and a qualified workforce.

Country Weak Points

Unstable investment climate, complicated and sometimes contradictory accounting regulations and legislations, infringement of intellectual property, many sectors closed to foreign investment as considered strategic.

Foreign Trade Overview

The country is fairly open to foreign trade (which represents around 50% of the GDP) despite the nationalistic attitude of its leaders and strict legislation and fare policies. Russia is amongst the 10 primary exporters and the 20 primary importers in the world. Its main trade partners are China, Germany, The Netherlands and the United States. The country shows a high trade surplus and this should continue regardless of the drop in raw material prices and the deterioration of the global economic situation.