Russia's Foreign Trade: New Directions and Western Policies

Russia is already a major trading partner of the West, especially the EU, exporting mostly energy sources (gas and oil), metal, minerals and timber, while importing a wider range of manufactured products. In the longer term, Russian manufacturing is likely to start recovering and hence Russia will need to have improved access to Western markets in order to expand its exports. This paper reviews recent trends in the direction and structure of Russian trade and summarises the reforms that have so far been applied to external trade policies and practices. It then develops three scenarios for the development of the Russian economy: (a) a centralised model; (b) muddling through; and (c) accelerated reforms, sketching the likely trading implications of all three. The paper argues that scenario (b) is the most likely, and suggests that the EU (and, to some extent the UK) could most usefully assist Russia in two ways. First, to provide technical assistance to strengthen the institutional infrastructure of foreign trade (i.e. to help reduce transactions costs and risk); and second to adopt a far more relaxed and open approach regarding access to EU markets for Russian manufactures.