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The collapse of the Soviet Union saw the Russian economy undergoing severe stress, as it transited from a centrally planned economy to a free-market system. One of the key factors in this shift to a free market system was the liberalized reform of Russia’s foreign trade. These liberalization reforms were responsible for an increase in the foreign trade of Russia. The enhanced trade that resulted has been one of the sustaining and stabilizing factors of the Russian economy.
Major Trade Aspects of Russia
A remarkable feature in the trade aspects of Russia is the surge in the foreign trade volumes subsequent to the demise of the Soviet Union. The growth witnessed in exports and imports was such that it surpassed even the growth in the Gross Domestic Product (GDP), though the growth may not have been regular. Thus during the period of reformation in Russia exports were the mainstay and the sustaining factor in the Soviet.
The importance of exports to Russian industry can be seen from the dramatic growth in exports during the ten years from 1992 to 2002, wherein the export from Russia virtually doubled. This growth was possible because of the increased exports to Western European countries through the liberalization reforms that occurred in Russia. Though Russian trade with the Commonwealth of Independent States (CIS) has also increased, it has not been as noticeable as the growth in trade with the Western European countries.
With more satellite countries of the erstwhile Soviet Union joining the European Union in the new millennium, the possibility of enhancement in the trade with Western Europe is expected. (1). Russian is not a member of the World Trade Organization (WTO), as yet. There are moves for this last large economy to become a member of WTO. Russian trade is expected to get a boost when it becomes a member of the World Trade Organization. (2).
Russia is endowed with rich mineral wealth and this is reflected in the export of mineral goods like gas, oil, petroleum, mineral ores, coal, and the like; and ferrous and non-ferrous metals and products to countries outside the CIS. These products make up almost seventy-five percent of the exports of Russia. The poor state of agriculture and industrial production in Russia is seen in the import of food products and agricultural raw materials; and machinery, equipment, and transport equipment; chemical products and rubber, which constitute more than eighty percent of the imports of Russia, from countries other than those in the CIS. (3).
The Russian armament industry is an exception to the general efficiency of Russian industry and several countries like India, China, Iran, Syria, and Venezuela are major importers of weapons and arms from Russia. Though there is a lot of clamor on Russian exports of arms and weaponry, Russia earns about five billion dollars from these exports, which is easily dwarfed by the quantum of export trade in energy raw materials, metal, and timber. (4).
The orientation of Russian exports trade reflects the fact that the raw materials production sector of industry constitutes the backbone of the Russian economy, and the Russian economy is dependent on it to remain in a healthy state. Though it contributes to only one and a half percent of the employment in the country, it contributes to almost six percent of the GDP. The raw materials production sector absorbs over twenty percent of the total investments of the economy of the country and more than sixty percent of the investments that go into the nation’s industries. This reflects the poor state of the other industrial sectors and agriculture, which employs a vast majority of the Russians.
The consequence of this tilt in trade in the Russian economy makes its economy strongly influenced by the price of raw materials in the world markets. The current trend of the high process for oil and petrochemicals has been a boon to the Russian economy.
Yet Russia needs to tread with caution as its large imports of agricultural products and machinery for the industry means that it is currently heavily dependent on the imports to sustain the basic needs of food and employment of its people. This anomaly has to be corrected. Russia needs to increase the efficiency and productivity of its manufacturing sector of industry and agriculture to prevent a drop in employment rates and inflation in the cost of food and food products.
It can be safely said that the specialization of fuels and minerals in the exports of Russia is a safe short-term means to boost the economy of Russia, but a more pragmatic view is required for the long-term prospects of the economy. Russia needs to evolve into a manufacturing-oriented economy to make maximum use of the richness and diversity of its natural resources as a means to sustained growth in its trade and economy.
An evaluation of the trade-in Russia shows that Russia has boosted its economy through reliance on exports of its mineral wealth. Long-term prospects for trade and its positive impact on the economy require that Russia develops its manufacturing industry.
Chistokhvalova, Daria. “THE RUSSIAN EXPORTS AND EXPORTERS”. 2003. COMPILER TRADE PORTAL. Web.
Arvedlund, Erin. E. “INTERNATIONAL BUSINESS; Europe Backs Russian Entry Into W.T.O.” 2004. The New York Times. Web.
“Foreign Trade of Russia”. 2007. Web.
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Bullough, Oliver. “Russia pragmatic on arms but is trade healthy?” REUTERS. 2005. Yahoo Asia News. Web.