Analysis of Russia's Trade Conditions and Laws

Being the largest country with an area of 17,075,200 square kilometers (6,592,800 sq mi), Russian Federation also known as ‘Mother Russia’, is full of blessings to earth, containing a wide range of natural resources including world’s largest natural gas reserve (2nd largest producer), oil reserve (8th largest), coal reserve (2nd largest), petroleum, timber, ores and other mineral resources. It’s Lake Baikal, world’s deepest and purest fresh water lake, well recognized for containing over one fifth of the world’s fresh surface water. Russia is also famous for producing barley, buckwheat, oats and exporting of rye, sunflower seed and wheat around the world for centuries. Becoming one of the energy superpowers of the world, it was the first country to construct nuclear power plant (4th largest nuclear energy producer) (Russia). Russia’s 160 ethnic groups and indigenous people, speaking in around 100 languages, practices Orthodox Christianity and enjoys free universal health care and education facilities. Although some of the free facilities are subject to registration and in higher education there is tremendous competition. But Russians never stopped surprising mankind. With the launch of first earth-orbiting satellite, Sputnik 1 (1957), and the first human trip into space by Yury Gagarin (1961), they showed the world the capability of humankind beyond imagination (Russia). The extreme cold weather of Russia might make the life of 144,526,636 (2018 estimate) people rather difficult to deal with, but on the contrary, it actually saved them several times from foreign invaders, even from Hitler’s Nazi soldiers who died starving in Mother Russia’s cold lap in 1945 (Keenan, 2018).

Russia is one of the super powers who brought an end to World War II and since they are one of the five permanent members of the UN Security Council, they worked hand in hand to control the level of chaos among the countries, including the approval of the European Convention on Human Rights (1998). Being a prominent member of UN, G8 industrial nations, NATO, BRIC, It also takes leading role in organizations like- CIS, EurAsEC, CSTO and SCO. At the same time they are one of the top arm suppliers, selling arms to about 80 countries of the world. Russia always maintains smooth diplomatic relationship with foreign countries (191) and has 144 embassies worldwide (Russia) (‘Russia Economic Outlook’, 2018). Russian economy has seen tremendous variations in years. In the era of former Union of Soviet Socialist Republics (USSR), to industrialize the large rural areas and to collectivize its agriculture, Joseph Stalin’s (1941-1953) introduced a planned economy, sending millions of people to penal labor camps where they worked as much as possible by any human being. This brought former Soviet Union a remarkable transformation from agrarian economy to a major industrial powerhouse but with the price of the death of around 500,000 to 1 million people during the Soviet famine of 1932-1933 (‘Russia Economic Outlook’, 2018).

Going further to the history of Russia we find the interesting, yet questionable largest land deal in history, The Alaska Purchase (1867), which was an aftermath of the defeat by Britain in Crimean War and United States got to buy the land for only $7.2 million (about two cents per acre) (Justin, 2017). Today Russia has the 12th largest economy in the world by nominal GDP estimated $1.522 trillion and 6th largest by purchase power parity (PPP) estimated as $4.152 trillion. Russia’s currency instability is pretty high because of the dependency on fluctuating oil prices. As of today, 1 US Dollar equals to 57.32 Russian Ruble (XE Currency Converter: USD to RUB). Since its foundation in 1990, Bank Rossii, The Central Bank of Russia, had remarkable contributions in times of financial crisis. Even its governor had won ‘International central banker of the year’ award twice (Rogoff, 2017).

In 2014, Bank Rossii resolved exchange rate controls, moving into a free-float exchange rate system. But again it took back charge because of the falling oil prices and risk of the investors (‘Russia Economic Outlook’, 2018). Russia is open to foreign trade which is now representing 46% of the GDP. It became the member of World Trade Organization (WTO) after 19 years of negotiation, in 2012, entering the overseas market and it is currently negotiating with India for a free trade agreement. It is also the largest trade partner of Hong Kong, estimated export to Russia climbed to 38%, about $2.4 Billion. Russia’s trade policy became liberal now and anyone is allowed to import all types of legal product. Russia is a member of the Eurasian Economic Union and ATA Carnet (‘Russia: Trade Profile’, 2018).

Worldwide Russia's major trade partners are China (Export: 9.8%, Import: 20.9%), Germany (Export: 7.4%, Import: 10.7%), and the United States (Export: 3.3%, Import: 6.1%). It is among the 15 largest exporters and 23 largest importers of the world. Oil, gas, metals and timber includes 80% of the total exports and food (13%) and ground transports (12%) are main imports. Currently it exports 4,350 products to 199 partners estimating total export of $285,491 million and imports 4,421 product from 220 partners worth $182,257 million (Russian Federation trade statistics, 2018). Russia has repaid all its major debts in 2006 and became one of the lowest foreign debts among major economies and the Putin government is planning to invest around $1 trillion for infrastructure development within 2020 (Russia).

Recently the Russian government has introduced a new fiscal rule to reduce the influence of external volatility on budget and the real rate of exchange which will be effective from 2019. In spite of stable unemployment, 19.2 million Russians live below the national poverty line. Corruption has been observed in almost every sector including education and it is said that corruption became a business here. According to experts corruption consumes around 25% of the GDP where World Bank report denoted the number as 48% (Russia). The U.S. government blacklisted the bank Rossiya, as report says, Russian President Vladimir Putin's closest friend Sergei Roldugin holds a 3.2% stake in that Bank and allegedly acquired a 12.5% stake in a major Russian advertising company (Mirovalev, 2016). In spite of all the mishaps, the world can hope Mother Russia comes out from all the hurdles it is going through now, as it always does.