Russia Trade

Subchapters:

  • Business Relationships
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

The European Union as a whole is stably the main trading partner of the Russian Federation. Until the end of the last decade, Germany was the main trading partner between the individual countries. But in the course of the second decade of the 21st century, Russia, for both political and purely pragmatic business reasons, began to massively develop trade relations with China, which made it Russia’s main trade partner from 2014-15. European products are still considered a quality standard in Russia, companies and individuals trust them and expect high quality and reliability from them.

Trade exchange with the EU:

2018 2019 2020 2021 2022
Exports from the EU (million EUR) 82,300.7 87,760.7 78,974.6 ON ON
Imports into the EU (million EUR) 160,911.7 145,035.5 95,334.9 ON ON
Balance with the EU (million EUR) 78,611.1 57,274.8 16,360.3 ON ON

Source: European Commission

Trade relations with the Czech Republic

Russia is, together with the United States, the most important trade partner of the Czech Republic outside the European Union. The Czech Republic mainly exports machinery and industrial equipment to the Russian Federation, we mainly buy oil, natural gas, metals and chemical products from Russia. In recent years, the importance of doing business in Russia through local investments by Czech companies has been growing. The Russian government makes it difficult in every possible way to import goods from abroad and demands so-called localization from foreign companies, i.e. the transfer of part or even all production to Russia. The pressure to transfer product development is also growing – for example, IT products of domestic origin are favored in state tenders and introduced to companies and banks with state ownership.

Trade exchange with the Czech Republic:

2018 2019 2020 2021 2022
Exports from the Czech Republic (billion CZK) 89.7 98.8 98.9 ON ON
Imports to the Czech Republic (billion CZK) 127.7 115.1 67.4 ON ON
Balance with the Czech Republic (billion CZK) 38.0 16.3 -31.5 ON ON

Source: businesscarriers.com

FTAs and treaties

Treaties with the EU
The European Union and Russia concluded the Partnership and Cooperation Agreement (PCA) in 1997. Until 2014, most mutual cooperation took place on the basis of this agreement. However, after the occupation of Crimea by Russia in 2014, the vast majority of mutual cooperation based on this agreement ended or was suspended by the EU. More often than with other trading partners, the EU and Russia meet at the WTO to resolve disputes and accusations of unauthorized state aid or unfounded restrictions on the export of products from the EU to Russia. Such disputes were and are being resolved in the area of ​​excessively high import duties, the ban on the import of pork from the EU or in the case of passenger cars. Russia, on the other hand, opposes the EU’s third energy package or the imposition of anti-dumping duties on imports of Russian cold-rolled steel.

Agreements with the Czech Republic
In the economic and trade area, the most important agreements concluded are
– the agreement on the avoidance of double taxation
– the agreement on mutual protection and support of investments.

The agreement between the government of the Czech Republic and the government of the Russian Federation on the prevention of double taxation and the prevention of tax evasion in the field of income and property taxes has been in force since 1995 (Prague, 17 November 1995) and the Agreement between the Czech Republic and the Russian Federation on the support and mutual protection of investments since 1994 (Moscow, 5/4/1994).

The trade and economic dialogue between the Czech Republic and the Russian Federation takes place on the basis of the intergovernmental agreement on economic and economic cooperation in the form of meetings of the Czech-Russian intergovernmental commission for trade, economic and scientific-technical cooperation. The last meeting was held in March 2019 in Prague.

Developmental cooperation

There is no form of development cooperation between the Czech Republic and the Russian Federation. The Russian Federation primarily provides humanitarian aid in the event of natural disasters.

In the field of development aid, the country is at the beginning of the process of creating a system of development cooperation, which is significantly influenced by Russian foreign policy.

Prospective fields of study (MOP)

Russia is the largest European (or Euro-Asian) country, and a far larger number of sectors than we list below could be identified as a perspective field. The size of the population (144 million) alone makes the local market promising for most companies, for which the number of potential consumers is directly proportional to the size of demand (food, beer, cars, etc.). However, Russia is still a very industrialized country, the raw material base in many cases makes it one of the world’s largest producers of the given product (petrochemicals, minerals, etc.). The perspective fields defined by us therefore meet at least one of these criteria, the other being the priorities of the Russian government, which is trying to make certain fields attractive again through state investments.

Transport industry and infrastructure

The country’s existing manufacturers will have a capacity problem to meet the government-mandated change, as the new type of bearings so far only has less than ten percent of the more than 1.15 million rail cars in Russia. There are not even enough service centers in Russia that could carry out these exchanges, which according to estimates can represent investment costs of around CZK 100 billion.

Water management and waste industry

In Russia, climate change is occurring times faster than the world average, out of the target 87, only 80% of the population has access to quality drinking water and 89% of the used water is discharged into rivers without treatment. In a situation where, in addition, people and companies generate 55-60 million tons of unsorted hard waste per year, the national projects “Clean Water” and “Solid Waste Management” are an opportunity to take advantage of Russia’s needs in these areas. Regions were given the right to plan the construction of their own solid waste incinerators, according to estimates, 25-30 of them could be built in Russia. The government wants businesses and residents to start recycling waste, with a goal of recycling 36% of all solid waste. It is planned to launch the “Extended producer responsibility” program, which will transfer the responsibility for the secondary use of the product and its packaging to the producer. The vast majority of industrial companies do not have experience in this area and may request consulting and assistance services when starting their own waste management capacities. While the plans are hampered by the unfinished reform of waste management and the complex relationship between the national Russian Ecological Center and regional operators and governments, the severity of the problem will probably force the Russian government to solve the situation even at the cost of massive subsidies.

Healthcare and pharmaceutical industry

Even before the COVID-19 pandemic, Russia launched two national programs – Healthcare and Demography, which are among the thirteen priorities of the Russian government (national programs). Their goal is to improve the level of healthcare and significantly increase life expectancy in Russia. At the end of last year, the President had about USD 9 billion added to the Health program over and above the planned expenditures, mainly for the restoration of the so-called first line, i.e. the network of polyclinics, first aid and regional medical centers, which are in poor condition and to which patients turn with the first signs of health problems. In addition to the medical, especially diagnostic, equipment of these objects, construction and installation work will be needed, supplemented by the subsequent maintenance of the installed non-operative devices, and the training of medical personnel. Russian hospitals are in demand for oxygen devices and shut-off valves for medical gas cylinders. Russia’s healthcare system provides few state-funded services, so people invest in over-the-counter drugs, nutritional supplements and vitamins to boost their immunity. Russia is also among the countries that put the most pressure on foreign manufacturers to provide their patented medicines at low prices. Many of them therefore preferred to leave the Russian market. This is also the reason why in Russia it is often more profitable to supply over-the-counter drugs than to supply patented prescription drugs.

Automotive

The Russian vehicle market is the fifth largest in Europe, the long-term plan for the development of the Russian automobile industry until 2025 and the General strategy for the development of the manufacturing industry in Russia until 2035 envisage a threefold increase in the number of passenger cars produced. Therefore, in 15 years, the total number of passenger cars should reach 4.22 million units per year (in 2019 – million units); trucks – 191.46 thousand (in 2019 – 15 thousand pieces); buses – 31.66 thousand (in 2019 – 4 thousand pieces). The main goal is the renewal of the vehicle fleet, the production of the first Russian electric car, the development of technologies. Here, too, opportunities are gradually concentrated in investment projects and production, as the automotive industry is at the center of the government’s so-called localization policy and the provision of targeted investment incentives for projects.

Russia Trade