Russia Briefing News
With the United States President Donald Trump meeting, at his own request, with Russian President Vladimir Putin, media coverage has focused almost exclusively on the political angle. Donald Trump is, however, not a career politician, he is a businessman – a self-proclaimed “genius dealmaker” at that. Yet, no coverage has been given to the prospects of Russia-US trade.
Firstly, where do we currently stand in terms of the bilateral trade between the two countries? In fact, Russia sells more product to the United States than vice versa.
Russian Foreign Minister Sergey Lavrov recently met with his Armenian counterpart, Zohrab Mnatsakanyan, with both parties saying that their membership of the Eurasian Economic Union (EAEU) has significantly boosted bilateral trade. Lavrov stated that “Russia remains a key economic partner to Armenia. Our trade turnover grew 30 percent in 2017, and the positive trend continues also this year, growth for the last three months is coming close to 40 percent.” Russia’s trade turnover with Armenia reached US$620.5 million (up 29.2 percent). Meanwhile, Armenia’s trade turnover with the Eurasian Economic Union for the first four months of this year amounted to US$640.5 million, showing a 29.9 percent growth. This means that Armenia’s trade with the other EAEU members Belarus, Kazakhstan, and Kyrgyzstan reached a rather more modest US$20 million in the period January-April 2018.
The 2018 World Cup Finals have been an extraordinary exhibition of Russian hospitality, organization, security, and infrastructure. Whoever wins on July 15th – and Russia are as of writing still in the tournament – a grand time will have been had by all with plenty of memories to cherish.
Yet just two days later, a rather more somber anniversary occurs – the date of the 100th year since the execution by the Bolsheviks of the last Russian Tsar, Nicholas II, his wife the Tsarina, their five children and several close personal staff. That occurred sometime during the evening of the 16th and 17th July 1918, in Yekerterinburg, itself host one hundred years later to some of the World Cup matches.
As I predicted last week, Russian President Vladimir Putin will meet with US President Donald Trump in Helsinki. The summit will take place on July 19.
The two men will have plenty to discuss:
- The de-nuclearization of North Korea, which shares a border with Russia;
- The current status of economic sanctions imposed by the US on Russia;
- Russian concerns about the breakdown of the global trade structure and US intentions;
- The war in Syria, which has seen military engagement from NATO and Russia on opposite sides of the conflict;
- The civil war in eastern Ukraine, which both sides unofficially support from opposite sides;
- NATO’s expansion and development plans – Russia has recently reacted with anger at the increased deployment of US marines in Norway;
- Any time frame for the clearing up of these outstanding matters and the possibility of a return to normalized relations; and
- Cordial invitations for both leaders for further talks at the Kremlin and in the White House.
Recent threats by US President Donald Trump to tear up the North America Free Trade Agreement (NAFTA) with Canada and Mexico are likely to trigger increased interest by these two countries in making free trade deals with the Moscow-backed Eurasian Economic Union.
Although such a deal would be completely different to that with the United States, both Canada and Mexico could seek to lessen their dependence on US trade by sourcing products elsewhere. With the EAEU already making serious overtures in South America and Asia, such a scenario may be rather more plausible than it initially appears. The EAEU already has a free trade agreement with China, while India is expected to agree an FTA later in the year. Although at present these agreements are not extensive in trade terms, it would be a relatively simple exercise to amend them. Both China and India of course possess massive consumer markets and have the highest GDP growth rates in the world. Emerging Asia, rather then North America, is also the wealthiest region in the world with some 52 percent of global wealth now based there and that trend is increasing. Continue reading…
The Moscow-backed Eurasian Economic Union (EAEU) has been quietly making overtures to South America as Russia seeks to limit exposure to Western sanctions. Interestingly, this comes at exactly the same time that the United States is moving away from multi-lateral free trade deals and is concentrating purely on its own domestic economic might as a future sustainable development policy and is moving away from participation in multilateral trade agreements.
The European Union has extended wide ranging sanctions against Crimea and Sevastopol for a further 12 months. The restrictions were imposed in the framework of the EU’s strategy of refusing to recognize Crimea’s reunification with Russia.
The Crimea-related sanctions include a ban on importing any Crimean goods, any European investments in Crimea, including buying real estate, financing businesses, providing services, including in the tourism sector. European vessels are banned from entering Crimean ports, and aircraft cannot land at Crimea’s airports, except for emergency situations.
Unconfirmed reports coming out of Washington suggest that the US President Donald Trump is planning for a meeting with Russian President Vladimir Putin next month. It will be the first time the two men have met in this capacity, although they have shared several phone calls and meetings on the sidelines of other summits, most notably the G20 last July in Hamburg. The US President is expected to be in Brussels for talks concerning NATO, where he is almost certain to raise the issue of the continuing cost of protecting the EU by the US taxpayer. EU nations are supposed to contribute two percent of their GDP to the United States for this service. President Trump has complained that very few meet this target.
Russia’s State Duma has proposed raising value-added tax to 20 percent from 18 percent, starting 2019. The raised funds are planned to be allocated for the development of infrastructure and new sectors of the economy. The VAT rate increase is expected to generate an additional 620 billion rubles (US$9.82 billion).
However, the reduced VAT rate at 10 percent and the list of goods to which it applies will remain unchanged, as will the zero VAT rate for all exported goods. The respective bills may be submitted to parliament this week.
Russia and Egypt have agreed to establish a 5.25 million square meters Russian Industrial Zone in East Port Said in the Suez Canal Economic Zone. The new zone is expected to attract some US$7 billion in investment.
Extending for 50 years, the agreement represents a shift in strategic relations between Egypt and Russia, and gives Russia access to north African markets and the Mediterranean. It aims to increase bilateral industrial cooperation, enhance investment opportunities, and provide favorable conditions for industrial, scientific, and technical cooperation between the two countries, according to the agreement. It provides for the creation of a special territory with a simplified tax regime and special conditions for the exports of Russian manufacturing enterprises.