FDI & Foreign Trade

Russia 2017 Inflation Rates Compared With Eastern European Union

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Armenia and Russia boasted the lowest inflation rates (consumer price index) in 2017 across the Eurasian Economic Union (EAEU) that includes also Belarus, Kazakhstan and Kyrgyzstan, the Eurasian Economic Commission, the executive body of the EAEU said. According to it, the annual inflation in Armenia was 2.6%, in Russia it was 2.5%.

Consumer prices in Armenia in December 2017 grew by 2.6% year-on-year with food products (including alcoholic beverages and tobacco products) growing by 5.3%, non-food products by 1, 7%, while services dropped by 0.5%. In general, inflation across EEU in 2017 did not exceed the ceiling set by the Treaty on the Eurasian Economic Union. The threshold inflation for the Russian-led bloc at the end of 2017 was 7.5%.

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Russian Non-CIS Imports Rise by 24.3 Percent in 2017

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Russia increased its import of goods from non-CIS countries in 2017 by 24.3 percent, year-on-year, to US$202.3 billion, the Russian Federal Customs Service said on Monday.
The total import of goods from non-CIS countries rose 11.3 percent, month-on-month, to US$20.7 billion in December 2017.

This is good news for businesses based in Europe and Asia, as it shows that the Russian economy is both expanding and developing pent-up demand for purchasing following the Western imposition of sanctions. CIS countries are the nations of the Commonwealth of Independent States, and include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan. The CIS nations have their own trading status, and some are also part of the Eurasian Economic Union. Trade among EAEU members has also significantly increased as witnessed in 2017.

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Russia Raises Minimum Wage Level, Comparable to South-East Asia

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russian-workersRussia has raised the monthly minimum wage level from January 1 to 9,489 rubles (US$165).
In Russia, the minimum wage is the monetary value of monthly wages, below which workers may not be offered or accept a job. The minimum wage is guaranteed by the Constitution of the Russian Federation (Article 7).

On September 29, 2017, the cabinet submitted the draft law “On Amendments to Certain Legislative Acts of the Russian Federation Regarding Raising the Minimum Wage to the Subsistence Level of the Working Population” to the State Duma, which is the lower house of parliament. The State Duma adopted the draft law on December 15, and on December 26, it was approved by the Federation Council, the upper house of parliament.

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Will Potential New Sanctions against Russia Businessmen Impact Asian Account Holders?

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op-ed-commentary
sanctionsStrong rumors are circling that a new wave of US sanctions against Russia will be extended to a number of Russian businessmen from a much wider circle than the current US sanctions. If true, this is likely to mean that should named individuals be subject to US sanctions, they would at the very least be treated as equivalent to a “PEP” (Politically Exposed Person) and this may lead to the closure of their overseas bank accounts.

While previous sanctions against Russian PEP’s have largely been followed and enforced in Europe and other Western nations, they have not been adopted in territories such as the Asian banking centers of Hong Kong and Singapore directly. But it has become difficult for all Russians to open bank accounts in Hong Kong and Singapore during the past two years.

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Russia-Singapore Trade and Joint Investment on the Up in 2018

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singrusBilateral trade and investment between Russia and Singapore is rapidly improving following Russia’s re-positioning of its trade and investment ties after the impact of sanctions imposed upon it by the West. Bilateral trade increased to about S$5 billion, while Russia’s tourist visitors to Singapore also went up 10 percent, to about 70,000 arrivals in 2017.

The Singapore government recently recognized Russia as a key country for Singaporean investment potential, and has been actively encouraging both Singaporean government funds and the private sector to invest in the country. Singapore is also fast tracking a Free Trade Agreement with the Eurasian Economic Union, a free trade area sitting between China and the EU that includes Kazakhstan, Russia, Kyrgyzstan, Armenia, and Belarus. That deal is expected to be signed off this year and will significantly enhance Singaporean trade with Russia. It will also assist Russian trade with the ASEAN nations, as Singapore remains the region’s de facto financial hub. The Eurasian Economic Union already has a successful FTA with ASEAN member Vietnam.

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Russian Trade with Hong Kong Up 53 Percent in 2017

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hkmoscowRussia’s overall trade with the Chinese territory of Hong Kong rose by 53 percent in 2017, with Hong Kong’s total exports to Russia soaring by 43 percent to US$2.1 billion in the first ten months of 2017, while imports from Russia surged by 63 percent to US$870 million. Russia signed a Comprehensive Double Tax Agreement with Hong Kong in 2016, which entered into force on January 1, 2017. In addition to this, Russia and Hong Kong are also in the process of negotiating an Investment Promotion and Protection Agreement (IPPA).

The DTA has allowed for a cutback of 17 percent from the non-treaty tax rate. A detailed comparison of Russia’s withholding tax rates on Hong Kong residents before and after the agreement is shown below:

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Russia-China Trade Corridor Volumes Push Ahead of EU Nations

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ruble-yuanWith Russia-China trade set to reach €70 billion this year and showing growth of around 30 percent, it is prescient to examine how this compares with other nations, including those of the European Union (EU). Russia is under sanctions from the EU, which has seen its trade with Russia drop significantly, yet at the same time placing Russia as a direct competitor against the EU for China trade. The table below shows Russia’s emergence as a direct competitor for trade with China against the five largest EU economies – it has almost immediately outstripped all of them except Germany.

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Russia Considers Connecting Rail Through Baltics & Kaliningrad To Berlin

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baltic_sea-mapRussian Railways is considering launching a passenger train along the route St. Petersburg – Kaliningrad – Berlin, passing through Latvia, Lithuania and Poland en route, Victor Golomolzin, the CEO of Kaliningrad Railroad, part of Russian Railways told journalists last week.

The route, which is currently connected, yet remains unused, will require some upgrading to bring it to contemporary standards. At present the most viable option for travelers wanting to reach the Baltics or Berlin is either to fly or take the bus, a lengthy journey. The Kaliningrad region is Russia’s westernmost region and an enclave on the Baltic Sea.

“We are generating the idea of launching the Berlin-Kaliningrad-St Petersburg train, taking passengers in Berlin, going through Poland to Kaliningrad, and going from Kaliningrad via Lithuania and Latvia to St. Petersburg,” Golomolzin said. He said that discussions are continuing with the Governments Railway companies of Latvia, Lithuania and Poland over the potential for increased rail connectivity.  Continue reading…

Russia Completes Rail Link Around Eastern Ukraine

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russia-ukraineRussian Railways has completed the construction of a rail link that keeps away from the Lugansk region of Ukraine, bypassing the country entirely. Service is expected to start in September.

A test train of a locomotive and freight cars has already run through the completed stretch, Russian Railways have said. The construction of the rail link between Zhuravka – Millerovo began in 2014, after the deterioration of relations between Russia and Ukraine. The new 137 kilometers stretch runs entirely within Russian territory in the Voronezh and Rostov regions.

This will increase the line’s capacity and ensure the security of freight and passenger traffic, Russian Railways said. “It will provide stability of passenger and cargo transportation, and most importantly – to reduce the economic and technological risks that could arise when the route goes through Ukraine. This includes stop and delay of trains, delivery time delays, and traffic violations.” Continue reading…

Russia, China, Announce USD13 Billion Wide Body Passenger Jet JV

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comacRussia and China have announced the signing of a USD13 billion Joint Venture company, the China-Russia Commercial Aircraft International Corporation (CRAIC), set up to compete with Boeing and Airbus. The license to operate in China was granted in Shanghai on Monday. The JV is between the Commercial Aircraft Corporation of China (COMAC) and Russia’s United Aircraft Corporation (UAC), with COMAC chairman Jin Zhuanglong saying the joint venture will develop wide-body aircraft and aims to produce “competitive” long-haul planes for the world’s aviation market.

CRAIC will be responsible for research, manufacturing, marketing, sales and services of its aircraft. According to an agreement by COMAC and its Russian partner United Aircraft Corp (UAC), 280-seat jets with a range of 12,000 kilometers will be prioritized.

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