Russia and Morocco: The Trade and Investment Dynamics

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Bilateral ties are increasing as Russia views North Africa with renewed relationship potential

By Emil Avdaliani

Amid Russia’s efforts to mitigate revenue losses from decreased trade levels with the West, Moscow has actively re-engaged with the African continent. Seen as a part of the vast Global South, Greater Africa offers numerous opportunities for Russian companies seeking new markets and  export manufacturing capabilities. In Africa, Russia’s economic interests are also neatly merged with global geopolitical shifts. Moscow is pushing for the creation of a multipolar world order and for the Kremlin, the African continent presents a good opportunity to tilt the balance of power away from the collective West, dragged down by a toxic colonial legacy and unfair trade and investment practices that have left little on the table for the Africans themselves. Russia is also keen on wooing African countries to develop a bloc of votes at the United Nations to fend off American policies.

While Morocco is not the biggest trade or investment partner for Russia, the country’s geopolitical importance has been growing and it sits on some of the world’s largest raw material deposits. Expanded ties with Morocco would give Russia an additional tool to help re-shape the shifting balance of power in Sahel where French influence is in decline and a power vacuum is emerging.

Elsewhere, renewed Russian involvement in North Africa is apparent with Egypt about to join the BRICS grouping, while Algeria and Tunisia have expressed interest. Morocco has also become a new preferred tourism destination for Russian nationals now feeling uncomfortable with European vacations. Direct flights are now operated between Morocco and Russia with tourism numbers reaching record highs in 2023.

Russia – Morocco Bilateral Trade

Morocco is Russia’s third biggest trade partner among the countries of the African continent after Egypt and Algeria. Russia’s exports to Morocco in 2021 amounted to US$1.6 billion (an increase of 58.50% compared to 2020) or 9.3% of the total trade Russia had with the African continent.

Russia’s trade with Morocco is significant as it constitutes a sizeable part of the country’s overall commerce with the African continent. In 2022 this reached US$6.7 billion purely in the agricultural sector alone. Russian importers are traditionally interested in grapes, citrus fruits, nuts and cocoa beans from Morocco and other North and East African countries.

Morocco maintains close ties with particular regions of Russia. For instance, the 2022 trade between the Russian Republic of Bashkortostan, a traditionally ethnic Turkic region, and Morocco increased by 3.3 times compared to 2021 and in the period 2017-2022, it grew by 27 times. Various autonomous regions of Russia have been selectively astute in developing trade partners that fit mutual needs.

Overall, Russia’s exports to Morocco mainly consist of oil, diesel, coal and inorganic chemicals. There are increasing exports of fertilizers, stone and plaster materials, aluminium, and cereals among related products. Russia imports fruits and nuts, and light industry products in addition to lumber, cars, veterinary vaccines, and IT services. Overall, Russian grain suppliers are particularly interested in Morocco as the country is among top African importers of wheat. For example, Morocco announced that by June 2024 it would be importing about 2.5 million tons of wheat.

However, a major hindrances to Russia’s exports are the customs duties – which can be as high as 40% for some products. For Russian companies, one of the strategies used to mitigate against this is to establish joint ventures in Morocco, which are granted more favorable conditions. The main advantage for companies opening production in Morocco, is the possibility of further export to the countries that Morocco has free trade zone agreements with. Morocco has preferential trade agreements with 62 countries, and is a member of the African Continental Free Trade Agreement (AfCFTA) which reduces intra-African trade tariffs on 95% of all products within various phased-in timescales. Rabat ratified this in April 2022. Morocco is also a member of the Greater Arab Free Trade Area which also includes Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, and the United Arab Emirates. Other notable FTA include agreements with Jordan and Turkiye.

Morocco also has an advantageous geographic position as its coastline is compatible with long standing routes used by major Russian exporters. The country also has a series of well-situated ports. Its southern border is of additional importance. As the geo-economic situation in the Sahel region further destabilizes, Morocco can serve as a gateway for Moscow to increase trade with and influence the Saharan region.

Longer-term trends are also promising. Although Russia does not yet have free trade agreements with African countries there are signs that this might be changing. In August this year, Russia’s President Vladimir Putin announced that negotiations are ongoing between Russia and four Arab nations, including Morocco, to enter into Free Trade Agreements with the Eurasian Economic Union (EAEU).

Russia – Morocco Bilateral Investments

Russian investments in Morocco are lagging behind its major competitors such the EU, US, and China. The reasons vary, but Russian scholars name the lack of knowledge concerning internal Moroccan politics as the most critical issue. Numerous projects have failed to materialize because of limited expertise from the Russian side. For instance, Russia’s Volgabas planned to invest in Morocco to produce electric buses. Yet the negotiations slowed down due to an unexpected change of government that had been largely unanticipated by the Russian side. The most active players in Russia’s efforts to invest in Morocco are Russian manufacturers in the automotive industry.

Among successfully realized investments were the €2 billion oil refinery built in 2019. Russia is also an investor in the Morocco-Nigeria gas pipeline. In addition to this, more recently are numerous potential areas of cooperation which have emerged following the recent Russia-Africa summit held in St. Petersburg. Russia is eyeing Morocco’s vast phosphate rock and uranium reserves. In this regard, Morocco is interested in closer cooperation with Rosatom. Another area of cooperation is seawater desalination as the African region increasingly facing water shortages.

Reflecting this, in July this year, Rusatom Smart Utilities signed a MoU with Morocco’s Water and Energy Solutions, with the aim to develop nuclear-powered desalination plants. Rosatom is well suited for this role especially as over the past decade the company has increased its business engagement with the Middle East and North Africa countries. These type of investments would help Morocco develop civilian nuclear technology and alleviate the exacerbating food-water-energy challenge.

Relations between Russia and Morocco are more trade-based and much will depend how Russia’s economy will fare in the coming years. There are, however, significant challenges in that regard. Various estimates forecast contraction of Russia’s GDP throughout 2023, although to date this has not yet materialised. Russia’s economic engagement with Africa also is well behind other state actors’ performance in Africa. For instance, Russia’s trade with Africa stood at US$18 billion and though the number is expected to increase in 2023 and beyond, it remains significantly short of the European Union’s and Chinese involvement, which are both close to nearly US$300 billion in trade.

Nonetheless, the trade and investment dynamics between Russia and Morocco are on an upward trajectory, while a pending FTA with the EAEU will further enhance bilateral trade volumes.

Emil Avdaliani is a professor at European University and the Director of Middle East Studies at the Georgian think-tank, Geocase.

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