Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Russia presents significant challenges and some opportunities for experienced American exporters. While targeted American and European economic sanctions remain in place and have gradually expanded, there is no overall trade embargo on Russia. Due to tight fiscal and monetary policy and higher oil prices, Russia achieved a GDP growth of 1.3% in 2019. The Russian economy contracted by 3.1% in 2020 due to the international health pandemic, less than expected by both the Russian Ministry of Economic Development and the IMF. The IMF projects 3.8% economic growth in 2021, although there are concerns that another “wave” of coronavirus infections and lagging vaccination rates might affect 2021 GDP growth. Despite these economic challenges, over 1,100 American firms of varying sizes continue to do business in Russia, due to its 144 million consumers, $29k+ GDP per capita (as measured in purchasing power parity), growing middle class, and highly educated and trained workforce.
Three broad factors merit consideration when assessing business prospects in Russia: geopolitics, market dynamics, and rule of law. The situation with all three factors worsened in 2020. Russia governmental support for separatists in Ukraine, interference in U.S. elections, Russian-origin cyberattacks, and the role of Russian security services in the March 2018 poisonings of residents in the United Kingdom and August 2020 poisoning of Russian opposition figure Alexei Navalny, as well as disagreements with the United States’ positions on certain global security challenges such as in Syria, Libya, and Venezuela, have raised tensions with the United States and its allies, leading to increased economic restrictions during recent years. This type of behavior has continued in 2020 and continues to present risks for any U.S. company looking to do business in Russia. U.S. and European economic sanctions imposed in 2014, and subsequently augmented, remain in place and are unlikely to be lifted soon. Sectoral restrictions on the energy sector (offshore, Arctic and shale oil and gas projects), the financial sector, and the defense industry continue. Additionally, some Russian entities and individuals are subject to a range of sanctions, requiring American firms to conduct careful due diligence on potential business partners. Since 2014, U.S. agricultural exporters have been hit with Russian countersanctions, one of several protectionist, import-substitution policies designed to provide Russian firms implicit or explicit advantages over international competitors. In 2018, the Russian Duma passed legislation endorsing further restrictions on Western imports in the event of the expansion of existing Western sanctions.