Russia

The Russian invasion of Ukraine completely altered the Basque Country’s trade relations with Russia, a country with which Basque companies had a smooth trade relationship particularly as a supplier of raw materials and steel products. The EU sanctions in response to the attack on Ukraine have meant that Basque business has had to restructures its supply chain in those sectors in which Russian raw materials and steel products were widely used. Trump taking up the US Presidency may change the outcome of the war in Ukraine and, therefore, alter the current trade sanctions on this country.

A key player in international trade

Russian is one of the largest markets in the world, with a highly trained workforce and an abundance of natural resources and raw materials. Even with the conflict in Ukraine and the EU and US sanctions, Russia has managed to improve its international relations, and is an indispensable partner of many Latin-American, African and Asian countries, which make it an indispensable country in international trade. Its alliance with China is expected to keep its key industries in growth.

Russia’s economic forecast depends on certain variables, such as the price of oil, EU sanctions and the course of the conflict in Ukraine. The greatest contribution to the Russian GDP will continue to come from the oil sector, as Russia has found ways of remaining on the western market by selling crude oil. That means that Russia’s growth will remain stable, mainly underpinned by high crude export figures and favourable relations with countries such as China and India. Its industrial sector will continue to stimulate the economy between 2025 and 2028.

The price of oil, along with the increase in demand, have kept Russia with a 2.5% surplus of the GDP this year. With the expect drop in the price of oil, the surplus is likely to shrink between 2025 and 2028. The construction of gas pipelines to China is expected to rally the economy, cut unemployment and increase consumer spending. Furthermore, the export levels to China are forecast to reach the export levels to the EU prior to the war, keeping Russian exports bullish.

Russia is one of the largest markets of the world, particularly for the oil sector. There are latent opportunities – should the existing sanctions be lifted – in the oil and gas sectors given the lack of equipment and spare parts needed to drill and refine oil in the country. Other possible opportunities come from the need for components, materials and works to build gas pipelines in order to export gas to the Chinese market. Outside that sector, Russia has expressed its need to roll out 5G due to a rise in the demand for internet, and it will therefore need components.

Russia is a country in which the risk has surged since the decision of its president, Vladimir Putin, to invade Ukraine. The huge dependency on imports in multiple sectors and the key economic dependency on oil exports add to the risks from the risks entailed in the complex Russian legal system, which does not currently guarantee investments from countries that have sanctioned Russia, such as the EU. International sanctions not only of the country, but also of some of its main customers such as China, could complicate the country’s situation even further. In addition to its slow and complex legal system, there are the banks mainly controlled by the state and a weak stock market which mean that the Russian market is not attractive for European companies.

Even though incentives and tax exemptions make Russia a country attractive in that regard, with a digitalised and modern tax system, the country is not attracting international investment due to the international sanctions imposed after the Russian investment of Ukraine. The state-controlled banking sector is subject to multiple international sanctions and the decline in the local stock exchange also makes it difficult for companies to access finance.

Russia is the world’s greatest producer of hydrocarbons, with rich reserves of raw materials, along with its extensive customer portfolio. Western sanctions on the country will limit its market, but the support of its powerful allies, such as China or India, will help it to keep its trade volume high. The non-tariff and tariff barriers are important, limiting the openness of the market. Furthermore, Russia’s poor international relations with the majority of the developed economies are limiting the country’s trade growth.

Goods imported into Russia are subject to customs duties. The rate depends on the type of good and the country of origin (in general, from 0% to 20% of the customs value). The import and export duties on Russian goods change weekly, particularly in the case of agricultural products. Companies will find multiple trade barriers, with the added complication that the duties and tariffs change regularly. Russia tends to have a planned rather than a free market, and most government measures are therefore protectionist.

The Russian legal system is increasingly more complex, making it very difficult for foreign companies to understand it. The legal system is not very transparent, lacks effective intellectual property protection legislation and the judicial system is not independent.

Contact office

BASQUE TRADE & INVESTMENT RUSIA

c. Zemlyanoy Val, 9, 4th floor, Office 4021 (Citydel)
105064, Moscú, Rusia

+ 7 49 9272 6091

* Office hours:

Monday to Thursday: 7.30 a.m. to 4.00 p.m.
Fridays: 8.00 a.m. to 1.00 p.m.

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