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NEW REALITIES FOR RUSSIA-USA TRADE AND INVESTMENT

N. Volgina, S. Balashova

Abstract

Russia-USA economic relations are subjected today to new realities, which imply a combination of effects, including geopolitical situation in Crimea and Eastern Ukraine, mutual economic sanctions that coincided with other negative phenomena in the Russian economy, such as the dramatic drop in oil prices and depreciation of rouble. These events have seriously affected trade and investment statistics with USA. During last years U.S.-Russia economic ties were relatively limited and now they are decreasing. The USA is accounted for a relatively small share of Russia’s overall trade and inflows of investment and vice versa. By the end of 2015 commodity turnover between Russia and the U.S. had decreased by 27.9% to $20 billion. And in comparison to the maximum figures in 2011 ($43 billion), turnover has fallen by 50%. USA has never been a key investor into the Russia’s industries. European countries, first of all, Germany, France and United Kingdom, are the main foreign direct investors, mostly because of close geographical location and tight trade links during last decades. American FDI inflows to Russia started to decrease before 2014 mostly because of economic reasons – deteriorating of post-crisis economic situation in Russia. Sanctions played here a second role and strengthened the trend. According to U.S. statistics estimates the total volume of direct U.S. investments in Russia's economy is around $9 billion or 0.2-0.3% of all U.S. FDI stock abroad. Nevertheless the actual participation of American business in Russia is higher and ties at the firm- and sector-level are in some cases substantial. Several large U.S. companies export to Russia; some of them have entered joint ventures with Russian partners, and are reliant on Russian suppliers for inputs. These are ExxonMobil, Ford Motor Co., General Electric, Boeing, and some others. Despite all these negative trends in mutual trade and investment, Russia is still attractive for large American business in the long-run perspective because of extensive natural resources, and the size and sophistication of the market.

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