The Ukraine crisis and the evolution of Russia’s geo-economy

QU Wenyi 1,2 SU Zhaorong2,3

(1.Research Center for the Economies and Politics of Transitional Countries, Liaoning University)
(2.School of International Economics and International Relations, Liaoning University)
(3.Nanchang Institute of Technology)

【Abstract】Due to the deterioration of relations with the West after the Ukraine crisis, Russia has shifted its focus of geo-economy to the East, a move that has been put into the spotlight. This article uses Russia’s foreign trade and foreign direct investment (FDI) data to investigate in detail the evolution of the country’s geopolitical economy and finds that the actual dependence of Russia on Europe so far has not changed significantly, especially in terms of energy and raw material exports, foreign investment, as well as imports of some key high-tech products. At the same time, however, the deterioration of its geopolitical relations with the West has actually accelerated the pace of the country’s geopolitical economy shifting to the East, especially in terms of import trade—the Asia-Pacific region has replaced Europe as Russia’s largest source of imports. China’s share in Russia’s foreign trade has predictably risen sharply, but its role in Russia’s external financing has been quite limited. The Asia-Pacific region, especially China, cannot completely replace the role of Europe in terms of capital and technology movement, which may be one of the reasons why some Russian scholars have questioned the country’s eastward shift strategy. But in a longer period of time, because of the shift of the global economic power to the Asia-Pacific region being an inevitable trend, the process of the eastward shift of Russia’s geoeconomic ties will be sustained and stable. In time, the fundamental shift of Russia’s geoeconomic ties to the Asia-Pacific will be irreversible.

【Keywords】 Ukraine crisis; geo-economy; Russia; eastward shift;

【DOI】

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    Footnote

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    [3]. [2] Refer to the Eurasian Geo-economic Report released by the Astana Club: Иван Тимофеев, Елена Алексеенкова,Геоэкономика Евразии: взгляд из России, Казахстан: Astana Club, 2016 (2): C. 56–63, https://astanaclub.kz/# [2019-01-02]. [^Back]

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    [11]. [3] Qu, W. Russian,East European & Central Asian Studies (俄罗斯东欧中亚研究), (2): 1–20 (2018). [^Back]

    [12]. [4] Леонид Козлов, Поворот России на Восток – иллюзия геополитического выбора, 21 апреля2016, https://primamedia.ru/news/500879/[2018-11-03]. [^Back]

    [13]. [5] I. Overland and G. Kubayeva, “Did China Bankroll Russia’s Annexation of Crimea? The Role of Sino-Russian Energy Relations”, https://link.springer.com/chapter/10.1007/978-3-319-69790-1_6[2019-1-6]. [^Back]

    [14]. [1] Тимофей Бордачев, Лицом к Азии--Итоги поворота России на Восток в 2016 году, 22 декабря2016г., https://lenta.ru/articles/2016/12/22/face_to_face_with_east/[2018-12-01]. [^Back]

    [15]. [1] In this paper, “Europe” and “Asia-Pacific” refer to the total of the countries and regions that have joined the European Union and APEC, respectively. “Eurasia” is a general term for the post-Soviet space, which includes Turkey in the specific text. [^Back]

    [16]. [1] The data in this part are based on the data of the Russian State Statistics Administration and the Russian Federation Customs. [^Back]

    [17]. [1] It ranked third in 2008, fourth in 2013, and further went down to fifth in 2017. [^Back]

    [18]. [2] It ranked ninth with 3% in 2013, and went up to the seventh place with 4% in 2017. [^Back]

    [19]. [3] Refer to Table 2 and Table 3; after “other commodities” are excluded, it includes the nine major categories of commodities. [^Back]

    [20]. [1] Russian exports are typically characterized with raw materials exportation. The two largest categories of exports are mineral products and metal products, and together they constitute 70%–80% of Russia’s total exports. [^Back]

    [21]. [1] The data in this part are based on the data of the Russian State Statistics Administration and the Russian Federation Customs. [^Back]

    [22]. [1] Ukraine’s ranking fell from the fourth place (5%) to the tenth place (2%), while Belarus’s ranking climbed from the sixth place to the fourth place, with its share rising from 4% to 5%. [^Back]

    [23]. [2] For a long term, Russian imports have been mainly demonstrated in three categories of commodities: machinery and equipment (making up nearly half of the total imports), chemicals (accounting for about 15%) and food (taking up 10%–15%); and the three together usually constitute 70%–80% of Russia’s total imports. [^Back]

    [24]. [1] The United States and Europe have had the different specific regulations on economic sanctions against Russia. For example, the European Union restricted Russia’s oil industry but did not restrict the natural gas industry, while the United States restricted the oil and gas industry at the same time; Europe allowed Russia to perform the agreements signed before the sanctions but the United States did not allow this. See M. Russell, “Sanctions over Ukraine: Impact on Russia”, European Parliamentary Research Service, 2016, PE 579.084, 1–12. [^Back]

    [25]. [2] See the report released by BOFIT: Iikka Korhonen, Heli Simola and LauraSolanko, “Sanctions, Counter-sanctions and Russia-effects on Economy, Trade and Finance”, BOFIT PolicyBrief, 4/2018, 30 May 2018, https://helda.helsinki.fi/bof/handle/123456789/15510[2018-12-21]. [^Back]

    [26]. [3] See “Russia Total External Debt”, December 23, 2018, https://tradingeconomics.com/russia/external-debt[2018-12-21]. [^Back]

    [27]. [1] In terms of the investment data, Europe covers the European Union (excluding Malta), Switzerland and Norway, and the Asia-Pacific includes the 15 countries and regions in APEC except Russia (excluding the five countries of Papua New Guinea, the Philippines, Peru, Brunei and Chile); the tax havens include the 11 countries or regions of Belize, Bermuda, British Virgin Islands, Gibraltar, Jersey, Bahamas, Panama, Cayman Islands, Seychelles, Saint Kitts and Nevis, and Isle of Man; and the Eurasian region is replaced by the CIS. Turkey’s direct investment in Russia basically accounts for about 1/3 of the FDI from the Eurasian region, but this fails to change the direct investment status of the region in Russia. In summary, the statistics roughly covers the main countries or regions from which Russia has attracted the FDI. [^Back]

    [28]. [2] According to the definition made by the Russian Central Bank’s Statistical Bulletin on international direct investment, the reason for the negative value of flows may be due to the following. Firstly, the funds repaid to foreign investors by the domestic subsidiaries, joint ventures or member companies in Russia in the current year (or in the previous years) are in excess of the funds made by such foreign investors in Russia’s domestic companies; secondly, the receivables between Russia’s domestic companies and foreign investors are less than the payables. [^Back]

    [29]. [1] The United States ranked 11th in 2015 and 2016, and 12th in 2017. [^Back]

    [30]. [2] China ranked 14th in 2016 and 16th in 2017. [^Back]

    [31]. [1] See Economic and Commercial Counsellor’s Office of the Embassy of the People’s Republic of China in the Russian Federation. Http://ru.mofcom.gov.cn/article /jmxw/201706/20170602585050.shtml [2018-12-15]. [^Back]

    [32]. [2] В. Загашвили, Западные санкции и российская экономика, Мировая экономика имеждународные отношения, No 11, Ноябрь 2015, C. 67–77. [^Back]

    [33]. [1] China and Russia are highly complementary in the resource industry and they have the great potential for cooperation. However, some non-economic factors, especially ideology, have imposed restriction on the investment cooperation between the two in terms of energy and raw materials. For relevant research, see Qu, W. China Market (中国市场), (29): 20–26 (2011). [^Back]

    [34]. [2] Н. С. Розов. “Геополитика, геоэкономика и геокультура: взаимосвязь динамических сферовистории России”, Общественные Науки и Современность, 2011 · № 4: 107–121. [^Back]

This Article

ISSN:1007-0974

CN: 11-3799/F

Vol , No. 02, Pages 123-141+7

March 2019

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Article Outline

Abstract

  • The geospatial evolution of Russia’s export trade
  • The geospatial evolution of Russia’s import trade
  • The evolution of Russia’s geographic space for attracting foreign investment
  • Conclusion
  • Footnote