Russia is some way off shifting trade from EU to China

Outlook

China has grown in importance as a Russian export destination over the last two decades, particularly since 2014 when Moscow targeted it as a strategic alternative to the West. Exports to China grew by 50% in 2014-18 while imports from the EU fell due to Western sanctions and Russia’s retaliatory food import ban.

Even so, Russia’s trade with the EU far outweighs its trade with China. The contours of both trading relationships are similar: Russia is primarily a raw materials exporter while importing higher value-added goods. The 2015 formation of the Eurasian Economic Union has yet to boost intra-regional trade, although Russian exports to former Soviet states are still comparable to China.

Impacts

• Germany is Russia’s second largest partner after China but bilateral trade fell from 70 to 60 million dollars in 2014-18.
• Russian grain exports are likely to outstrip arms sales consistently, barring spells of poor weather.
• As an added incentive, the government is prolonging the zero-rate export tax on wheat until July 2021.