INVESTORS AND CONSUMERS BEGIN TO IMPORT AGAIN.

The October foreign trade balance of US$3.5 billion (calculated by Goskomstat on a balance of payments basis) was the smallest surplus earned since May of 2000. The average balance in the preceding 12 months was US$4.7 billion. While the cumulative trade surplus for the first ten months of the year was still a very substantial US$43.6 billion, this was 11.9 percent less than the surplus for the same period of 2000. The deterioration took place entirely in trade outside the CIS, as exports for the ten-month period were essentially stagnant from a year earlier while imports from that region surged 28.2 percent. The surplus with the Far Abroad for the first ten months of 2001 amounted to US$41.8 billion, down 14.2 percent from the same period of 2000. While the trade surplus with CIS countries remained small, that surplus more than doubled to US$1.8 billion in the first ten months of 2001 due to trends nearly the reverse of those in trade with the Far Abroad.

According to recent reports, one category of Russian exports, arms, performed quite well in 2001; the government is optimistic about further strong increases in 2002 as well. Exports of arms are expected to hit as much as US$4.5 billion in 2001, up from US$3.68 billion in 2000. The chief destinations of arms exports are China, India and Iran, but much of the increment in 2001 has gone to the Middle East, which now accounts for about 40 percent of total Russian arms shipments. Purchasers include Egypt, Algeria and Libya. The State Committee on Military-Technical Cooperation with Foreign Countries announced that it is aware of orders for 2002 already in hand to the tune of US$2 billion. That amount includes only orders processed through the Rosoboroneksport organization.

Imports from the Far Abroad surged 20.3 percent in the first ten months of 2001, while those from CIS countries increased by a mere 2.0 percent. The preference for imports from the Far Abroad is due to the categories of imported goods that have enjoyed the most rapid increases in demanda variety of processed foods and manufactured items, including machinery and equipment for investment, as well as consumer durables and nondurables. In the first three quarters of the year, imports of machinery and equipment, including transport equipment, increased 27.9 percent in dollar terms (Goskomstat).

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