Publication: Monitor Volume: 4 Issue: 39

Despite Moscow’s lip-service to the importance of economic ties with her giant Asian partners, Russia’s trade with China and India has fallen below the level attained in the Soviet era. The existing pattern still derives from Soviet-era commodity-swaps, and grandiose plans for Russian involvement in power-engineering projects in India or gas-export pipelines to China have been stymied by lack of investment capital.

India accounts for only 1.5 percent of Russia’s foreign trade, with turnover having fallen from $5.5 billion in 1990 to $1.4 billion in 1996. India imports newsprint, metals and fertilizer from Russia and exports tea, fruit and medicines in return. The bulk of Indian exports are not paid for in cash, but are in payment for India’s pre-1991 debts. This gives Indian entrepreneurs little incentive to seek out new Russian customers. Prior to 1991 Russia had exported about 5 million tons of oil to India under a swap agreement with Iraq: this ceased with the 1991 sanctions on Iraq. Coal deliveries, which had run at 2 million tons a year, are no longer profitable because of the hike in Russian rail costs. Russia has high hopes of participation in Indian power stations, the one project which has broken ground is the construction of the Kudankulam atomic power station, for which Russia is reportedly preparing a $2.6 billion credit. (Nezavisimaya gazeta, February 19)

The situation with regard to China is equally bleak, notwithstanding Prime Minister Viktor Chernomyrdin’s upbeat visit to Beijing in June 1997. Sino-Russian trade peaked at $7.7 billion in 1993, falling to $6.8 billion in 1996 and $4.3 billion in the first nine months of 1997. China accounts for less than 4 percent of Russia’s trade, and Russia for less than 3 percent of China’s trade. Sixty percent of Russia’s exports are ferrous metals and fertilizers, and another 26 percent machinery, mainly weapons (only half of which are paid for in cash, and the remainder in barter goods.) China’s exports consist of consumer goods and food, although it should be remembered that in addition to the official figures there is perhaps another $5 billion in unrecorded shuttle trade. (Pravda, February 17)

Despite Russia’s opening to a market economy, the country has failed to get a share of the economic boom that has gripped India and China since 1991. Russia’s trade with its Asian partners is still dominated by state-level contracts and clearing accounts inherited from the Soviet era. Geographical factors and the weakness of the transport infrastructure in Asiatic Russia mean that trade liberalization has seen most of Russia’s resources flow east. Correspondingly, Russian businesses — and the Russian government — have put most of their efforts into breaking into Western markets and entering the World Trade Organization.

Yeltsin to Visit Japan.