According to the Ministry of Agriculture of the Russian Federation (Minselkhoz), the year 2020 set a new record for Russia’s exports of agricultural products. Cumulatively, the country exported 79 million tons of products (worth $30.7 billion), a 20 percent increase year on year (Forbes.ru, March 8). This success inspired mainstream experts to issue exuberant declarations that Russia is “abandoning its notorious oil dependency” and the long-discussed diversification of its economy is finally taking concrete shape (Rossaprimavera.ru, February 25). The tone for this triumphalism—appearing well before official data was presented—was set by Valentina Matviyenko, the senator from St. Petersburg and chairperson of the Russian Federation Council (upper chamber of parliament). In a meeting last year with President Vladimir Putin and other senators, Matviyenko stated, “I am glad that by 2023 our oil and natural gas–based revenues will subside… This draws on the fact that our economy is becoming more dynamic and diversified, which is very important” (Lenta.ru, September 23, 2020).
It is true that in 2020, Russian exports reached 150 countries and experienced the highest year-on-year growth in China (13 percent), Turkey (10 percent) and Kazakhstan (7 percent) (RBC, March 9). According to the head of Gazprombank’s Center of Economic Forecasting, Darya Snitko, just prior to Moscow’s implementation of an import substitution strategy (2014), triggered by economic sanctions introduced by the European Union, Russian imports of foodstuff and agricultural products exceeded exports by approximately $25 billion. But today, the situation is dramatically different (Rossaprimavera.ru, February 13). Russian economists note that several factors are responsible for this recent success. First, last year was marked by a record-high grain harvest, which allowed Russia to “fully cover domestic needs and enhance export capabilities.” Second, the devaluation of the Russian national currency, the ruble, made Russia’s exports more competitive and allowed Minselkhoz to increase operational incomes due to the difference in currency prices. Third, the outbreak of COVID-19 resulted in skyrocketing demand for agricultural products (due to increasing consumption) worldwide, and Russia managed to fill the void on the global market with its exports (Regnum, March 9). Furthermore, as noted by the head of the Union of Grain Exporters, Eduard Zernin, Russia’s success owes to simultaneous production slowdowns of other strategic competitors, primarily, the EU and Ukraine (Rossaprimavera.ru, February 3).
This glittering image, however, does not reflect the full picture of Russia’s exports, which is much more complex and less one-sidedly positive than that presented by mainstream Russian experts.
First of all, in comparison with 2019, in 2020, Russia’s volume of total exports actually shrank by 20.4 percent. Most crucially, according to official Russian sources, the main decrease in revenues—due to constrained exports—was observed in such strategic and traditionally economically crucial areas as oil and oil-related goods, ferrous-based products, fertilizers, vehicles, and heavy machinery and equipment (Russian-trade.com, February 13). Indeed, research done by FinExpertiza (a network of professional audit, valuation and consulting firms) estimated that, in 2020, the overall amount of Russian exports collapsed by 20.7 percent (approximately $88.1 billion)—data that largely agrees with official government statistics—which set a record for the past five years. According to the report, the main declines befell exports of oil, gas and coal (which fell by 36.4 percent). Moreover, that collapse could have been worse if the second half of the year had not seen some rebound of oil prices. Russia’s export capabilities were only somewhat boosted by growing demand for its agricultural products and precious/rare earth minerals, including gold. In the final analysis, the FinExpertiza report argues that, in the future, the overall revenue accrued from raw materials can be expected to decrease further, which will necessitate structural economic changes on Russia’s part. If these structural transformations are not introduced, the Russian economy may be facing multi-year stagnation (Lenta, February 19).
Second, Moscow is effectively reinstituting the notorious “we-must-go-hungry-but-export” policy. First articulated in the late 19th century by Ivan Vyshnegradsky (Russian finance minister during 1887–1892) and later continued by the Bolsheviks (albite in a far more inhumane manner), this aggressive export strategy seems to have at least partly returned today. Specifically, while dramatically increasing crop and foodstuffs sales to foreign markets, Russia faces a pair of major socio-economic problems on the domestic front. According to the Federal State Statistics Service (Rosstat), by early 2021, domestic Russian prices for consumer goods increased by 8.2 percent compared to last year; while in the EU, the same prices only rose by 1.1 percent. At the same time, as a result of growing inflation in Russia, this period was marked by deficits of some essential basic goods, including, among others, poultry (Kapital-rus.ru, March 9). The Russian government, including Putin, admitted this trend. And Moscow is now considering taking measures (including governmental regulations as well as setting “hard prices”) to combat the issue (RBC, January 21).
The third consideration is the (controversial) China factor. As stated in Russian official sources and state agency–generated reports, Russia’s largest importer of agricultural goods is China. Over time, this might become a mixed blessing. Specifically, the head of the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) Sergey Dankvert noted that while 70 percent of the country’s total exports of fish (and marine resources) goes to China, recent events have vividly demonstrated the perils of dependency on de facto a single importer. Namely, at the end of last year, China banned the entry of Russian seafood allegedly due to traces of COVID-19 found on imported fish. Dankvert warned that this episode might not be “just a temporary crisis” but “a part of China’s long-term strategy that will allow them [Chinese] to regulate imports of any […] agricultural goods from Russia.” He concluded that in terms of marine resources, China is essentially a monopsony buyer of Russia’s exports, which could have overtly negative consequences for Russia in the future (Rossiyskaya Gazeta, March 8).
On the surface, Russia appears to have made a solid step toward diversifying its exports away from the decades-long dependence on hydrocarbons. But upon closer scrutiny, the picture looks far less unequivocally rosy than the triumph presented by mainstream Russian economists and commentators.