A very interesting article here on EU and Russian trade shows that Russia is well integrated with EU trade and shows that some significant percentages of Russian trade were – actually are – with the EU (both imports and exports).
In 2020, less than 2 percent of EU total exports and imports went and came from Russia – remarkably, including oil and gas, while for the Russian economy this percentage was 34% of Russian imports of goods and services (and as a percentage of its GDP it was 21 percent in 2020). The article continues:
One factor explaining Russia’s sectoral trade profile and dependency is its poor labour productivity. Russian labour productivity in the industrial sector is 21 percent of US and 36 percent of EU’s labour productivity. In other words, the Russian economy needs five workers to do the job of one US factory worker.
Personally, I have my doubts that productivity is a key factor – though admittedly the differential is huge. I would actually like to have seen investment per employee instead – where I suspect – in an economy that owes so much to extracting mineral wealth, that there is little investment elsewhere – simply because the mineral wealth is so large.
I’d also add that the article mentions nothing of farming when we know that Russia is the world’s largest wheat exporter. That in and of itself is a potential threat to the world economy – if not to the EU’s.
However, Russia is a vulnerable economy for,
There were €22 billion of Russian imported products for which 75 percent came from the EU and the US, €7 billion for which this ratio was 85 percent, and €2 billion for which more than 95 percent of Russian imports were sourced from the EU and the US. In comparison, there were only ten product categories (out of 9,000) with a value of €8 billion (0.5 percent of EU imports) that the EU buys mostly from Russia – and half of the import value of these products were oil and gas.
The article is worth looking over, if you have the time. It does, I suggest, rightly conclude:
Understanding Russian import dependency, the number of product categories, and value of these products that Russia imports from the EU and the US is crucial to appreciate the economic shock to the Russian economy. The sudden stop in many of these exchanges will be difficult to overcome…..Some of it can be imported from elsewhere, but trade substitution of this scale in an economy under siege and faced with hard Foreign Exchange sanctions will take a very long time.
He suggests that looking at the map of these Chinese initiatives, they may be now almost completely broken:
I’m afraid I cannot see this case – most of these lines are railways that already exist – and amount to no more than Chinese paid usage. I very much doubt that Russia will prevent that!
I do agree though, when he says:
Unless something changes, China is revealed as a weak foreign policy player, having to respond to events such as invasion and sanctions, even by supposed allies, and showing no ability to shape them…..
Indeed, if we look at the group of countries not criticising Russia, it is more awkward squad than reliable allies for China, in particular Pakistan and India. All that effort and money spent, and hard to say China has any reliable foreign policy allies.
Certainly we can conclude that China and Russia are not bosom buddies… So he concludes:
….reports of the death of Western dominance and inexorable rise of China are rather premature….
But while possibly China is not so clever at foreign policy, it is much cleverer at domestic policy and its decision to require Western investment to require eventual majority Chinese ownership by a Chinese ‘partnership’ was inspired – and in stark contrast to the now vulnerable, and extractive, klepto-capitalist systems in Russia, based on the original advice of economists from the western world, which is a thoroughly self-defeating model.
In the West freedom is usually all.
While Ukraine has embraced the Western ‘ideal’, Russia is stuck with a deficit of both prosperity and freedom.
And it now looks as though, in Putin’s Russia, this deficit of both will be getting much worse.
That must be Ukrainian and Western hope…