In 1998, the tradeturnover with the CIS countries was US$ 28.6 billion,which is by 20.6% less than in 1997. The share of the CIS countries in theaggregate commodities turnover with the CIS countries reduced by 0.8% down to21.5%.
The trade balance was positive,US$ 1.2 billion (against the US$0.7 billion in 1997). The tendency to thegrowth of the positive balance resulted, in many aspects, from the financialcrisis of August 1998. It should be noted that during the several previousyears (1995 to 1996) the balance was negative. In addition, for example, thebalance of the trade with Byelorussia was negative in 1997, as well:US$ 106.9 billion; in 1998, the positive balance of US$ 67.4 billion formed Inwhole, even in 1998, Russia maintained the positive trade balance with the CIScountries only up to the beginning of the second quarter-year: beginning fromApril, the import began exceeding the export, though insignificantly; onlyafter the August events, the situation made the U‑turn.
Among the CIS states, Byelorussia,Kazakhstan, Uzbekistan, and Ukraine continue staying the main trade partners ofRussia; their aggregate share in the trade between Russia and CIS is 92%.However, in 1998, the specific share of the Russian trade with Ukraine, thelargest trade partner of Russia, reduced by 1.6% down to 35%. During 1997,despite the distancing of Ukraine from most of the integration programs in theframework of the CIS, the trade turnover between Russian and Ukraine showed thetendency to growth. As for the countries within the Customs Union, the contrarytrend was observed: the share of these countries in the aggregate turnoverbetween Russia and CIS countries grew by 5%, up to 55%. Probably, in 1999, thisindex will grow even more when Tajikistan joins the Customs Union.
In 1998, the export from Russia was US$ 14.9 billion,which was by 18.7% less than in 1997. The main cause of the reduction of theRussian export cost was the cutback of the export prices for the CIS countriesby more than 13%, due, first of all, to the drop of the oil prices. However,the physical volumes of export of certain goods showed the positive dynamic:the Russian export of the crude oil to these countries grew by 12.2%; thegrowth for the petroleum products was18.3%; the export of the coal grew by 55%;and the export of the iron ore grew by 9.0%.
In 1998, the commodity structure of theRussian export remained stable: its main share fell on the fuel and energyresources and mechanical engineering products (respective 48.9% and 13.9%).However, the export of the machinery and equipment was under the effect of theopposite direction factors: at the beginning of 1998, the export of theseproducts was growing due to the lowering competitiveness of the Russianmanufacture products in the world market, their redirection to the neighboringcountries, and the low efficiency of the Governmental support of the export tooutside the FSU. However, the lack of the budget resources, the illogicaleconomic policy, and the high level of risk for the national markets of the CIScountries have conditioned the extremely low level of demand for the investmenttype equipment.
The financial crisis in Russia was a highpower bomb for the national currencies of the neighboring countries and sharplyreduced the inflows of the foreign investments in them. As for the results ofthe year 1998, the supplies of the machines and equipment reduced by 35.9%compared with 1997.
In 1998, the volume of the import wasUS$ 13.7 billion, which was by 22.6% less than in 1997.
The structure of the import by commoditiesshowed the predominance of the food, products for the processing enterprises ofthe agrarian production complex, machinery and equipment, and products of theferrous metallurgy.
In 1998, the most significant reduction ofthe Russian import was seen for the following items: by 43.7% for thefresh-frozen meat; by 68.8% for the refined sugar, by 61.1% for the grain, andby 19.6% for the machinery and equipment.
The greater reduction of the import fromthe CIS countries (in 1998, the import from the outside FSU reduced by 17.9%)was, in many aspects, due to the low quality of the exported goods, theirpacking, low terms of storage, and higher, compared with the outside FSU,import prices: by 22.9% on the fresh frozen meat; by 40.4% on the fresh frozenpoultry meat; 2‑foldon the fresh-frozen fish; 1.4‑fold on the butter; and 2.0‑fold on the raw sugar.
With all these, the import of the foodsensured, mainly, by the supplies of the neighboring countries, reduced, e.g.,the import of the refined sugar; hence, the reduction of the share of Ukrainein the aggregate volume of the Russian external trade.
The reduction of the cost of the Russiantrade with the CIS countries was also affected by the mutual lowering of thecontract prices on the certain important products, including the crude oil,coal, fresh-frozen meat, and butter exported from Russia.
The comparative analysis of the monthlyranges of the average prices on the above produce has shown that the certaingrowth of the crude oil export prices observed in January and February 1998(from the US$ 98.00 per MT to US$ 103.00 per MT) was replaced by their gradualreduction to US$ 65.00 per MT to October 1998. The similar tendency was seen,in 1998, with the supplies of the coal and petroleum products to the CIScountries: the respective price drops were from the US$ 33.00 per MT down to22.00 US$ per MT and from US$ 176.00 down to US$ 111.00 per MT. During 1998,the change of the prices on the natural gas and electric energy was notsignificant: the variation was, mainly, within the limits of US$ 54.00 perm3 to US$ 59.00 perm3 and US$ 25.0 per kWh toUS$ 27.00 per kWh.
As for the back supplies from the CIScountries of the fresh-frozen meat and butter, these saw the growth of therespective contract prices, in January to May 1998, up to theUS$ 1,934.00 per MT and US$ 2,760.00 per MT; then the respective drops down tothe US$ 1,500.00 per MT and US$ 2,100.00 per MT followed.
During the first nine months of 1998, thevolume of the barter exchange with the CIS countries was equal toUS$ 4.2 billion, or the reduction by 14% compared with the relevant period of1997. Hence, the export from Russia reduced by US$ 1.8 billion (or by 24%) andthe import from Russia reduced by US$ 2.4 billion (or 5%). As for the barterexchange with the CIS countries, the tendency opposite to the one of thegeneral turnover trend has been observed: the import from the CIS countries hasexceeded the export by almost US$ 0.6 billion.
As for the barter exchange in the aggregatevolume of the barter with all the countries of the world, it was 77% as for thecommodity turnover within the framework of the CIS countries, it was22%.
As for the commodity structure of theexport to the CIS countries, the prevailing items are the fuel and energyresources (49%); mechanical engineering products (17%); and chemical industriesproducts (12%). As for the structure of the barter-type import from thesecountries, the prevailing items are the ferrous and non-ferrous metals (29%);mechanical engineering products (22%); and energy resources.
As of today, the outstanding debts of theCIS countries to the Russian commodity producers only for the energy resourceshave amounted (as of 1 December 1998) to Rbl. 41.5 billion, including Rbl. 19.4for Ukraine; Rbl. 8.2 billion for Kazakhstan; and Rbl. 5.3 billion forByelorussia.
The greatest share of the outstanding debtsto Russia falls on the natural gas (64% of the aggregate production volume) andelectric energy (28% of the aggregate production volume).
The payment for the cost and transport ofthe Russian natural gas via the Ukrainian territory has remained crucial, aswell. Though, in 1998, Ukraine reduced the tariffs for the transport of theRussian natural gas via its territory; it has declared its readiness to leaveits transport at no cost (32 billion m3 annual) at the account of repayment of its debts for the naturalgas, in whole, the problem of the payment for the Russian natural gas has notbeen settled, yet.
The similar situation is forming with thepayments for the supplies of the natural gas to Byelorussia: despite the factthat Byelorussia has signed the Agreement to pay the US$ 225 million till theend of 1998, only 10% of the declared sum have been actually paid.
The influence of the today’s crisis in Russia on theevolution of the trade links in the CIS will, seemingly, be of the ambiguouscharacter. For the one hand, the sharp worsening of the situation with theRussian import due to the devaluation of the Ruble should have had the lessereffect on the trade with the FSU countries because the settlements with thesecountries remain based on the clearing and barter. Hence, one could havesupposed that the share of the CIS countries in the Russian trade turnoverwould somehow grow. Besides, immediately after the beginning of the crisis, itseemed that the foreign currency exchange rate forecast for the following sixmonths could be not only a protection for the Russian producers giving them, ata reasonable pricing policy, the possibility to expand their market nicheinside the country, but also the possibility to increase their supplies to theCIS countries, thus improving the positive trade balance.
For the other hand, the crisis has led tothe significant weakening of the positions of Russia as the center and motiveforce of the integration within the framework of the Commonwealth, has reducedthe role of the Russian currency in the settlements between the partners withinthe CIS, etc. Though Russia has been and remains the main or one of the mainexternal trade partners for all the countries of the Commonwealth, and manycountries are fully dependent of not only the supplies of the Russian energymedia (Byelorussia, Ukraine, Kazakhstan) but are also critically dependent ontheir export to Russia (Byelorussia, Moldavia), the Russian crisis has onlyintensified the already existing tendency to the development of the bilateraland multilateral relations between the CIS countries without the participationof Russia.
Even during the pre-crisis period, theneighbor countries had been to a certain extent oriented to the export of theavailable feedstock resources to the countries outside the FSU or the transitof the Russian energy media via their territories. The situation has aggravatedwith the drop of the world energy media prices.
The crisis has made the situation with thegrowth of the negative balance in the trade with Russia practically impossibleto settle. The sharp drop of the Russian Ruble rate does not allow anymore toefficiently solve the problems of the negative trade balance by the growth ofthe export to Russia; this makes the neighbor states to limit their import fromthere. Thus, in January 1999, for the first time since the creation of theCustoms Union, Kazakhstan fixed the limits on the import of the Russian food,including meat, milk, and butter, for the 21 items of goods in total. Thoughsuch policy of Kazakhstan does not directly contradict the conditions of theCustoms Union on the possibility to limit the import in the event of menace tothe national producers, it will, without doubt, worsen the positions of theRussian producers for which conserving the former volumes of the export is oneof the not numerous ways to exist under the crisis.
Thus, the attempts of certain countries ofthe CIS to get out of the crisis situation are, rather, of the centrifugalcharacter. The leaders of the post-Soviet stated are not really aimed at thejoint actions to overcome the crisis, which actions require, in particular, thejoint economic policy and unification of the external economiclaws.
The interest of the countries of theCommonwealth in the economic cooperation with Russia had been, in many aspects,stimulated by the relatively longer way hour country had followed by the way ofthe reforms. And the deceleration of the economic transformations can make tothe integration tendencies such damage that will overweigh all the politicaldeclarations on strengthening of the unity and friendship. Already today, theCIS countries are trying to diversify their import and export flows and lookingfor the ways to the new markets; if the today’s tendencies remain the same,this will result in the reductions of the volumes of the mutual trade withinthe framework of the Commonwealth.
Regulation of external trade
In 1998, the issues of protection of thedomestic market were being solved by the methods of the tariff and non-tariffregulation of the external economic activity.
In 1998, the drafting of the new version ofthe Russian Federation Customs Code was completed; its purpose is to developthe external trade of the country, create the conditions for the support of thedomestic manufacturers, and counteract the violations of the customsregulations and smuggling. The amendments have been made to the rates of theimport duties on certain goods (medicaments, articles and equipment for medicalindustry, certain foods, accumulators, and chemical products).
The set of the measures aimed at improvingthe governmental regulation of the production and turnover of the ethyl alcoholand alcohol containing products; the licensing of the alcohol import and exportwas implemented. On 13 January 1998, the Law "On the Fees for Issuing of theLicenses on and the Right to Produce the Ethyl Alcohol and Alcohol-ContainingProducts" was promulgated.
In order to protect the branches of economyand individual subjects of economy against the unfavorable effect of theforeign competition, the Federal Law "On the Measures of Protection of theEconomic Interests of the Russian Federation at the Foreign Trade in Goods", of14 April 1998, # 63‑FZ, was promulgated.
The Kaliningrad region had been the onlyone to which the foreign goods had been imported without the duties and VAT.The Governmental Act of 5 March 1998, # 281, limited the duty-free import tothe region of 35 kinds of goods. The quotas on the duty-free import to theKaliningrad region of the alcohol, cigarettes, gasoline, certain kinds ofchemical feedstock, construction materials, furniture, certain kinds of food,and second-hand passenger cars were introduced. For the goods imported over thequotas, the duties shall be levied under the general terms and conditions. Itwas the regional administration that had made the efforts to obtain theGovernmental Act in order to protect the Kaliningrad region enterprises againsttheir foreign competitors.