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Russia: Tensions with the West Remains

Key Information
Population147 million
CurrencyRussian ruble
Official languageRussian
Form of governmentRepublic


Major Merchandise Exports (% of total, 2016*)Major Merchandise Imports (% of total, 2016*)
Oil, fuel & gas (59.1%)Machinery & equipment (47.3%)
Metals (13.3%)Chemicals (18.5%)
Machinery & equipment (8.5%)Food & agricultural products (13.7%)
Top Three Export Markets (% of total, 2016*)Top Three Import Markets (% of total, 2016*)
Netherlands (10.3%)China (21.1%)
China (9.5%)Germany (10.6%)
Germany (7.4%)US (6.1%)

* Most recent data available
Source: Economist Intelligence Unit

Political Highlights

Vladimir Putin has been Russia's dominant political figure since elected as president in 2000, serving three terms and a four-year stint as prime minister. He seeks to enhance Russia’s geopolitical influence and reassert the world power. Putin won the presidential election in March 2018 and will remain as Russian leader by the end of his term in 2024.

Tensions with the West have driven an upsurge in nationalist and anti-West sentiment in the country, while the government’s economic policy has grown more protectionist. The US and the European Union (EU) are currently imposing sanctions on Russia, and restrictions on access to capital markets targeting Russia's banking, oil and defense sectors. In response, Russia bans a wide range of food imports from the US, the EU, Australia, Canada and Norway, among others. Tensions with the West are likely to remain in the near future.

As the economy has been hit by low oil prices and international sanctions, Russia started looking for new partners and growth opportunities in Asian markets. It signed a 30-year, US$400 billion deal with China to supply natural gas to northeast China. It is also seeking to market its weapons and military equipment as well as expertise in the energy sector.

Economic Trend

Economic Indicators2015
Nominal GDP (USD bn)1,3631,2801,5741,6641,773
Real GDP growth (%)-2.8-0.21.5*1.71.8
GDP per capita (USD)9,2808,71010,710*11,32012,070
Inflation (%)
Budget balance (% of GDP)-2.4-3.4-1.4-1.0-0.8
Current account balance (% of GDP)*3.12.8
Government debt (% of GDP)
External debt (% of GDP)34.341.034.1*33.131.7

* Estimates  ^ Forecasts
Source: Economist Intelligence Unit

Russia is a major exporter of crude oil, petroleum products, and natural gas. Sales of these fuels account for 60% of Russia's total export revenue and the hydrocarbon sector contributed to half of the federal budget revenue. The country's reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the fluctuations in global prices. A combination of low oil prices and western sanctions pushed Russia into recession in 2015 and 2016, while the ruble has depreciated by roughly 40% against the US dollar since the beginning of 2014.

Currently, the sanctions imposed by the West are mainly targeted to block deals and cut business ties with key sectors of the Russian economy. In particular, the US and EU sanctions prohibit their citizens or companies from providing new financing to major state-owned Russian banks and energy companies with a maturing exceeding 30 days.

Russia’s international reserves were still large, equivalent to nearly 17 months of imports at the end of 2017. Current account surpluses, a flexible exchange rate regime and the injection of liquidity into the banking system also cushioned the shocks. After a two-year recession, the Russian economy has rebounded, supported by a partial recovery of oil prices. Nevertheless, economic growth is likely to remain low in the short term, on the back of enduring sanctions, fiscal consolidation and relatively low oil prices.

Chart: Hong Kong total exports to Russia
Chart: Hong Kong total exports to Russia

Hong Kong-Russia Trade

Total exports from Hong Kong to Russia increased by 39.4% from HK$15,685 million in 2016 to HK$21,868 million in 2017. The top three export categories to Russia were: (1) telecommunications and sound recording and reproducing apparatus and equipment (+19.7%), (2) office machines and automatic data processing machines (+92.1%), and (3) electrical machinery, apparatus & appliances, and electrical parts thereof (+49.3%), which represented 84.2% of total exports to Russia.

HKECIC Underwriting Experience

HKECIC imposes no restrictions on covering Russian buyers. Currently, the insured buyers in Russia range from small and medium sized companies to large scale retail groups. The Corporation’s underwriting experience on Russia has been satisfactory, with no claim payment or payment difficulty case reported from May 2017 to April 2018.

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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