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Aug 24, 2022
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Huge amounts of trade surpluses are leaving Russia through several channels

The main sector of the Russian economy turned out to be a “nanny without an eye” for the state

https://t.me/fsk_today

​​​​​​​If we evaluate the importance of industries and sectors of the Russian economy by their share in the gross domestic product, then many will put the oil and gas sector in first place. In 2017, Rosstat for the first time published such an indicator as the share of the oil and gas sector in the generated GDP. It turned out to be equal to 16.6%. An impressive share, although many believed that it was higher. At the end of 2021, Rosstat estimated this share at 17.4%.

However, there is one sector of the Russian economy that surpasses the oil and gas sector in terms of the scale of operations. If we evaluate it using the relative indicator of GDP. We are talking about foreign trade (export and import). Let us turn to Rosstat data, which allow us to estimate the value of exports and imports both in absolute cost indicators (Russian rubles) and in the form of relative indicators (share in GDP).

tab. one.

Cost volume of exports and imports of goods and services of the Russian Federation in relation to gross domestic product (GDP), %

1997

2000

2010

2016

2019

2020

2021

Export

24.7

44.1

29.2

30.8

27.0

26.6

26.3

import

22.5

24.0

21.5

14.7

21.1

21.7

24.2

Balance

2.2

20.1

13.7

16.1

5.9

4.9

2.1

I would like to draw your attention to the fact that throughout the existence of the Russian Federation, its foreign trade has always been characterized by an excess of exports over imports. In other words, a surplus, or trade surplus. In some years, the surplus was measured in double digits. Thus, in 2000 it amounted to 20.1% of GDP. In some years, the excess of exports over imports was twofold or even more. For example, in 2016.

To be honest, such “records” cause bewilderment and anxiety. Especially when you consider the trade balance in the context of the balance of payments of the Russian Federation. It is clear from the latter that gigantic sums of trade surpluses are leaving Russia through several channels. First, these surpluses pay for the income of foreign investors withdrawn from the country. Secondly, surpluses are transformed into the export of private capital from the country, which goes to the West and offshore jurisdictions. Thirdly, with the help of this currency, the Central Bank builds up international reserves, which is also a kind of export of capital that fuels Western economies.

If you call everything by its right name, then chronic trade surpluses are a manifestation of the colonial robbery of Russia by the West. Using data from the Bank of Russia, you can calculate the extent of this robbery. The balance of payments of Russia is posted on the website of the Central Bank from 1994 to the present day.

I will give aggregated estimates of the total trade surpluses of the Russian Federation for four periods. The first period is from 1994 to 2000; the second – from 2001 to 2010; the third – from 2011 to 2020; the fourth – from 2021 to mid-2022.

So, the value of total surpluses (billion dollars):

first period – 137.6

second period – 899.7

third period – 1.187.3

fourth period – 328,

In general, for the period from 1994 to mid-2022, the trade surplus amounted to $ 2.553.1 billion. These are the approximate scale of the robbery of Russia in twenty-eight and a half years. I say “approximate”, meaning that they are most likely underestimated. For the reason that the data of the Central Bank reflect only legal transactions in foreign trade, which are recorded by the FCS. And there are still illegal operations, or smuggling. And the scale of such smuggling, according to experts, has always been very significant.

The problem of imbalances in Russia’s foreign trade has come to the fore particularly clearly this year, especially after February 24th. I have already written about this many times. According to the Bank of Russia, exports of goods and services from Russia in the first half of this year amounted to $319.5 billion, imports – $161.1 billion, and a trade surplus – $158.4 billion.

The Bank of Russia has already published an estimate of the surplus for the first seven months of 2022, it grew to $192.4 billion. For seven months, the surplus amounted to a value that exceeds the record surplus figures for the whole year. And the record surpluses were the following years (billion dollars): 2018 – 165.9; 2011 – 163.4; 2008 – 157.2. According to most experts, the surplus will continue to grow in the remaining months of 2022. No one doubts that by the end of the year, the excess of exports over imports will be at least $300 billion and will be approximately twofold.

And if earlier the monetary authorities of Russia (the Central Bank and the Ministry of Finance) rejoiced at surplus records, today they are also expressing concern. After all, most of the surplus now consists of the so-called toxic currencies (first of all, US dollars and euros), which can be frozen or even confiscated at any time.

The sanctions war against Russia for the first time made many think: why do we need such trade surpluses? Is there any department in the state that is authorized to control and regulate the state of the trade balance?

In the USSR, as many people remember, there was the Ministry of Foreign Trade (MFT), which implemented the principle of the state monopoly of foreign trade. All foreign trade was in the hands of the state: the MVT carried out planning and general management of foreign trade, and practical operations were carried out by specially authorized all-Union foreign trade associations that specialized in certain commodity groups (in the 1980s there were about fifty such associations). The IMT was also responsible for balancing exports and imports. Any imbalance in trade was treated as an emergency.

There was no longer a state monopoly of foreign trade in the Russian Federation. However, the department in charge of foreign trade continued to exist by inertia. At first it was called: Ministry of Foreign Economic Relations of the Russian Federation (Ministers: V.N. Yaroshenko, P.O. Aven, S.Yu. Glazyev, O.D. Davydov). In 1997, the department was reorganized into Ministry of Foreign Economic Relations and Trade of the Russian Federation (Minister – M.E. Fradkov). In April 1998, the department was abolished. Foreign trade issues were transferred to the newly created Ministry of Industry and Trade of the Russian Federation (Ministers G.V. Gabunia, Yu.D. Maslyukov). In September of the same year, a Ministry of Trade of the Russian Federationissues of foreign trade were transferred to him (Ministers G.V. Gabunia, M.E. Fradkov). In May 2000, the world was born Ministry of Economic Development and Trade of the Russian Federationin addition to everything, he was instructed to engage in foreign trade (ministers – G.O. Gref, E.S. Nabiullina). In 2008, the sign of the ministry was changed, it became known as the Ministry of Economic Development of the Russian Federation. And all trade issues were referred to at the same time, in May 2008, in Ministry of Industry and Trade of the Russian Federation (which was previously called the Ministry of Industry and Energy of the Russian Federation). And since then, foreign trade issues have been in charge of the specified department, which is briefly called the Ministry of Industry and Trade. From 2008 to 2012 the department was steered by V.B. Khristenko, then it was headed by the well-known D.V. Manturov.

The sphere of foreign trade in the Russian Federation has become more and more ownerless every year. This most important sector of the Russian economy was transferred from one department to another. It seems that foreign trade was seen as a “free appendage” to core activities. Thus, the Ministry of Trade was engaged mainly in domestic wholesale and retail trade, and foreign trade – according to the “leftover principle”. Foreign trade became an even greater stepchild in those ministries that dealt with economic development and industry.

The Ministry of Industry and Trade in today’s Russia has generally turned into a super-ministry. The agency deals with almost all industries (with the exception of the extractive industry in the oil and gas sector, which is under the Ministry of Energy). In the USSR in some years there were up to three dozen ministries and state committees in various areas of industry. And today all this is in the hands of the Ministry of Industry and Trade. Apparently, this ministry’s foreign trade is in 101st place. Despite its prominent place in the economy.

It is noteworthy that in the Russian Federation there is a law regarding foreign trade. It was adopted on December 8, 2003 and is called “On the basics of state regulation of foreign trade activities“(N 164-FZ). For some reason, almost no one remembers him today. He is from the category of those that are commonly called decorative. And even as a decorative one today, in the conditions of the sanctions war of the collective West against Russia, it is unacceptable. Article 4 “Basic principles of state regulation of foreign trade” lists 13 principles. The list begins with the following principle: “protection by the state of the rights and legitimate interests of participants in foreign trade activities, as well as the rights and legitimate interests of Russian producers and consumers of goods and services“. Simply put, this is the principle of the primacy of the interests of participants in foreign trade activities. Almost like the primacy of human rights over the interests of society. None of the thirteen principles says anything about the fact that foreign trade should serve the interests of society and the state (for decency it is only said that they should be taken into account) And we see that participants in foreign trade realize, first of all, their interests, which, to put it mildly, do not always coincide with national ones. Forcing the export of goods and services by private companies often aims not to provide the country with the currency necessary for the purchase of vital goods, but to leave the received currency abroad. In some England, America or offshore jurisdiction.

Under the new conditions, radical amendments should be made to the 2003 law. It is even better to write and adopt a new law due to the special significance of foreign trade. We have the concept of “strategically significant enterprise (company)”. It would also be necessary to introduce the concept of “strategically significant sector (industry)”. The defense industry should take the first place in the list of such strategically important sectors of the economy. And the second place can be claimed by the foreign trade sector, and here it is necessary to fully restore the state monopoly, similar to the one that existed in the USSR.

The proposed new law should be called the law on the establishment of the state monopoly of foreign trade. It should provide for the establishment of a full-fledged Ministry of Foreign Trade of the Russian Federation, which should include specialized state-owned export and import companies. In the first place in the list of principles of foreign trade should be put the primacy of state interests in the planning and conduct of foreign trade operations. And the principle of ensuring a balanced foreign trade should also follow from it.

Figure: crescofinance.ru

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