Foreign trade of Russia under falling world prices and the “War of sanctions”

Abstract

The article analyzes the effects of falling prices on world goods markets and the “war of sanctions” on Russia’s foreign trade in 2014-2016. It estimates the impact of decreasing prices: the value of export losses in foreign exchange earnings and import foreign exchange savings. It also states that the devaluation of the rouble and the increase in shipments resulted in higher exporters’ earnings in the national currency that compensated for the decrease in the foreign exchange earnings. At the same time the costs of importers also increased and that entailed price increases in the domestic market. The article shows that the price factor brought positive shifts in the structure of Russia’s exports – decline in the share of energy resources and increase in the share of agriculture and manufacturing industries. The author states that a very significant reduction in the imports of all categories of goods due to the devaluation and the “war of sanctions” have led to the reduction in supplies of goods to the majority of domestic markets, narrower range of products, their inferior quality and the price increase. The author comes to the conclusion that the main goal of the economic policy at the present moment is to decrease the strongest dependence of the national economy on the world economic situation through diversification of exports: stable increase in competitive products, and in particular high technology goods. In addition, it is critical to end the “war of sanctions” as early as possible.