Moscow News
http://www.mnweekly.ru/
May 15, 2008
Trade Deficit Reported with the U.S.
By Edward Bentley
Russia has registered a trade deficit with the United States for the first time in seven years, the economics ministry announced last week. The trade deficit stood at $1.3 billion, with $8.168 billion worth of Russian exports and $9.457 billion worth of U.S. imports. However, the total volume of trade grew by $17.626 billion last year, which was a 17.1 percent increase on the preceding year.
One of the major causes of the deficit was the depreciation of the dollar from 26.5 rubles in January 2007 to 24.5 rubles by the end of the year.
The relative price of a U.S. import therefore fell by 7.5 percent for Russian consumers over the course of the year, while the cost of exporting goods to the U.S. increased similarly.
Russia's exports were dominated by raw materials, particularly oil and gas products (28 percent), aluminum (15.4 percent) and steel (17 percent.)
In return, Russia predominantly imported engineering and transport products (about 65 percent). Imports also included technological equipment such as optical, photographic and measuring devices, electrical machines and aircraft.
Russia continues to run a net current account surplus, of which the balance of trade is the most important component, and it stood at $76.6 billion last year. In preceding weeks the Russian Central Bank has denied speculation that it may strengthen the ruble, as this would decrease exports and therefore slow industrial growth.
The economics ministry also reported an increase in accrued U.S. investment in the Russian economy, up from $7.7 billion in 2006 to $8.6 billion in 2007.
Despite this increase, direct investment from the U.S. fell by $1.2 billion to $3.6 billion last year, although portfolio investment increased to $1.2 billion, up from $0.5 billion.
In the past month, both governments have been actively promoting bilateral trade.
In April, Presidents George W. Bush and Vladimir Putin agreed on a Strategic Framework Declaration which set new and ongoing initiatives between the two countries.
"The Strategic Framework Declaration committed the two governments to seek to expand economic cooperation" said Daniel Fried, the U.S. Assistant Secretary of State for European and Eurasian Affairs on May 8.
"In order to provide a stable and predictable environment for investment and to strengthen investor confidence, the United States and Russia will advance efforts on a new Bilateral Investment Treaty."
Fried welcomed the new President into office in his speech, entitled "Looking Forward to the Medvedev Administration in Russia" and although he highlighted some concerns, he was positive about future economic relations between the two countries.
Fried also highlighted the energy sector as a key area for mutual cooperation in the future.
"We intend to intensify U.S.-Russian energy collaboration through a new, more structured energy dialogue that will focus on expanding energy supplies in an environmentally-friendly manner while developing new, lower-carbon emission energy sources" he stated.
Dmitry Medvedev echoed these sentiments in March, stating that "we need to create a base for continuity in relations between Russia and the United States."