Russia’s Trade and Investment Role in the Global Economy

Russia’s Trade and Investment Role in the Global Economy

Updated January 17, 2023
Russia’s Trade and Investment Role in the Global Economy
The invasion of Ukraine by the Russian Federation (Russia)
and mechanical appliances was the top import category,
in February 2022—and the expansion of U.S. and
accounting for almost a third of Russia’s goods imports.
international sanctions that followed—has heightened
Recipients of goods exports were highly concentrated
congressional interest in understanding Russia’s economy,
geographically. In 2021, top export destinations were the
including the composition, direction, and value of its trade
European Union (EU), followed by China and Turkey. In
and investment flows. Members of Congress may have an
recent years, China and other Asian economies have
interest in scrutinizing these flows to better understand any
accounted for a growing share of Russia’s oil and gas
potential economic leverage that the United States and
exports. Sanctions, combined with the halting of the Nord
allies may have to compel Russia to change course, and to
Stream 2 pipeline project and uncertainties surrounding the
help inform potential additional U.S. policy responses.
status of regional transmission systems, could accelerate
Russia’s Economy
this trend. The EU was the largest source of Russia’s goods
Russia’s significance in the global economy is tied to its
imports in 2021, followed by China and the United States.
role as a major energy and grain producer and exporter.
The U.S. share of Russia’s 2021 goods exports and imports
Outside commodity markets, Russia has long been a
stood at 4% and 6%, respectively.
relatively minor economic actor, despite its large land mass
In services trade, Russia ranked 26th among world exporters
and population. Its economy, the 11th largest in the world,
and 19th among importers in 2020, the most recent year for
accounted for 1.8% of the world’s total output in 2021 and
which there is data. It was a net services importer, exporting
remains weakly integrated into global value chains (GVCs)
$49 billion worth of services and importing $76 billion.
(Figure 1). Despite Russia’s stated desire to diversify its
Participation in Trade Agreements.
economy for decades, oil and gas dominate Russia’s goods
Russia joined the
(merchandise) exports and account for a large share of the
World Trade Organization (WTO) in 2012, after nearly two
government’s budget revenue. For more detail, see CRS
decades of negotiations on the terms of its accession. The
Report R46518, Russia: Domestic Politics and Economy.
U.S. Trade Representative (USTR) has consistently raised
concerns about Russia’s compliance with its WTO
Figure 1. Russia’s Role in the Global Economy
commitments. In its most recent review on Russia (as
mandated by statute), the USTR noted that the country
continues to disregard its WTO commitments and maintains
restrictive trade measures that distort trade.
Russia is a founding member of the Eurasian Economic
Union (EAEU) and is party to EAEU trade agreements with
Vietnam, Iran, Singapore, and Serbia. In 2018, the EAEU
signed a trade cooperation agreement with China, and it is
in trade negotiations with India, Israel, and Egypt. Russia is
also a party to several agreements that predate the EAEU.
As the United States does not have a bilateral trade deal
granting more preferential terms, WTO most-favored-
nation (MFN) terms governed U.S.-Russia trade until P.L.
117-110 suspended U.S. normal trade relations with Russia
in April 2022. (Some other countries have also revoked
Russia’s MFN status.)
Sources: CRS analysis using data from the IMF, World Bank, EIA,
As a result, U.S. imports from
UNCTADstat, Russia’s Federal Customs Service, and Bank of Russia.
Russia are ineligible for MFN treatment and might face
Russia’s Trade with the World
higher U.S. tariff rates. Congress and President Biden have
also banned certain U.S. imports from Russia, such as oil.
Trade is relatively important to the Russian economy: the
ratio of Russia’s
Supply Chains. Russia is relatively poorly integrated into
goods trade (exports plus imports) to GDP
GVCs, partly due to its economic structure and business
has averaged about 40% in recent years, compared to 20%
environment. Nevertheless, some industries around the
for the United States. In 2021, Russia ranked 13th among
world are dependent on Russian inputs for which there are
world goods exporters and 22nd among importers.
limited alternative sources of supply. Russia is one of the
According to Russian official sources, its goods exports
largest producers and exporters of certain grains and critical
totaled $492 billion in 2021, up 46% from 2020 (not
minerals. For example, the country is a leading exporter of
adjusting for inflation) (Figure 2). Minerals, including oil
neon (for semiconductors), palladium (catalytic converters),
and gas, accounted for almost 45% of these exports. Goods
and titanium (aircraft). Shortages and plant stoppages,
imports increased 27% to $294 billion in 2021. Machinery
combined with port closures and restricted Europe-Asia
transit routes due to sanctions, have affected production,
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Russia’s Trade and Investment Role in the Global Economy
caused market volatility and higher prices, and exacerbated
annexation of Crimea in 2014 and its support for Donbas
existing issues in already stressed supply chains.
separatists, neither side had traditionally engaged in
Figure 2. Russia’s Trade with the World in 2021
significant levels of bilateral trade and investment. This
lack of engagement is pronounced when compared to
Russia’s ties with other partners, such as the EU and China.
Despite overall lack of engagement, several large U.S.
companies had been involved in projects with Russia, and
trade ties at the product or firm level can be significant.
Figure 3. U.S.-Russia Goods Trade in 2021

Source: CRS analysis with USITC data.
Russia was the United States’ 23rd-largest goods trading
partner by country in 2021. It comprised 0.8% of U.S.
goods trade, while the United States accounted for 4.4% of
Russia’s goods trade. The EU, as a bloc, was Russia’s (and
the United States’) largest trading partner. In 2021, top U.S.
exports to Russia included civilian aircraft and engines and

communication satellites, while the top U.S. imports from
Source: CRS analysis with Russia’s Federal Customs Service data.
Russia were heavy fuel and petroleum oils and palladium
International Investment
(Figure 3). Russia supplied about 8% (or 245 million
barrels) of U.S. imports of crude oil and related products. In
In recent years, foreign direct investment (FDI) into Russia
services, Russia was the 33rd-largest U.S. trading partner in
has decreased, mainly due to greater uncertainties derived
from U.S. and EU sanctions and Russia’s countermeasures.
2021, accounting for 0.4% of U.S. services trade.
While Russia has bilateral investment treaties (BITs) in
In 2021, U.S. FDI stock in Russia was $12.3 billion (0.2%
force with about 60 economies, including the UK and many
of total U.S. outward FDI stock), and Russia’s FDI stock in
EU members, the Russian market has not been a strong
the United States was $4.9 billion (0.1% of total U.S.
attraction for FDI. Despite abundant natural resources, an
inward FDI stock). Top sectors for U.S. FDI in Russia are
educated labor force, and large consumer base, a number of
manufacturing and wholesale trade, and U.S. affiliate
factors have contributed to a less-than-favorable business
activity there supported over 206,000 workers in 2020.
environment, including the role of the state in the economy,
Issues for Congress
corruption, lack of regulatory transparency and property
As Congress oversees and contemplates additional
rights protection, and regional instability.
legislative responses to Russia’s actions in Ukraine, key
In line with the strong decline in global FDI flows due to
issues that Members may consider include:
the Coronavirus Disease 2019 (COVID-19) pandemic, FDI
 Given Russia’s relatively small economic footprint
into Russia plummeted in 2020. Russia’s inward FDI stock
outside commodity markets, what are points of U.S.
stood at $522 billion in 2021, which represented about 1%
leverage in bilateral trade ties or multilaterally?
of the world’s total. Its outward FDI stock amounted to
 To what extent can the impacts of the war and sanctions
$399 billion, equivalent to 1% of the global total. In recent
on the global trading system continue to be contained and
years, FDI into Russia has flowed mainly into mining and
a global economic crisis averted? What steps should
quarrying of fuel and energy materials. Notably, Cyprus is
policymakers take to support affected countries?
both the top destination and source of Russian investment,
 How will sanctions and countermeasures ultimately alter
reportedly in part due to “round-tripping” (e.g., domestic
the economic trends discussed above? How are sanctions
investment disguised as foreign investment).
currently affecting regional and global trade flows?
U.S.-Russia Trade and Investment Ties
Andres B. Schwarzenberg, Analyst in International Trade
Russia has historically not been a major overall economic
partner of the United States. Even before U.S.-Russia
and Finance
economic ties were constrained in the aftermath of Russia’s
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Russia’s Trade and Investment Role in the Global Economy

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