Moscow. january 24th. INTERFAX - The foreign trade turnover of the Russian Federation in 2024, despite the endless stream of sanctions, remained stable at the level of 2023. Only the first stage of the reorientation of Russian exports has been completed, and now the task is to enter new markets, primarily the ASEAN countries. Vladimir Ilyichev, Deputy Minister of Economic Development of the Russian Federation, spoke in an interview with Interfax about the results of 2024, the prospects for developing new markets and concluding agreements on free trade zones, including with China and India, the situation in the WTO and the challenges facing world trade in 2025.
- What are the preliminary results of Russia's foreign trade in 2024?
- The final figures for 2024 will be in March. In the first 10 months of 2024, the foreign trade turnover amounted to about $584 billion, approximately at the level of the first 10 months of 2023, a decrease of 1.5%. Exports of goods increased by about 1% in 10 months to $354.4 billion, while imports decreased by 2.7% to $229.8 billion.
At the same time, we may see growth at the end of the year, because we are looking at preliminary data for individual countries, and they are relatively optimistic.
China has already published its preliminary data - according to their data, the growth of trade turnover with Russia in 2024 amounted to 1.9%, the volume exceeded $244 billion. Our estimates of the absolute values of trade are very close to those of China in 2024. That is, despite all the difficulties, growth is noticeable, which is very good.
According to the data for 10 months, the share of friendly countries amounted to about 83% of the trade turnover compared to 77% in 2023.
- Do you explain the reduction in imports by the weakening of the ruble exchange rate or problems in payment or logistics?
- There are a number of factors involved. The logistics situation has probably become a little easier than it was a year ago. It's complicated with payments, and it's constantly changing.
But, strangely enough, we also see a factor influencing the saturation of our market for some imported goods. That is, from some countries where there was a sharp increase in imports of some goods, for example, from China, then there was some cooling and saturation of the market.
There are some questions about consumer qualities, service, and so on.
And in general, consumer demand in Russia is slowing down a bit now. A number of these factors lead to the fact that imports have such a tendency.
- Can you list the top 5 countries in terms of trade turnover with Russia in 2024? How has this list changed compared to 2023?
- There are no fundamental changes here. The first three countries are still China, India, and Turkey. Next are our partners from the EAEU - Belarus and Kazakhstan.
- Is it possible to say that the reorientation of Russian exports has been completed, or is it a long process? What will be its next stage? How are the tracks for increasing trade flows with ASEAN countries, Africa, the Middle East, and Latin America being implemented?
- I would not say that this process is completed. Let's just say that the first stage has been completed - when everyone was urgently forced to look for new markets under the influence of external circumstances. In general, of course, this reorientation has occurred.
Further, in our opinion, there will be some fragmentation, when our exporters will look for possible ways to diversify their supplies. The situation with China and India has stabilized. I would rather expect that some of these supplies will go to other countries, based on the premium ratio of the markets, based on the fact that new logistics routes and new payment options in national currencies are being built anyway.
Accordingly, our companies are discovering new markets. In our opinion, this will be to a significant extent ASEAN (Association of Southeast Asian Nations), a growing market, if not a new one for us, but one that remains to be explored. Indonesia, Thailand, Malaysia, and other countries are showing interest in our products. In my opinion, the reorientation there will be more in accordance with objective prerequisites, including how their market is growing.
Naturally, the Chinese market will continue to be the key for us. But, in my opinion, there will be a certain commodity diversification - the growth rate will slow down, while exports of goods will become more diversified.
- A lot has been said over the past year about the potential for developing trade and investment cooperation with Africa...
- Africa is a very interesting market. But he's not that simple: he came, and right away you did something. It requires painstaking work. Naturally, they are all interested in our products, and it is a matter of building interaction so that it is not just an interest, but a commercially justified interest for us.
- What about logistics in this market? Do you need new logistics centers?
- Logistics centers are needed. Of course, there is still a lot to be done in logistics, but slowly companies are starting to work out these routes. So far, it is quite difficult to say that there are permanent lines that allow us to ensure competitive freight rates. Depending on this and how the payment channels of work will be established, the situation will develop.
I repeat, the markets are generally interesting. There are goods that can be directly imported from these countries. In addition to various raw materials, these are food products such as coffee, cocoa, and so on. The question, in my opinion, is that the growth of trade turnover will greatly depend on how balanced the trade will be.
- What are the prospects for trade with Latin America?
- In Latin America, we have a very rapid development of trade relations with Brazil, we are growing noticeably for obvious reasons - there is one of the largest markets for our fertilizers. Other goods are also actively supplied. I think this market will become more and more important for our exporters. The situation is very different with other countries, depending on how things are in a particular country. There are obstacles, including at the logistical level.
- What are the trade expectations for the Middle East?
- With high-margin markets, such as the UAE and Saudi Arabia, we have significant growth. For our food exporters, for example, this is very interesting, and supplies will continue to grow.
- What is the share of national currencies in the payment of foreign trade transactions at the end of 2024? Which of the trading partner countries are the leaders in this indicator?
- The Russian ruble continues to increase its position in the foreign trade of the Russian Federation with foreign countries. In the 3rd quarter of 2024, its share in export calculations increased by another 9 percentage points, to 43%. The share of ruble payments in exports is growing, including in settlements with Asian countries - from 29% to 39%, and Africa - from 13% to 46%.
- China is the undisputed number one for Russia in terms of trade turnover. What is planned to be done to increase trade with China further? Are any agreements being discussed, and at what stage is the discussion on the FTA?
- The issue of a free trade area with China is extremely complex, and, of course, it has to be assessed, including from the point of view of interests and possible consequences for various industries, and given that this is a Eurasian track, not only the position of the Russian Federation, but also that of other countries [of the Union] is important here, so there is an understanding that It is necessary to assess the possible consequences carefully and very sensibly.
Our trade turnover with our Chinese colleagues is already growing well, and certainly the absence of a free trade area is not the main story, which is a deterrent to further growth. It is clear that the issues of payment and logistics infrastructure, probably no less, and even more, in my opinion, are important for further changes in these figures than the average level of import duties that we have, which is, in principle, small - about 4.5%.
We are trying to look at this issue quite carefully and carefully. There is a discussion going on, but we are having a discussion on a number of issues, and I think this is not the most important one.
- The same question about the FTA with India. What are the prospects here?
- This discussion has been going on for a long time. Moreover, on our part, all decisions on the start of negotiations have been made at the EAEU level. At the end of last year, we had a more optimistic feeling about the position of our Indian partners. At least we started discussing something with them in this part. We hope that official negotiations will begin this year.
In our opinion, given the higher level of the customs tariff in India, the possible positive impact for our exporters is more obvious, and the problem areas that the FTA may entail are much smaller.
- With which countries is it already possible to conclude a free trade area in 2025, and with which new countries besides India can negotiations be initiated?
- We proceed from the fact that we have a good chance to complete the negotiation process with the United Arab Emirates, colleagues in the EAEU have already stated that it is essentially completed. At the same time, we assume that Russia, in turn, will complete negotiations on the FTA in terms of services. Let me remind you that the FTA for goods is concluded by the EAEU, and the FTA for services is concluded by each country separately.
The task for Indonesia is also clear - to sign a free trade area agreement with them in 2025, or at least complete negotiations.
As I said about India, we hope that we will be able to start negotiations, and then it depends on the Indian side, because there are various options for cooperation.
Colleagues from the EAEU have actively launched a joint research group on the FTA with Tunisia. Negotiations have not yet formally begun, and now there is a preliminary stage when both sides exchange data in order to assess the possible consequences for themselves. But I think there is a good chance to start negotiations this year.
- What are the prospects for the FTA negotiations with Egypt?
- The history with Egypt is still complicated. Three years ago, the Egyptians and I, in fact, agreed on the commodity part of the industry, there were some unresolved issues on agriculture, after which they, in general, suspended the negotiation process due to the position of a number of their industries, and it remains in this version, somewhat frozen.
- But the goal of concluding a free trade area with some African country remains, for example, now with Tunisia, to make it easier to enter the African market?
- In my opinion, this is an exaggerated story that if we conclude a free trade agreement with someone, we will immediately enter the market of the entire region. First of all, there are many countries in Africa with their own interests, and you need to understand that you have absolutely no access to the market of other countries if, for example, you have a zero tariff in Egypt. At least, the experience in ASEAN has not shown us for sure that we have made significant progress in the market through Vietnam, with which we have concluded a free trade area. There are many nuances in such matters, including those related to determining the country of origin and so on. Of course, it can be said that it is easier to enter other countries, but this is definitely not the key.
- Several years ago, the idea was voiced to hold negotiations on a free trade area between the EAEU and ASEAN as a whole. What is the current position on this idea?
- This idea is constantly being discussed, it will be implemented, but not through negotiations with ASEAN, but through negotiations with individual countries. Because the conditions differ by country, the set of possible obligations, and the consequences for Russian industries. We have agreed that we will act step by step.
- So in the future, negotiations on the conclusion of a free trade area may begin with Thailand, Malaysia, and other ASEAN countries?
- Yes, with Thailand, Thai colleagues are quite actively asking us to start negotiations on the FTA. There are several different points of view on this issue within the EAEU. But we have an understanding that we are going through the track with Indonesia and then we look at what we are doing. It should be understood that this is also a matter of limited negotiating resources - the number of officials and experts who conduct negotiations.
- There was also a topic on the FTA with Mongolia - at what point are the negotiations now?
- Negotiations on the FTA with Mongolia were generally completed, in fact, at the end of last year. But our Mongolian colleagues asked us to return to the discussion after that, because there were some difficulties.
- In 2024, Russia was the chairman of the BRICS. What are the main agreements on trade issues that can be identified in this regard?
- This is a fairly broad question. In our part, we have created a working group on climate issues. This is the first step for us to move towards each other on the entire green agenda, including how to respond jointly and in a coordinated manner to what is happening in the European Union on this topic. We also agreed with our colleagues that we will work closely on the creation of appropriate carbon markets in order to try at the very initial stage to coordinate the methods used to create such markets and to ensure that standards are compatible. Colleagues go to such a conversation, although, of course, it is not an easy one.
We have made good progress on the trade agenda, including even starting to coordinate on the WTO platform, which was not the case before.
- And what is this coordination?
- It is clear that this is not coordination at the level of everyone taking a common position, etc. This happens in such a way that we discuss at least at the expert level, trying to find those issues on which a common position can be formed.
Oddly enough, there are such questions. These are the TOUR (issues of cross-border carbon regulation), some subsidies, and a more expanded climate story that Western countries are trying to introduce into the WTO. This is also the position on the dispute resolution system.
- Can any alternative dispute resolution system be created at the BRICS level?
- In my opinion, at this stage we do not need such an alternative system for the purposes of the BRICS countries. We resolve any discrepancies that arise bilaterally. We manage to resolve them through negotiation rather than a judicial process.
- The WTO Ministerial Conference and the annual UN Climate Conference were held in 2024. How do trade and climate issues relate to each other? The Russian Federation, in particular, claims that under the guise of solving climate problems, a number of countries, for example, the EU, impose trade restrictions through the same TOUR mechanisms. Is there any progress in linking these issues?
- These issues are being raised both at the UNFCCC (UN Framework Convention on Climate Change) and in Geneva (where the WTO headquarters are located). It is clear that we are raising issues from the point of view of defending our position that climate goals are one thing, and what they are doing in the form of a tour is purely trade restrictions. We will defend this position, and the rigidity of our position will only grow. One way or another, our colleagues, including those from BRICS, share this vision.
- Are there any risks that the BRICS countries will somehow come to an agreement with the EU separately, but the BRICS will not have a unified position on this?
- There are always such risks, but so far I see a slightly different picture than what everyone will try to negotiate individually, for a number of reasons. In my opinion, this situation will change, because, as the experience of the past few years shows, the main beneficiary of this entire "green agenda" is not the EU, but a completely different country - one of the BRICS countries.
"China?"
- See who is most successful in the production of electric vehicles, batteries, solar panels, wind turbines and further down the list. Therefore, in my opinion, the very idea of the "green agenda" to ensure advanced technological development for the European Union has not worked. On the contrary, it worked with the opposite sign, and, in my opinion, the Europeans in the next few years will be forced to make some decisions in this regard. Therefore, the agenda will evolve, but in a slightly different way than our former Western partners would like.
- After the WTO conference in February last year, was it possible to achieve the goals that the organization set for itself in 2024? In particular, it was planned to agree on new dispute resolution rules by the end of the year. At what stage is this discussion?
- It was not possible to complete this process within the deadlines set by the ministers. There are solutions to many issues related to the reform of dispute resolution rules, or at least we are close to them. However, all these issues are rather technical in nature. We have not been able to move on to discussing the central issue of what will happen to the Appellate Body. This was not due to the reluctance of the vast majority of WTO members. The United States, which stopped the work of the Appellate Body, was unable or unwilling to formulate what alternative it could be. I doubt that the new administration, under which the Appeals Body completed its work during Donald Trump's first term of office, will be more supportive of negotiations on this topic.
In addition, in December last year, the previous US administration proposed that any measures taken for reasons of national security protection should not be subject to jurisdiction. That is, if the state says that the trade restriction was imposed to protect security, the rest should just accept it. As it was, for example, with the American additional duties on steel and aluminum. According to the logic of the United States, WTO members who suffered from these restrictions should not have gone to court. Who needs rules that can be ignored so easily is a big question.
- How does the Russian Federation protect its interests in the WTO in the absence of an appellate body? If there is no progress in the dispute resolution system, will Russia conclude any bilateral agreements on this topic or join the existing interim agreements?
- The Appellate Body for Dispute Resolution (LFS) is not the only WTO institution that allows resolving trade disputes. Members of the organization continue to use the LFS procedures, and they often manage to achieve mutually acceptable results before the appeal stage. Since the termination of the work of the Appellate Body, about 40 lawsuits have been filed with the LFS. This figure strongly demonstrates that Governments see the point in using this system.
In addition, the WTO has specialized bodies - councils and committees, which, in fact, are platforms for discussing trade problems and finding solutions without contacting the WTO. The organization's members continue to make effective use of these platforms, and Russia is no exception. Thus, the WTO mechanisms continue to function, and we will continue to use them.
- How can you describe the overall development of global trade in 2024? What trends prevailed in it? What are the expectations for 2025, given the inauguration of Trump, from whom many, out of habit, expect trade wars after his first term as president?
- According to UNCTAD, the growth of world trade in 2024 amounted to 3%, which is generally a good pace. The level of global trade has reached $33 trillion, an increase of $1 trillion over the year. The IMF also provides similar data on trade growth of 3.1% in 2024.
This is a kind of recovery growth that still exists after covid restrictions.
But, nevertheless, the situation is not easy. In our opinion, the fragmentation of world trade will continue anyway, and the US position will only contribute to this.
One way or another, trading goes into a certain block option. You can look, for example, at China, for which ASEAN is becoming a key trading partner. Direct trade between China and the United States will fall further.
Plus, the logistical factor is the tension that exists in the Suez Canal area, which also has a certain impact on world trade. At certain points, up to 90% of the traffic that went through the Suez Canal was redirected by other streams bypassing Africa.
But much, of course, will strongly depend on the actions of the United States - how they will behave with China, how they will implement the threats they have even against the European Union. Therefore, in our opinion, maybe not in a dramatic way, but the reorientation to certain regional blocks will continue.
