Russia’s economic turn to the global south

Alexey Kuznetsov,
Acting Director,
Institute of Scientific Information on Social Sciences (INION), Russian Academy of Sciences,

After the beginning of “sanction wars” with Western countries against Russia in 2014 some political figures stated that the aim of the Russian Federation is turning to the East. However, radical changes have not yet materialized due to well-known inertia in foreign trade and FDI geography. Our analysis shows that real reorientation has already begun. The changing role of the global South is the main reason for shifts in Russian trade and FDI.

Trade in goods

In 2013, the EU’s share in Russian foreign trade turnover was 49.4% (Federal customs service data). Then it steadily decreased to 41.7% in 2019. Nevertheless, it is still impressive. Moreover, the US share in Russian trade increased from 3.3% to 3.9% during 6 years. However, we think that comparison of top Western and Southern partners is more indicative. We have methodological problems with Ukraine (pro-West country with modest GDP per capita), Switzerland and Israel (Western states which avoid “sanction wars” against Russia) as well as Serbia but we exclude them from comparison (their shares in Russian trade in 2019 were 1.7%, 1% 0.3% and 0.4% correspondingly).

Compositions of top-3 and top‑6 for 2013 and 2019 were almost constant: Netherlands, Germany and Italy + Japan, Poland and USA (but the USA instead of Italy in 2019) vs. China, Belarus and Turkey + Kazakhstan, Rep. of Korea and India. In 2013, the share in Russian trade in goods was 24.3% for the Western top-3 and 18.4% for the Southern top-3. In 2019, proportion turned to an opposite – 19.2% for the West and 25.5% for the South. If we look at top-6, there were 34.8% vs. 25.7% in 2013 but 28.6% vs. 33.8% in 2019.

The same trends can be observed for top-10 and top-20. The Western list contains additional EU countries. Taiwan, Uzbekistan, Vietnam as well as Brazil in 2013 and Egypt in 2019 can be seen in the Southern top-10 of Russian trade partners. Azerbaijan, Thailand, Indonesia, Malaysia and Singapore are permanent participants of top-20, while Algeria, Mexico, Armenia and Bangladesh substituted Hong Kong, UAE, Venezuela and Kyrgyzstan. For top-10, there were 43.9% (West) vs. 28.1% (South) in 2013 but 36.8% vs. 37% in 2019. Only for top-20 the West barely holds its leadership – 53.9% vs. 30% in 2013 and 45.3% vs. 41.4% in 2019. The fact is that the EU lost dominance as a source of technologies for Russia. The COVID-19 crisis also demonstrates weakness of crucial service sectors of the EU, namely healthcare.

Trade in services

According to Bank of Russia data, changes for trade in services remain not so radical but the West has stepped back. In 2013 the share of the Western top-3 (Germany, UK and USA) was 17.7% while in 1–3 quarters 2019 it slashed to 15.1% (moreover, the USA was replaced by Cyprus). The share of the Southern top-3 (Turkey, China and Belarus) increased from 11.4% to 12.4%. The share of the Western top-10 (additional 7 EU members) slightly changed from 37.1% to 37.2%. On the contrary, the share of the Southern top-10 increased from 19.5 to 21.2%. The list consisted of top‑3 + Kazakhstan, UAE, Thailand, Rep. of Korea, Panama, Hong Kong and Vietnam in 2019 (latter two states replaced Uzbekistan and British Virgin Islands).

Russian inward FDI

Bank of Russia data has a serious defect because it is ignorant of round-tripping and trans-shipping FDI. For instance, Cyprus dominates in terms of Russian inward FDI stock ($143.3 billion or 31.4%, as of 1.10.2019). The Netherlands, Bermuda, UK, Bahamas, Jersey, Luxembourg and British Virgin Islands are among other leaders (in total $172.3 billion or 37.7%). However, data on some countries can clarify trends towards Russia’s turn to the global South. During 2014 – 3 quarter 2019 German FDI stock in Russia decreased from $18.9 to $18.8 billion, US FDI – from $18 to $3.5 billion, Swedish FDI – from $16.2 to $4.8 billion and Austrian FDI – from $11.8 to $6.4 billion. Meanwhile, French FDI stock increased from $14.1 to $21.8 billion, Finnish FDI – from $4.2 to $6.9 billion and Italian FDI – from $1.2 to $4.9 billion. Total share of these 7 countries decreased from 17.9% to 14.7%. On the contrary, although Chinese FDI stock decreased from $4.5 to $3.4 billion, FDI stock from Singapore increased from $0.2 to 4.4 billion, South Korean FDI – from $1.9 to $3.4 billion, Kazakhstani FDI – from $1.0 to $3.2 billion, FDI from Hong Kong – from $0.1 to $3.0 billion, etc.

Russian outward FDI

The beginning of a kind of turn to the global South could be seen in activities of leading Russian MNEs. According to the author’s estimates, top‑3 in terms of foreign assets in 2019 consists of such “actors” as Lukoil ($23-24 billion), Gazprom ($17.5-18.5 billion) and Rosneft ($12.5-13.5 billion). During 2015-2019, almost all their significant FDI deals were located in the global South. For instance, Rosneft spent only $1.5 billion in Germany increasing its involvement in oil refining whilst invested almost $4 billion into Indian refinery, $2.1 billion in Iraqi Kurdistan and $1.1 billion in Egyptian oil project. Lukoil decreases its presence in the EU and Ukraine but intensifies activities in the South (e.g. it invested more than $3 billion in construction of Uzbekistani gas refinery in 2016-2018 and $800 million in Rep. of Congo in 2019). Largest Russian MNEs outside oil & gas sector are Rusal ($6.4-6.5 billion) and Atomenergoprom ($6.1-6.2 billion) which also operate significant projects in the global South.


Cooling of relations between Russia and the West during the next decade or so can result in real Russia’s economic turn to the global South (instead of traditional cliché of the “East”) due to the same inertia in newer geography of foreign economic ties.


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