news
Trade & Policy

Russia’s EU Borders & Trade Compared With Its Asian Borders & Trade

Russia’s non-EU borders are 4.5 times longer, and with Moscow – friendly nations as the Russian Belt and Road heads to Asia. Here’s a simple, if slightly variable statistic. With the European Union – and Ukraine – cutting off Russia’s land supply chains, the total length of that now heavily sanctioned border extends for approximately 3,606 km. Here’s another statistic – Russia’s land border with non-EU/Ukraine countries extends for 16,254 km, or about 4.5 times the distance. For every kilometre of border Russia has had barred to the West, it has 4.5 km to replace it to the East. These basic statistics will redraw Eurasian and EU-Asia supply chains, a phenomenon that has already begun. It also calls into question the viability of Western sanctions. The West may have disconnected Russia from Europe, but the Asian frontier is still very much open – and far larger. Russia, Belarus, EU & Ukrainian borders Russia’s current borders with the European Union extend for 2,250 km and include borders with Estonia, Finland, Latvia, Lithuania, and Poland. Russia also has a 196 km land border with Norway (not part of the EU). Belarus, like Russia also heavily sanctioned, has land borders with Latvia, Lithuania and Poland amounting to some 1,250 km. Russia’s border with Ukraine is disputed, especially in the Donbass and Crimea regions, with this yet to be resolved. However, they can be estimated to currently extend to 2,295 km. To the west, and to the EU, Ukraine has a 1,358 km border. This means that an absorbing Ukraine – which has also cut off borders with Russia – into the EU would create, give or take disputed territory, a combined EU / Ukraine border with Russia of approximately 3,606 km. About 1 million TEU’s transited Russia to the EU last year, with major inland and sea ports, including Rotterdam and Hamburg, along with the inland border ports have now stopped accepting Russian and Belarussian cargo, effectively sealing their borders against Russia and Belarus, aiming to prevent both Russian sales to the EU and EU exports to the Russian market. Russian-EU trade reached Euro 257.5 billion (US$ 281 billion) in 2021. Russia, Belarus & Asian borders Russia’s current borders to the East extend for 16,254 km and include borders with Georgia and Azerbaijan, Kazakhstan, Mongolia, China, and North Korea. It also has maritime borders with Japan, South Korea, and the United States. Russia & The Caucasus Russia’s relations with Georgia are strained, and the country is in the process of making an application to join the European Union – the EU is Georgia’s largest trade partner, followed by Turkey and Russia. EU membership however is unlikely to happen, and NATO membership definitely not given the threat of war. Despite the stresses, Russia’s exports to Georgia reached US$ 1.2 billion in 2021. Russia’s relations with Azerbaijan are more productive and are based upon the energy sector, although Russia will want to diversify this and needs improved access to Azerbaijan’s Baku Caspian sea port to facilitate increased export trade volumes. That is easier said than done, the Russia-Azeri border is mountainous, although discussions are underway to improve connectivity. Doing so would boost the potential for Russian exports to reach significant markets in Iran, the Middle East, East Africa, India, and South Asia via the INSTC network. Russia’s exports to Azerbaijan reached US$ 2.1 billion in 2021, although the transit potential is far higher – if connectivity and INSTC access can be improved. The Russian Caspian Azerbaijan aside, Russia has its own Caspian seaports at Lagan and Astrakhan – improved infrastructure connectivity and capacity expansion can be expected at both of these ports. Lagan is still under development, however it should be noted that Astrakhan port showed the highest container throughput growth in Russia in Q1 2022, with container traffic multiplying three-fold. These ports can reach other Caspian sea ports such as Baku mentioned above, as well as Kazakhstan, Turkmenistan, and Iran. These collectively give additional multi-modal access to markets in China, Uzbekistan, the Gulf states, East Africa and onto India and South Asia. Russia and Iran have already agreed  to increase pan-Caspian shipping volumes, and these routes have now become of much more strategic development interest to Russia. Significant increases in export volumes can be expected via Russia’s Caspian access, with the trends already apparent. Russia-Iran bilateral trade increased 38% in 2021 to US$ 1.6 billion, while Russia’s trade with the Gulf Cooperation Council (GCC) has also increased 80% in the past five years and now stands at US$ 5 billion. Russia-India bilateral trade increased 58% in 2021 to US$ 8.2 billion. The two countries have set bilateral trade targets at US$ 30 billion by 2030. Russia, Central Asia and the EAEU Russia’s border with Kazakhstan extends for 7,644 km, and is known mainly for its transit potential as a conduit between China and Europe. With the onward Kazakhstan-Russia-EU routes now blocked, this means the Russian focus will shift to Russia-Kazakhstan-China trade as well as the diverging additional rail spurs that feed off the main line. This includes access to Central Asian markets not just in Kazakhstan but also to Uzbekistan, Kyrgyzstan, and Tajikistan. Intra-trade volumes between Russia and the Eurasian Economic Union (EAEU) can be expected to rise. An unforeseen benefit of the loss of EU transit goods is the freeing up of rail capacity on these routes and improving diversification of freight traffic throughout Central Asia. Russia’s trade with the EAEU rose by 34% in 2021 to reach US$ 69.1 billion. With Uzbekistan poised to join the EAEU, these figures could significantly improve. If Russia can maintain its current trade growth rates with the EAEU, it will have absorbed the impact of the complete loss of EU markets by 2026. Russia and China Russia’s border with China extends for 4,209 km and includes several points of entry, with major ones being via Kazakhstan, Mongolia, and the Russian Far East. All are in the process of being improved and expanded. Maritime connectivity is also being improved – Russian President Putin increased the budget for the development of the Northern Sea Passage and North Latitudinal Railway by US$ 18 billion. Russia’s bilateral trade with China is currently about US$ 150 billion and increased by 36% in 2021. Both parties have set trade targets to reach US$ 200 billion by 2024, this looks increasingly likely to happen. That can be further enhanced should the two countries wish to bring forward the issue of tariff reductions as part of the China-EAEU Free Trade Agreement signed off in 2018. Even at present growth rates, Russia will have absorbed the loss of EU markets by increased bilateral trade with China by 2025. Russia, Mongolia and North Korea The Russian border with Mongolia runs for 3,485 km, just on its own nearly the length of the entire Russia – EU and Ukraine border. The route is essentially operated as a transit connectivity through to China and other markets, although Russia-Mongolia bilateral trade volumes increased 21% in 2022 as a spin-off result. Russia’s border with North Korea is heavily militarised and extends for just 17 km. It carries essential supplies and some limited trade to the DPRK. Given the increased trade volumes from Russia to the East, it is possible that North Korea could indirectly benefit from this. Summary In examining the existing trade fundamentals and the massive borders that Russia has with the East, it appears that as long as existing trade patterns with Russia’s Asian partners are maintained, the country will be able to absorb the impact of the complete loss of the European Union markets by 2025-26. This is without any analysis of Russian-ASEAN trade, itself at about US$ 20 billion and also rapidly increasing. Japan and South Korea tend to follow United States directives, but real sanctions on Russia as concerns Ukraine have been minimal – and again, in both cases Russia export trade volumes have also been rising, increasing 34.8% in 2021 to Japan and similar increases for South Korea. Russia’s main ability to overcome Western sanctions lies in the East, as appears obvious from the underlying trends. Key to this are China and the Eurasian Economic Union, with Iran and the INSTC also likely to provide significant trade increases as improved connectivity via the Caspian comes online. Significant opportunities will arise this year and into 2023 as supply chains adjust to a new normal and Russia extends its footprint east. What is essentially occurring is a Russian-financed version of the Belt and Road Initiative – but heading towards China and Asia rather than Europe. The Russian Belt and Road heads to Asia. (Russia Briefing, Dezan Shira & Associates)

Textile Excellence

ban on parallel imports lifted as russia seeks to mitigate sanctions’ impact

61 proposals of over rs 19k cr approved under pli scheme for textiles

Subscribe To Textile Excellence Print Edition

If you wish to Subscribe to Textile Excellence Print Edition, kindly fill in the below form and we shall get back to you with details.