Russia planning to increase non energy exports

It is commonly  assumed that Russia's economy was solely reliant on its energy resources. Neo Con war mongerers like the batch shit crazy John McCain even described Russia as a gas station masqueraing as a country. Yes energy exports have been important but other exports  over the years have been crucial, Russia is the world's second largest exporter of military equipment,the largest exporter of enriched uranium nuclear fuel and the world's largest wheat exporter for a  few examples.  

However, in recent years, there has been a notable shift in the country's income structure, with a growing contribution from non-energy goods. President Putin has directed the government to determine the export potential of these goods until 2030 and to identify strategies for enhancing them.
President Vladimir Putin has directed the government to refine the forecast for non-energy exports until 2030 and propose measures to increase it. The deadline for compliance with this instruction is 1 April 2025.

The Ministry of Industry and Trade is developing a new national project, entitled "International Cooperation and Export." The objective is to increase the proportion of non-raw material, non-energy exports by a minimum of two-thirds by 2030, and agricultural exports by one and a half times.

Russia has made notable strides in the realm of non-energy exports in recent times.

"Since the early 1990s, Russia's non-energy exports have grown at a slow pace. However, there was an acceleration in the 2000s due to increased demand in global markets and high prices for raw materials, which provided foreign exchange earnings and stimulated other industries. "In the 2010s, Russia proactively pursued diversification of exports, reducing reliance on energy resources. By 2020, the export structure had begun to encompass a broader range of products from the agro-industrial complex, metallurgy, and chemical industries," states Yaroslav Kabakov, Strategy Director at Finam Investment Company.

He states that the significant growth of non-energy exports began in the 2010s and was supported by the state programme for export development, including the International Cooperation and Export programme. State support was instrumental in promoting our non-resource goods abroad and creating trade mechanisms.
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Consequently, by 2021, non-energy exports had reached a record of $194 billion. However, the sanctions imposed in 2022-2023 have caused significant damage. In 2023, non-energy exports declined to $146.3 billion from $190.4 billion in 2022. This is the result of sanctions and reduced demand in Europe, according to Kabakov.
The performance of Russian non-resource non-energy exports (NNE) is significantly influenced by global pricing trends, according to Alexander Firanchuk, a leading researcher at the International Laboratory for Foreign Trade Studies at the IPEI of the Presidential Academy. He states that in the 2021-2022 period, NNE reached record levels due to a sharp increase in prices for key goods such as metals, food, and fertilisers. However, the price correction in 2023 resulted in a 25% decrease in the value of these exports compared to 2021, while the decline in physical volumes was more modest at 10%.

However, there was a resumption of growth in non-energy exports in 2024. Over the seven-month period, there was a 5% increase, bringing the total to $89.8 billion.

Mr. Kabakov anticipates that export growth will resume in 2024, driven by Russia's enhanced presence in Asian and African markets, the advancement of domestic industry, and the expansion of product offerings.

However, the tightening of sanctions has presented Russia with new challenges. "The re-establishment of NNE exports to 2021 levels may be hindered by sanctions, logistical difficulties and financial transaction issues, with a projected timeline of approximately five years." "Maintaining positions in developed markets, particularly in the fertiliser and metals sectors, will be important," says Alexander Firanchuk from the Presidential Academy.
The expert highlights the export of high-tech goods, which are concentrated in the machinery, equipment and other goods segments. These experienced a more significant decline in 2023. The export of these goods decreased by 33% compared to 2021, and their share of total exports fell from 8.3% to 5.4%. Mr Firanchuk forecasts that by 2030, these exports will have recovered partially, reaching approximately 6% of the total volume.
"The loss of foreign partners and cessation of supplies present significant challenges to the restoration of exports and domestic production alike. "Companies are forced to seek alternative solutions for the supply of essential components, which increases costs and delivery times and reduces the competitiveness of their products," Firanchuk is concerned.

"The President has directed the government to provide a prompt clarification of the forecasts for non-energy exports," states Pavel Sevostyanov, Actual State Counselor of the Russian Federation and Associate Professor of the Department of Political Analysis and Socio-Psychological Processes at the Plekhanov Russian University of Economics. The Russian economy has significant growth potential outside the energy sector, particularly in light of the global energy transition. This will result in significant transformation and growth in a number of key industries, including high technology, the agro-industrial complex, and the production of lithium and other rare earth metals and elements. For instance, the IT sector saw a 15% growth compared to 2023, indicating an increased demand for digitalisation. The agricultural sector also demonstrated positive dynamics, with agricultural exports growing by 12%. These changes present new opportunities for diversifying the economy and reducing the energy component.
Mr. Kabakov agrees that promising areas for export growth until 2030 include the agro-industrial complex, metallurgy, IT and high-tech products, as well as mechanical engineering.

The Russian Export Center has identified a number of countries in Asia, Africa and Latin America that are seeking Russian suppliers of a range of products and services, including industrial raw materials, complex industry and infrastructure equipment, IT solutions, medicines, rolling stock and more.

"To meet the demand for these Russian goods in overseas markets, a new industrial base must be built on domestic technological solutions," the press service of the Russian Export Center notes.

The REC reports a high demand for domestic consumer goods in post-Soviet countries, including ready-made food, building materials, plastic products, furniture, and household chemicals. Furthermore, there is an increase in the supply of equipment for the energy and railway sectors. The countries of the post-Soviet space and the EAEU will be key markets for many Russian goods in 2030. This is due to the fact that, as a result of demographic changes, demand there will grow faster than in Russia.
Russia is also keen to foster closer ties with countries in the Global South, offering not only food, energy resources and industrial raw materials, but also goods and solutions for the complete modernisation of the entire engineering, energy, transport, urban infrastructure, educational and medical services, IT services and much more, according to the REC.

Trade turnover with friendly countries has already grown to a level comparable to Russia's trade with the entire world, as reported by the Russian Export Center's press service. In 2021, friendly countries accounted for 60% of Russia's non-resource non-energy exports. Currently, this figure has risen to 86%.

However, there are factors that are impeding further growth of the NNE. Mr. Kabakov identifies logistical limitations, a lack of financial instruments for exporters, and high competition as key challenges impeding further growth.
Some of the current restrictions that are hindering the reorientation of exports can be mitigated. To overcome logistical challenges, it is essential to develop robust transport infrastructure and proactively identify potential bottlenecks. The success of these measures is contingent upon the precision of foreign trade forecasting and the identification of promising export avenues. "A key priority is the strategic allocation of rail transport resources, with a focus on the added value and total tax revenues per unit of cargo," states Alexander Firanchuk.

One of the challenges is obtaining the necessary approvals to sell our products in a new market. "Many of the countries that we are interested in doing business with have high tariffs on their domestic markets, particularly India, the UAE, and African countries. However, in the industrial sector, localisation programmes are being implemented (these are our capabilities), with discussions already underway and projects already in place in a number of countries. These science-intensive, technological products allow our suppliers to gain a foothold in the target market for many years by servicing such projects, according to the Russian Export Center.

A predictable and reasonable trade policy is also a key factor in driving growth in the NNE. In Russia, quotas and export duties are actively employed as a means of stabilising domestic prices and replenishing the budget. However, the long-term use of these measures could have the unintended consequence of reducing the attractiveness of investment and complicating business planning, according to Firanchuk.

To significantly increase the country's income from the non-energy sector by 2030, it is essential to strengthen the infrastructure, attract investment in high-value-added products, optimise tax conditions and build protection against currency risks, concludes Kabakov.