When the world gets closer.

We help you see farther.

Sign up to our expressly international daily newsletter.

Already a subscriber? Log in .

You've reached your limit of one free article.

Get unlimited access to Worldcrunch

You can cancel anytime .


Exclusive International news coverage

Ad-free experience NEW

Weekly digital Magazine NEW

9 daily & weekly Newsletters

Access to Worldcrunch archives

Free trial

30-days free access, then $2.90
per month.

Annual Access BEST VALUE

$19.90 per year, save $14.90 compared to monthly billing.save $14.90.

Subscribe to Worldcrunch

Russia Needs To Do The Heavy Lifting To Become An Export Nation

Moscow's goal be an exporter of manufactured goods must be done in the face of major political and financial uncertainties.

A Russian ship carrying used cars docks in Japan
A Russian ship carrying used cars docks in Japan
Aleksandra Romanyicheva

MOSCOW — The government has stated on many occasions that manufactured exports, instead of raw materials, should be the engine of economic growth for Russia. But making the leap onto the market for exporting goods is a major challenge.

"One of the most formidable barriers for potential exporters is the colossal amount of work required to secure credit," says Rodion Surkov, whose company Ruselprom is a leading producer of electrical equipment in Russia.

Commercial financial institutions are not prepared to take on the risks associated with supporting exports, citing financial and political unknowns, management difficulties and low profit margins. It doesn’t help that many of Russia’s traditional export markets are in the relatively unstable countries of the Middle East and Latin America.

But at least one of the problems facing exporters was solved when the Russian Export Insurance Agency (REIA) opened two years ago. Most commercial insurance agencies refuse to offer insurance for exporters, so the outfit fills a crucial gap. State-sponsored export insurance agencies are common around the world, since exporting is considered risky not just by Russian insurers, but also by insurers worldwide.

[rebelmouse-image 27087414 alt="""" original_size="333x499" expand=1]

Port of Taganrog - Alexxx1979

But accessibility of export insurance is just one step towards creating a better economic environment for Russian companies. Peter Fradkov, head of REIA, says he has been actively working with banks and regulatory agencies to try to stimulate lending to exporters. The first step was a change to Bank of Russia regulations — in force since Jan. 1 — that allows banks to accept export insurance as loan collateral without having to establish reserves. Previously, banks making loans to exporters had to evaluate the loan risks and have up to 100% of the loan amount in reserve, which made it extremely difficult for exporters to get credit.

Another change Fradkov pushed forward has to do with the way banks evaluate the credit-worthiness of their portfolio, using a coefficient. The lower the coefficient, the better, and Fradkov managed to reduce it to evaluate credit given to exporters.

It is also now easier for exporters to handle deals in foreign currencies without worrying about breaking regulations.

Is it enough?

But will these simple measures stimulate manufactured exports and begin to change the ratio of raw materials exports, which now represent two-thirds of Russia’s total? According to Aleksander Knobel, head of the Laboratory for International Trade at the Gaidar Institute, creating the Russian Export Insurance Agency was critical, but is simply not enough.

“Giving Russian exporters of manufactured goods access to export insurance and guarantees just gives them the same conditions as exporters from other countries who are active in the international market. Without that, there is no way to increase exports,” he says. “There is no universal recipe that would immediately allow us to increase our competitiveness. ... There’s a long global practice that we just need to follow. In that sense, it’s easier for us, because we just have to look at what is being done in other countries, but putting it into practice is harder for us,” Knobel says.

In his view, the highest priority should be removing export barriers within Russia. For example, to export a product, a company has to prove that it could not be used for military purposes. “Exporters have trouble getting to the market because of administrative barriers,” he says. “Plus, at the moment the custom’s service doesn’t work very well, and that is delaying exports. In ratings of effectiveness of the customs system, Russia is in last place.”

The government has prepared a road map of sorts for improving exports, but many outside experts say that even this plan is too “bureaucratic.”

For the moment, is seems that institutional changes are still stalled, and developing Russia’s export market still has institutional hurdles to overcome. Fradkov admits that he often does things that would seem inappropriate for the head of an export agency — for example, personally escorting exporters to meetings with bankers.

“It is not a classic role for an export agency at all, but we are living with the reality that the export market is still in the phase of early development.”

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

FOCUS: Israel-Palestine War

The Red Sea Attack Shows Two Scenarios For How The Gaza War Goes Global

Houthi rebels in Yemen have escalated their maritime attacks in the strategically vital Red Sea. Both their links to Iran, and the decision to target key shipping routes raises the risks for international escalation.

Crowd of newly recruied Houthi rebels participating in a military parade carrying weapons and rocket launchers. Holding and wearing both the Palestine flag and the Yemen flag.

Newly recruited Houthi rebels marching in a military parade

Source: Osamah Yahya/ZUMA
Elias Kassem


CAIROKeep your eye on Yemen. The Houthi rebel group from the war-torn Gulf nation has not attracted the same attention over the past two months as the Lebanese militants of Hezbollah, considered the most immediate risk of setting the spark that could ignite the Hamas-Israel war beyond Gaza.

For the latest news & views from every corner of the world, Worldcrunch Today is the only truly international newsletter. Sign up here.

Yet over the past 48 hours, a major Houthi attack on seaborne targets was launched with ballistic missiles and explosive-landed drones. The U.S. said one of its warships in the area shot down three drones in self-defense during the hours-long assault on the vessels, including the Bahamas-flagged bulk carrier Unity Explorer and the Panamanian-flagged bulk carriers Number 9 and Sophie II.

The Houthis claimed the attack in a statement read by their military spokesman, saying the targeted vessels have links with Israel, a claim Israel’s military denied.

“The Yemeni armed forces continue to prevent Israeli ships from navigating the Red Sea (and Gulf of Aden) until the Israeli aggression against our steadfast brothers in the Gaza Strip stops,” Brig. Gen. Yahya Saree said in the statement.

The U.S. military’s Central Command said in a statement that the attacks put at risk the lives of international crews working on the ships. And more broadly, CENTCOM warned that “these attacks represent a direct threat to international commerce and maritime security.”

Keep reading...Show less

The latest