Is Russia protected from trade wars?

Is Russia protected from trade wars?

Russia is one of the economies that is best protected from negative consequences, including a trade war between the U.S. and China, Russia's Economic Development Minister Maxim Oreshkin said.

"Russia is in many terms one of the economies that is best protected from such an external influence," RBC cited him as saying.  

"Such a global economic situation will influence all the financial markets. The Russian financial market is part of the global one. If there are negative trends on the global financial markets, they will, of course, impact the Russian market," Oreshkin noted.

The minister stressed that it is a full-fledged trade war between China and the United States with duties of about 25% that will destroy the value chain and the value added itself in the global economy. This, in turn, will affect the growth rate of the global economy, first of all industrial production, which will be under serious blow, Oreshkin said.

"Under a negative scenario, the global economy may lose up to several percent of global aggregate GDP," Oreshkin said. How soon it may happen will depend on how intensive the trade war is, he said.

"This can happen quite quickly if the escalation is very serious. That is, we can immediately lose a few percent from the base trend. That does not mean negative values, but the growth may be 1-2% instead 3-3.5%," Oreshkin explained.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, speaking to Vestnik Kavkaza, noted that Russia is not one of the direct participants in trade wars, but its economy, focused on the export of raw materials, is very much dependent on their outcome. "The decline in the economies of the two countries, the decline in GDP growth in these countries is a decrease in demand for raw materials. Of course, for Russia, it will mean a decline in income and a weaker ruble, and so on,” the expert acknowledged.

According to him, in order to protect the country from these consequences, the authorities may resort to instruments of a more cautious policy. “But the main thing is to pursue some structural changes in the economy more actively. To some extent, short-term measures are accumulating reserves and reducing the debt burden," the professor at the department of the stock market and investments at the Higher School of Economics said.

Abramov pointed out that, most likely, the escalation will not get so serious. "I think that most people in different countries hope that the parties will make some noise, but later reach some kind of consensus and make an agreement. Therefore, in fact, there is no shock at the markets from bilateral exchanges of tariff blows between the U.S. and China," the expert noted.

Residents of Russia, he added, will feel the painful consequences of a trade war, primarily on the basis of the exchange rate. "Because many incomes, commodity prices depend on the exchange rate, so this is the main direction where the population faces the greatest risks from the trade war between China and the United States," Alexander Abramov concluded.

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