With Russia finally joining the World Trade Organization (WTO) after almost 20 years of negotiations BricPartner looks at the different Industry’s which are likely to benefit or lose from Russia’s WTO entry. 

Agriculture: many of the Russian farming Industry is bracing itself for a flood of cheap food imports which will greatly effect this industry. The larger modern and more efficient farms will survive and embrace the opportunities the WTO will present for them in international markets. Smaller less efficient farms will struggle to survive. Russia will also stop subsidizing fertilizer and fuel costs for its important Agriculture sector.

Consumer and services industry: will greatly benefit from lower import costs as trading barriers are removed. More International companies are expected to set up there business in Russia which will create more jobs and push up wages. With a higher level of disposable income and a rising middle class in Russia this will translate to an increase in consumer good sales. Russia will also increase its share of the tourism market as costs will be reduced with more competition from international hoteliers and a better quality level of service. International Banks and Insurance companies are expected to become very active in developing there business in the Russian market.      

Construction: will gain as more economic activity will lead to investment in Russia’s infrastructure and more building of houses, flats, factories and transport hubs. Also the lowering of tariffs and other protectionist measures will mean it’s cheaper to import building materials and construction machinery into Russia.

 Automobile: Russian Auto makers will face one of the biggest challenges from overseas car makers as Russian trade tariffs for the importation of vehicles has been slashed from 25% to 15% . A higher level of investment in the Russian automobile sector will be needed to ensure that they can modernize and compete.

Aerospace: Russian airlines such as Aeroflot its national carrier will benefit with the lowing of costs for leasing planes and equipment from the international market as tariffs will be reduced. The Russian Aerospace manufacturing sector will find it harder to complete with International companies but in the long term joining the WTO will lead to overseas investment in the Aerospace industry which will only lead to a stronger industry.

Transportation: sector will be greatly improve both inbound and outbound as trade with in Russia increases as it’s export companies that have the most to gain from the WTO agreement.

Metals Industry: will see a benefit as importers of Russian metals and commodities will reduce their import tariffs on Russian materials and this along side the Chemicals industry will be one of the biggest winners.

Chemicals: there are a lot of protectionist measures against the Russian chemicals industry around the world and this industry will greatly benefit from trade barriers being removed and allowing it to compete on a level playing field.

Oil and Gas Industry: the impact on the Russian Oil and Gas industry will be fairly minor despite the fact that this industry represents 60% of Russia GDP. Russia will be allowed to place a tax of up to 30 percent on top of the price at which it sells natural gas domestically for the foreseeable future, despite the fact that several government experts, working for the government Strategy 2020 economic plan wanted to abolish them to stimulate economic modernization.  On the oil side, similar deliberations took place. At issue were fears that gasoline prices might rise and since the price of natural gas is tied to the price of oil, any adjustment to oil prices would affect natural gas.

 Russia joining the WTO is one of the best things that has happened to the Russian economic policy in terms of giving international investors confidence. The WTO will lead to overall improvement in the investment climate through out Russian Industry leading to a better quality level of economic policy from Russia in the coming years. Becoming members of the WTO is expected to help the Russian economy grow faster and the World Bank estimates that this will add 3.3 % growth in Russia GDP. Russia also wants to diversify its economy away from being overly dependant on the Oil and Gas Industry and now being WTO will help.