Too much of a good thing? Russia-EU international trade relations at times of war

In: ECONOMIA E POLITICA INDUSTRIALE

Abstract

Abstract In this paper, we investigate the evolution of Russia's position in the world trade system, especially in relation to the European Union (EU). Data show that after entering into the WTO, Russia did not use this accession to develop and diversify trade flows (like China did, for example) but it augmented its specialization in fuels and raw materials, increasing its dependency on the rest of the world, and especially on European demand. Russia did not exploit its trade potential and its favorable geographic position to foster its economic development and to improve the welfare of its population. At the same time, the integration within the European Single Market and with the rest of the world both for older and new EU member formerly linked to the Soviet Union, has helped the EU to maintain high standards of living, and a relative stability, even if increasing its dependency on Russian fuels. We argue that it is also because of these differences and the related economic problems that tensions between Russia and the EU grew over time.