If you have been keeping up with the global issues at all it would be hard not to know about the conflict between Russia and Ukraine. The conflict has been ongoing for sometime now and has been a problem ever since Ukraine has been separate from Russia. I don't want to go on about this because its not the focus of the post but a short summary of the conflict would be that Ukraine was set to join the UN a while back and then took a bailout from Russia. Now Russia has occupied Ukraine and there have been a number of protests and many members of United Nations feel that this conflict could be a threat to world order.
So how does this have an effect on Russia's foreign trade? Well ever since the end of the Soviet Union it has been a struggle to involve Russia in world trade. Russia was able to succeed though eventually and was able to establish a fairly strong amount of foreign trade. Trading to the outside world was very important to Russia and the rest of the world because they have many resources worth trading for. Also Russia's economy was helped along by the Foreign Trade they established. Things were on the up for Russia
Then the conflict with Ukraine started getting a little out of hand and started to worry other counties, especially members of United Nations. This caused a reduced demand for trade with Russia. Russia's foreign trade dropped by 11.4%. Exports dropped by 12.7% while imports dropped by 9.4%. This reflects how Russia's terms of trade have dropped. Trade with Russia is less desirable so the prices of their exports drop while prices for their imports rise. This also can have an effect on terms of trade for the rest of the world because other countries are against Russian imports so the have to import from elsewhere for higher prices also they are not getting exports from Russia so they might have to sell to other counties for less.
Overall for Russian foreign trade and their economy to rebound the crisis in Russia would need to be resolved and hopefully trade with Russia would continue to grow. You can read more on this subject in the article linked to the title.
For Russia to improve their terms of trade it will take a lot of time and effort. Depending on how the Ukraine conflict ends will determine how willing other countries will be to trade with Russia again. It will take effort from Russia's side to repair relations with the rest of the world. Though it doesn't look like there is an end in sight to the conflict. Until then Russia will only dig themselves in a deeper hole which unfortunately affects the rest of us in world terms of trade.
ReplyDeleteThat's a really good representation of how the decrease of exports and imports for a country can affect world prices. I briefly understood what was going on between Russia and Ukraine but now I better understand what all is at stake for Russia as well as the rest of the world. The decrease in trade in Russia will also cause the labor demand and GDP to decrease. Hopefully Russia can rebuild its relationships with countries it trades with and continue to increase trade with other countries.
ReplyDeleteI have heard about the crisis between Ukraine and Russia in the news now for several months, but I never thought to take into account how this could impact Russia's terms of trade. Your article did a great job explaining how two countries that seem to have a never ending battle can really negatively impact the worlds terms of trade.
ReplyDeleteThis reminds me of the discussion we had in class about trade embargoes/sanctions and if they "work". This is just another example of how it doesn't. While Russian terms of trade have diminished, they continue to seek out their own agenda. This is similar to that of Cuba and North Korea. We see that political leaders continually ignore what is best for their county's economy and therefore overall welfare for their own personal agenda. I wonder how this can be changed, or if there is even a way that we can impact how a country does business by affecting their terms of trade.
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