Some Good News (Seriously) About U.S. – Russian Relations

A Russian Far Eastern Shipping Company (FESCO) container ship in port at Vostochniy.

Trying to say something upbeat about U.S.- Russian relations this week entails the same risks as going to a wake intent on offering words that will cheer up the deceased’s widow. The observation that, “At least you won’t have to put up with his snoring anymore” may be accurate enough, but in the grand scheme of things misses the point in cringe-worthy fashion.

Fully cognizant of the hazards, I’ll venture the view that there actually is one bright, or at least bright-ish, spot in U.S. – Russian relations these days. It turns out that accusations, criticisms, and punitive legislation aren’t the only things the two countries have been trading with increased frequency since then-Secretary of State Hillary Rodham Clinton presented Russian Foreign Minister Sergey V. Lavrov with the famed “reset button” in Geneva in March 2009.

American merchandise exports to Russia almost doubled from 2009 to 2012, growing from $5.4 billion to $10.7 billion last year, while merchandise imports from Russia increased from $18.2 billion to $29.3 billion. Of course, 2009 marked a trough year for international trade as the full effects of the global financial crisis came to be felt, but the trends over the past decade have been favorable, as well: By 2012, the value of U.S. goods exported to Russia increased more than four-fold over the 2003 level of $2.4 billion, while Russian imports more than tripled from the 2003 figure of $8.6 billion (see table below).

What’s more, those figures do not reflect the impact of the U.S. conferring “permanent normal trade relations (PNTR)” status on Russia. That move came late last year, after the House approved the move in November in a 365-43 vote and the Senate concurred by a 92-4 margin the following month. President Obama signed the legislation into law on December 14, but the trade implications of the measure were overshadowed by a focus on the Magnitsky Rule of Law Accountability Act of 2012, a component of the bill that imposes sanctions on Russians linked to the jailing and death of Russian attorney Sergei Magnitsky.

Passage of the Magnitsky Act with the trade bill ensured that Moscow would see the legislation as cause for retaliation rather than celebration. Exactly two weeks after President Obama put his pen to the PNTR measure, President Putin signed the Dima Yakovlev Act, a bill introduced in the Duma less than three weeks earlier that bars entry to Russia to any U.S. citizen alleged to have violated the rights of a Russian citizen. (The measure is named for a boy born in Russia and adopted by U.S. parents who lived in the Washington area. In July 2008, at age 21 months, the toddler died of heatstroke after his father left him strapped in a car seat for nine hours in the family’s sports utility vehicle. While the case attracted moderate media attention in the U.S., it was closely followed in Russia, where people were outraged when the boy’s father was acquitted of involuntary manslaughter in December 2008.)

Despite the initial focus on the Magnitsky Act, U.S. businesses hope that approval of permanent normal trade relations status for Russia will lead to expanded markets and a strengthening of trade ties in the years ahead. Last year, Russia ranked 28^th among U.S. export markets, and 16^th in terms of import sources. Aircraft, machinery – particularly for the oil and gas industries – and meat make up the majority of U.S. exports, while oil and other natural resources are the main imports from Russia.

There are, of course, problems to address and issues to resolve in U.S. – Russian trade relations. There are concerns about Moscow’s commitment to protecting intellectual property rights. A 2010 dispute over the safety of U.S. poultry producers’ processing methods, while resolved, has had a lingering negative impact on U.S. meat exports to Russia. And, of course, there’s the matter of the balance of trade. But running a trade surplus with the U.S. puts Russia in good company with much of the rest of the world and, as congressional researcher William H. Cooper noted in a March 2013 report to legislators, “The surge in the value of imports is largely attributable to the rise in the world prices of oil and other natural resources – which comprise most of U.S. imports from Russia – and not to an increase in the volume of imports.”

While the commercial outlook may not be uniformly favorable, any net-positive news on U.S.-Russian relations these days represents a welcome anomaly. At a time when the Kremlin won’t export Edward Snowden to the U.S., and President Obama won’t trade views one-on-one with President Putin in the Kremlin as a result, at least we’re still exchanging poultry and oil.

U.S. Trade in Goods with Russia, 2003 through June 2013
            (Billions of Dollars)

Source: U.S. Census Bureau. http://www.census.gov/foreign-trade/balance/c4621.html.

Note: Trade balance figures reflect rounding and adjustments.