The EU's Trade Relationship with Russia

The European Union and the Russian Federation have a strong trade relationship. Bilateral trade and investments continue to grow rapidly.

Russia is one of the EU's key trading partners and trade between the two economies has showed steep growth rates over the last years. The EU is by far Russia's main trading partner, accounting for 52.3 % of its overall trade turnover in 2008. It is also by far the most important investor in Russia. It is expected that up to 75% of FDI stocks in Russia come from the EU Member States. At the centre of EU-Russia relations at present are ongoing WTO accession negotiations, negotiations on a new agreement to replace the current Partnership and Co-operation Agreement and the implementation of the EU - Russia Common Economic Space (CES).. The negotiations on a new agreement with Russia, which were launched in July 2008, will strengthen bilateral trade relations by enshrining some basic principles and objectives in the area of trade. Negotiations on a more detailed trade and economic agreement, which will be negotiated in the context of the new agreement, can start as soon as Russia has joined WTO.

Trade in goods

EU good exports to Russia 2008: €105 billion

EU goods imports from Russia 2008: €173,2 billion

Imports from Russia are mainly energy and mineral fuels products (68.2%), some manufactured goods chemicals and raw materials. EU exports to Russia are diversified, covering nearly all categories of machinery and transport equipment, manufactured goods, food and live animals.

Trade in services

EU services exports to Russia 2007: €18 billion

EU services imports from Russia 2007: €11,5 billion

Foreign Direct Investment

EU outward investment to Russia 2007: €17 billion

Russian inward investment in the EU 2007: €1 billion

The Partnership and Cooperation Agreement

The Partnership and Co-operation Agreement (PCA) has been the framework of the EU-Russia relationship for a decade. It was signed in 1994 and entered into force on 1 December 1997. The agreement regulates the political, economic and cultural relations between the EU and Russia and is the legal basis for the EU's bilateral trade with Russia. One of its main objectives is the promotion of trade and investment as well as the development of harmonious economic relations between the parties. The PCA contains special provisions regarding the economic relations between the EU and Russia. EU imports from Russia are to a very large extent not subject to any restrictions. Remaining EU restrictions, notably in the steel sector, are being addressed under a bilateral agreement. The current agreement foresees increases of the mutually agreed steel quotas until the end of 2008.

Towards a successor agreement to the current PCA

The EU and the Russian Federation are currently negotiating a new agreement to provide for the contractual framework for EU-Russia relations in the years to come, replacing the 10-year old PCA. This new legally binding agreement will provide a comprehensive framework for bilateral relations. A mandate for these negotiations was agreed in May 2008 and the negotiations were launched on 4 July 2008.

In this context, once Russia has acceded to WTO, the EU is eager to pursue, a deep and comprehensive economic integration agreement between the EU and Russian economies, building on but going beyond the PCA and WTO provisions. This agreement is to tackle trade barriers between the EU and Russia. It will put a special emphasis on regulatory issues, and give new impetus to economic reforms in Russia.

The Common Economic Space (CES)

At the St Petersburg Summit in May 2003 the EU and Russia agreed to reinforce co-operation with a view to creating four EU/Russia common spaces, within the framework of the existing Partnership and Co-operation Agreement (PCA). The Common Economic Space (CES) aims at increasing opportunities for economic operators, a further step towards establishing a more open and integrated market between the EU and Russia. The overall objective of the CES is to put in place the conditions for increased and diversified trade and creating new investment opportunities by pursuing economic integration, elimination of trade barriers, regulatory convergence, market opening, trade facilitation and infrastructure development by closer co-operation, exchange of information and sharing of best practices. Working towards regulatory convergence will allow economic agents to operate subject to common rules in a number of fields throughout the enlarged EU and Russia, which represent a market of around 600 Million consumers.

The Roadmap on the Common Economic Space was adopted at the EU-Russia Summit in Moscow on 10 May 2005. The document sets out a number of principles and priority activities. It also sets up dialogues on the following trade related issues: Investment dialogue, IPR dialogue, Public Procurement Dialogue, Regulatory Dialogue on Industrial Products and Industrial and Enterprise Policy Dialogue, Energy Dialogue, Competition Dialogue, Macroeconomic and Financial Services Dialogue, Trade Facilitation and Customs.

Russia 's WTO accession

The EU recognises the fundamental importance of WTO membership for Russia. Russia is the only major international economy which is not yet a member of WTO. Once negotiations are concluded, Russia will benefit from the rights and obligations that every WTO member has. WTO membership is also an important element for Russia's own reform process. Moreover, once negotiations on WTO accession have been concluded, it will bring opportunities for a qualitatively new step in EU-Russia economic relations, i.e. the perspective of an economic integration agreement.

The EU Trade Commissioner and the Russian Economy Development and Trade Minister signed on 21 May 2004 the agreement concluding the bilateral market access negotiations for the accession of the Russian Federation to the WTO. With the conclusion of a similar bilateral agreement with the United States on 19 November 2006, Russia has finalised a substantial part of its bilateral market access negotiations. The next step is the conclusion of the multilateral part of the WTO accession negotiations through the adoption of the so-called "working party report". From an EU perspective, key outstanding issues to be solved are related to export duties, including on wood, and railway fees. Russia also has to implement a number of legislative changes to bring its regulatory system in line with WTO rules.

It is Russia's Government's aim to complete its WTO- accession negotiations by the end of this year. The EU supports this timetable, provided that the outstanding issues can be solved.

Source: European Commission