The West's tricky trade relationship with Russia
updated 11:17 AM EDT, Tue April 15, 2014
This map shows the general routes of the main gas pipelines
that go through Ukraine, and the EU's dependence on Russia for energy.
Design: Inez Torre/CNN
STORY HIGHLIGHTS
- Russia risks being isolated by the West as it introduces visa bans and threatens more sanctions
- But the European Union is reliant on Russia for its energy supplies, and has strong trade links
- Trade is not so important between Russia and U.S., which is becoming energy self-sufficient
- These differences have impacted the economic approaches to Russia amid the crisis in Ukraine
The move comes after the West introduced sanctions over the conflict, with more expected. But Russian President Vladimir Putin remains bullish, clashing with U.S. President Barack Obama over the worsening crisis during a conversation Monday.
Meanwhile, European Union
foreign ministers on Monday agreed to expand the list of those subject
to sanctions and took further steps to help Ukraine economically, as
Kiev's interim government continued to seek closer ties to the West.
So far the EU has imposed financial and visa restrictions around 30 Russian and Ukrainian officials -- but stopped short of measures that would hit trade.
Russia is deeply
integrated in the global economy, and links with the EU are particularly
strong. Here's the background to Russia's relationship with the West.
How important is Russia's economy?
Russia is the eight biggest economy in the world,
with GDP of more than $2 trillion. Its economy -- which is heavily
reliant on commodities, particularly oil and gas -- is expected to grow
only slightly in 2014 to around $2.4 trillion. Hopes it would be one of
the decade's powerhouse economies have faded, with its GDP growing just
1.3% last year compared to 2012, one of the sharpest slowdowns in the emerging markets.
Russia boomed in the late
1990s and early 2000s as energy prices rose, then stumbled as demand
for commodities contracted. But its energy supplies remain vitally
important for the European Union, to which it supplies a third of its
natural gas. Germany, the eurozone's biggest economy, imports around 40%
of its gas from Russia.
With the Ukraine crisis taking its toll, Russia's economy may not grow at all in 2014, some analysts have warned.
What is Russia's economic relationship with the U.S?
Obama: The world should support Ukraine
Obama orders sanctions over Ukraine
The economic
relationship between Russia and the U.S. is unbalanced. Russia is the
20th largest trading partner for the U.S., with $27 billion worth of
trade exported across the Atlantic. On the flip-side, the U.S. is
Russia's fifth largest partner, with just $11 billion worth of trade.
Barroso: Ukrainian goal is convergence
According to Russian
Foundation chair David Clark, trade is a "relatively unimportant"
component of relations. Energy links are also weakening as the U.S.
looks to shale gas for its energy supplies and heads towards
self-sufficiency.
However, in March the U.S. State Department imposed a visa ban
on Russian and Ukrainian officials and individuals "responsible for, or
complicit in threatening the sovereignty and territorial integrity of
Ukraine." An expansion of the sanctions has been threatened.
Russia's trade flows
What is Russia's economic relationship with the EU?
The EU is Russia's
largest trading partner, and there are deep economic links between the
two. Almost half of Russia's exports -- $292 billion worth -- end up in
EU countries. Russia, in turn, is the third biggest trading partner for
the EU, with $169 billion in imports.
The EU initially stepped
more cautiously than the U.S. on sanctions. However, on Monday, the EU
said it would reinforce sanctions and target an additional four people
in its sanctions. This will bring the total number of people subject to
EU asset freezes to 22.
Members of the G8 have
also said they will not attend a planned summit in Sochi this June,
instead meeting in Brussels without Russia.
Meanwhile, the West has offered $16 billion in aid for Ukraine,
helping the country prop up its ailing finances. The International
Monetary Fund has also said Ukraine has $14 billion to $18 billion
credit available if required.
Why did the U.S. and EU approach Russia differently?
The eurozone has only
just emerged from its own crisis, and commentators say it could be wary
of rapidly cutting ties with such a powerful economic partner. Its
reliance on gas out of Russia would also feed caution. In contrast, the
U.S. is weaning itself off Russia's energy supplies and its trade
relationship is much less intertwined.
CNNMoney's Mark Thompson contributed to this report
end quote from:
Russia sanctions: Why the U.S. and Europe are not quite in step
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