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Russian trade: Strategies and challenges – Interview with Peter Fradkov

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The Russian Export Center (REC) is created as a state specialized institute to support Russian export to foreign markets. It has a group of companies that provides comprehensive financial and non-financial support to Russian export-oriented companies and industries in the single window format.

One of the key tasks is to interact with relevant ministries and departments in the sphere of improving and developing foreign trade of the Russian Federation to Europe, Latin America, Asia and Africa.

In this interview, Peter Fradkov, General Director of the Russian Export Center (REC), discusses some aspects of Russian trade operations, strategies and challenges as well as future plans in the direction of Africa during a recent meeting with Kester Kenn Klomegah, an independent researcher and a policy consultant on African affairs in the Russian Federation and Eurasian Union.

Could you please tell us about the Russian Export Center and why it was established as a subsidiary of Vnesheconombank in 2015?

In recent years, Russia has been making every effort to avoid the “raw-materials” export model and focus on developing export-oriented industries. The launch of the Russian Export Center was a key step towards the development of a full-fledged national export support system. Previously, the exporter had to apply to various authorities on different issues. In the course of time it became clear that it was necessary to create a “one-stop-shop” for exporters to receive a full range of services and support their products in foreign markets.

The reason behind creating a Russian Export Center within Vnesheconombank, based on the mandate of Vnesheconombank as a development institution, was the need to unite the Center, the EXIAR insurance agency and Roseximbank in one group in order to offer our customers a full range of financial and non-financial services, to provide Russian exporters with ample tools for entering foreign markets.

With a focus on South Africa, is there any possibility for it to be used as a gateway to reach the market of southern African region? Do you also plan to develop or localize production centers and cooperate or compete with other foreign producers there?

Let me address the last question first. It is unlikely that upon entering the South African market, Russian companies will pursue any competition objectives. On the other hand, they are not afraid of competition, as Russian industrial products, primarily machinery, are quite competitive and can occupy positions not only in the market of South Africa, but also in other African countries. Russian manufacturers have a number of specific competitive advantages. Let’s take, for example, agricultural machinery. The main advantage of Russian products as compared to the counterparts by major foreign manufacturers is a lower price and almost the same level of capacity, quality and useful life. Moreover, the cost of operation, including maintenance, repairs, etc. is often lower than that of the foreign competitors worldwide. Considering the fact that Africa has 60% of the world’s resources of untreated but agriculturally suitable land, we recognize remarkable opportunities for supplies of agricultural machinery, fertilizers, plant protection products and other solutions to improve the efficiency of agricultural activities in African countries. 

Besides, a number of Russian companies operating in South Africa, such as Rosatom, Rostselmash, and Renova are implementing educational programs to train local specialists for the subsequent operation and maintenance of equipment, facilities or plants built with Russian support. This is an important contribution to the social development of the African country.

As for the plan to establish production there, it is a very interesting form of cooperation, which the Russian companies are now considering. And what matters here is that a reliable partner has to be chosen. In this context, cooperation with local and foreign producers in South Africa looks very promising The Russian Export Center takes an active part in the development of state support measures to create a service and repair infrastructure for Russian companies operating abroad, the launch of which is scheduled for the next year. The Republic of South Africa offers good conditions for the creation of joint manufacturing facilities and opportunities for them to enter the markets of the South African Customs Union (SACU) and the Southern African Development Community (SADC) countries in the future.  

Do you also think there is a lot of potential in terms of raising trade and economic cooperation between the African continent and Russia? Doing business in Africa is not easy but what kind of approach do you envisage to adopt?

Today, African countries are taking an increasingly active part in the global political and economic space. The Soviet Union made a significant contribution to the social and economic development of African countries by building large industrial and infrastructure facilities and helping to establish national education and health care systems. However, in the 1990s the Russian-African relations came virtually to a standstill. At present, Russia’s foreign trade turnover with Africa is about 12 billion US dollars, which is a rather modest achievement. Nevertheless, the African continent remains a rather promising market for Russian industrial goods.

When working with exporters, we are witnessing increasing understanding that Africa is a new global market with a population of more than 1 billion people, with great potential for economic growth and, accordingly, consumption.

On the other hand, I can’t recall of any special difficulties, inherent to the Russian-African business partnership. Perhaps, I should point out a still insufficient awareness of the real economic opportunities, market conditions and specific counterparts in African markets by Russian businesses and, accordingly, poor awareness of capabilities of Russian partners incumbents by Africans.

As I already said, what really matters for Russian companies is to find potential partners and distributors. Many companies do not possess competencies for searching foreign partners. Any successful project which came to exist had very often a spontaneous nature and was forged due to some historical experience, exhibitions or some other events. And we haven’t undertaken any focused effort based on modelling of business processes to find dealers and distributors. Russian Export Center actively engages in tackling this issue in order to reconcile consistently supply and demand with each other.       

What are your key focus, products and services? Would you also focus on big companies and who are your potential clients? And what about medium-size enterprises?

Customers of the Russian Export Center include representatives of very different industries: machine building, agro-industrial complex, IT, chemicals, pharmaceuticals, and many others. Our customers cooperate with countries in Asia, CIS, Africa, South America and Europe. The important thing is Russian Export Center deals with both major businesses and small and medium-sized exporters. Of course, the goals and opportunities of these companies vary. The medium- and small-sized exporters e.g. submit inquiries relating to non-financial support, search for partners, analysis of foreign markets, educational services in the field of exports. The major players are more interested in financial and insurance support. Russia is a big country, so we pay special attention to working with regions. According to data for 2016, a significant proportion of REC customers (about 70%) accrued exactly to the regional companies. And it comes without surprise since the vast majority of manufacturing companies are located in the regions. We are pleased to witness a higher interest shown by the regional companies in entering African markets, most of these companies represent small and medium businesses.

So, what are the key challenges here with regard to the latest economic developments which are faced by other foreign players on the African continent now?

Currently, lots of countries worldwide are intensifying efforts to get a foothold in Africa. Russia has traditionally and historically built very good, trust-based relations with the African continent. At the same, I should notice that trade and economic relations with many countries do not meet the achieved level of political relations. Trade turnover could be much more sizable in terms of both quality and numbers and both sides could experience such growth.

Reinforcement of positions of Russian exporters in Africa requires creation of certain conditions. The main one of them is penetration into the market. We are often faced with discriminatory barriers, which are there not because we are from Russia, but because we have just not thought about how to remove these barriers. For example, in some African countries we deal with the fact that European or American companies have to pay really low customs dues or do not have to pay them at all, while we often have to pay away 20-40 % custom duties, for example, for cars or cement. The government authorities, both intergovernmental commissions and the Russian Export Center, are primarily concerned with removing barriers for Russian exporters and opening up foreign markets for them.

What do you hope to achieve over the long term in the market in Africa? Describe the African market and say your final words to your potential clients who are located in different countries and regions in Africa?

Global goal of the Russian Export Center is to create favorable conditions for the growth of Russian exports. Being a key state institution for export support, the Government of Russia has set important tasks before us. This year we are to involve more than 6.5 thousand new companies in export activities and also support export deliveries worth at least $ 20 billion.

The world of today has gone global, and without the integration of world trade into the processes business scaling would be impossible. Our primary task is to gradually change the thinking of Russian entrepreneurs, who are often skceptical about entering foreign markets, including African ones. Secondly, we strive to promote the image of Russia as a producer of diverse and high-quality products. For this purpose, the Russian Export Center has launched a program to promote Russian goods and services under a single country brand “Made in Russia”. And in this context, Africa is a very important partner for us, though not an easy one.

Currently, the REC Group which includes EXIAR and Roseximbank has developed a comprehensive line of financial and non-financial instruments for the support of Russian companies in foreign markets operating or going to enter the African markets. In my opinion, the key products are financing of goods supplies (including, credits to the buyer or the buyer’s bank), insurance of export contracts and international investments, issuance of guarantees. The potential customers in Africa should be aware that the beneficiaries and consumers of these governments support measures are not just our exporters since we additionally arrange financing for supply of products and take other special support measures which are in fact assumed by the Russian state. Thus, the Russian Export Center aims to reach a mutually beneficial, long-term cooperation with our African partners.

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Putin’s post-Soviet world remains a work in progress, but Africa already looms

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Russian civilisationalism is proving handy as President Vladimir Putin seeks to expand the imaginary boundaries of his Russian World, whose frontiers are defined by Russian speakers and adherents to Russian culture rather than international law and/or ethnicity.

Mr. Putin’s disruptive and expansive nationalist ideology has underpinned his aggressive

 approach to Ukraine since 2014 with the annexation of Crimea and the stoking of insurgencies in the east of the country. It also underwrites this month’s brief intervention in Kazakhstan, even if it was in contrast to Ukraine at the invitation of the Kazakh government.

Mr. Putin’s nationalist push in territories that were once part of the Soviet Union may be par for the course even if it threatens to rupture relations between Russia and the West and potentially spark a war. It helps Russia compensate for the strategic depth it lost with the demise of communism in Europe and the collapse of the Soviet Union.

However, equally alarmingly, Mr. Putin appears to be putting building blocks in place that would justify expanding his Russian World in one form or another beyond the boundaries of the erstwhile Soviet Union.

In doing so, he demonstrates the utility of employing plausibly deniable mercenaries not only for military and geopolitical but also ideological purposes.

Standing first in line is the Central African Republic. A resource-rich but failed state that has seen its share of genocidal violence and is situated far from even the most expansive historical borders of the Russian empire, the republic could eventually qualify to be part of the Russian world, according to Mr. Putin’s linguistic and cultural criteria.

Small units of the Wagner Group, a private military company owned by one of Mr. Putin’s close associates, entered the Centra African Republic once departing French troops handed over to a United Nations peacekeeping force in 2016. Five years later, Wagner has rights to mine the country’s gold and diamond deposits.

Perhaps surprisingly, the Russian mercenary presence persuaded President Faustin-Archange Touadera that the African republic should embrace Russian culture.

As a result, university students have been obliged to follow Russian-language classes starting as undergraduates in their first year until their second year of post-graduate studies. The mandate followed the introduction of Russian in the republic’s secondary school curriculum in 2019.

Mr. Touadera is expected to ask Mr. Putin for Russian-language instructors during a forthcoming visit to Moscow to assist in the rollout.

Neighbouring Mali could be next in line to follow in Mr. Touadera’s footsteps.

Last month, units of the Wagner Group moved into the Sahel nation at the request of a government led by army generals who have engineered two coups in nine months. The generals face African and Western sanctions that could make incorporating what bits of the country they control into the Russian world an attractive proposition.

While it is unlikely that Mr. Putin would want to formally welcome sub-Saharan and Sahel states into his Russian world, it illustrates the pitfalls of a redefinition of internationally recognised borders as civilisational and fluid rather than national, fixed, and legally enshrined.

For now, African states do not fit Mr. Putin’s bill of one nation as applied to Ukraine or Belarus. However, using linguistics as a monkey wrench, he could, overtime or whenever convenient, claim them as part of the Russian world based on an acquired language and cultural affinity.

Mr. Putin’s definition of a Russian world further opens the door to a world in which the principle of might is right runs even more rampant with the removal of whatever flimsy guard rails existed.

To accommodate the notion of a Russian world, Russian leaders, going back more than a decade, have redefined Russian civilisation as multi-ethnic rather than ethically Russia.

The Central African Republic’s stress on Russian-language education constitutes the first indication in more than a decade that Mr. Putin and some of his foreign allies may expand the Russian world’s civilisational aspects beyond the erstwhile Soviet Union.

Some critics of Mr. Putin’s concept of a Russian world note that Western wars allegedly waged out of self-defense and concern for human rights were also about power and geopolitical advantage.

For example, pundit Peter Beinart notes that NATO-led wars in Serbia, Afghanistan, and Libya “also extended American power and smashed Russian allies at the point of a gun.”

The criticism doesn’t weaken the legitimacy of the US and Western rejection of Russian civilisationalism. However, it does undermine the United States’ ability to claim the moral high ground.

It further constrains Western efforts to prevent the emergence of a world in which violation rather than the inviolability of national borders become the accepted norm.

If Russian interventionism aims to change borders, US interventionism often sought to change regimes. That is one driver of vastly different perceptions of the US role in the world, including Russian distrust of the post-Soviet NATO drive into Eastern Europe and independent former Soviet states such as Ukraine.

“People with more experience of the dark side of American power—people whose families hail from Guatemala, Chile, Brazil, Haiti, or Mexico, where US guns have sabotaged democracy rather than defended it—might find it easier to understand Russian suspicions. But those Americans tend not to shape US policy towards places like Ukraine,” Mr. Beinart said.

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Neighbours and Crises: New Challenges for Russia

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Through all the discussions that accompanied the preparation of the Valdai Club report “Space Without Borders: Russia and Its Neighbours”, the most clear question was whether Russia should or should not avoid repeating the historical experience of relations with its near abroad. This experience, in the most general terms, is that after Russia pacifies its western border with its foreign policy, the Russian state inevitably must turn to issues related to the existence of its immediate neighbourhood. With a high degree of probability, it will be forced to turn to its centuries-old method for solving problems that arise there: expansion for the sake of ensuring security.

Now Russia’s near abroad consists of a community of independent states that cannot ensure their own security and survival by relying only on their own forces; we cannot be completely sure of their stability. From Estonia in the west to Kyrgyzstan in the east, the existence of these countries in a competitive international environment is ensured by their link with one of the nuclear superpowers. Moreover, such connections can only complement each other with great difficulty. As the recent developments in Kazakhstan have demonstrated, they are not limited to the threat of an external invasion; even internal circumstances can become deadly.

The dramatic events in that country were intensified by external interference from the geostrategic opponents of Russia, as well as international terrorists, but it would be disingenuous to argue that their most important causes are not exclusively internal and man-made. We cannot and should not judge whether the internal arrangements of our neighbours are good or bad, since we ourselves do not have ideal recipes or examples. However, when dealing with the consequences, it is rational to fear that their statehood will either be unable to survive, or that their existence will take place in forms that create dangers which Russia cannot ignore.

In turn, the events experienced now in relations between Russia and the West, if we resort to historical analogies, look like a redux of the Northern War. The Great Northern War arose at the beginning of the 18th century as the result of the restoration of Russia’s power capabilities; the West had made great progress in approaching the heart of its territory. Within the framework of this logic, victory, even tactical victory, in the most important (Western) direction will inevitably force Russia to turn to its borders. Moreover, the reasons for paying more attention to them are obvious. This will present Russia with the need to decide on how much it is willing to participate in the development of its neighbours.

The developments in Kazakhstan in early January 2022 showed the objective limits of the possibilities of building a European-style sovereign state amid new, historical, and completely different geopolitical circumstances. More or less all the countries of the space that surrounds Russia, from the Baltic to the Pamir, are unique experiments that arose amid the truly phenomenal orderliness of conditions after the end of the Cold War. In that historical era, the world really developed under conditions where a general confidence prevailed that the absolute dominance of one power and a group of its allies creates conditions for the survival of small and medium-sized states, even in the absence of objective reasons for this.

The idea of the “end of history” was so convincing that we could accept it as a structural factor, so powerful that it would allow us to overcome even the most severe objective circumstances.

The Cold War era created the experience of the emergence and development of new countries, which until quite recently had been European colonies. Despite the fact that there are a few “success stories” among the countries that emerged after 1945, few have been able to get out of the catch-up development paradigm. However, it was precisely 30 years ago that there really was a possibility that a unipolar world would be so stable that it would allow the experiment to come to fruition. The visible recipes of the new states being built were ideal from an abstract point of view, just as Victor Frankenstein was guided by a desire for the ideal.

Let us recall that the main idea of our report was that Russia needs to preserve the independence of the states surrounding it and direct all its efforts to ensure that they become effective powers, eager to survive. This desire for survival is seen as the main condition for rational behaviour, i.e. creating a foreign policy, which takes into account the geopolitical conditions and the power composition of Eurasia. In other words, we believe that Russia is interested in the experiment that emerged within the framework of the Liberal World Order taking place under new conditions, since its own development goals dictate that it avoid repeating its past experience of full control over its neighbours, with which it shares a single geopolitical space.

This idea, let’s not hide it, prompted quite convincing criticism, based on the belief that the modern world does not create conditions for the emergence of states where such an experience is absent in more or less convincing forms. For Russia, the challenge is that even if it is technically capable of ensuring the immediate security of its national territory, the spread of the “grey zone” around its borders will inevitably bring problems that the neighbours themselves are not able to solve.

The striking analogy proposed by one colleague was the “hallway of hell” that Russia may soon face on its southern borders, making us raise the question that the absence of topographic boundaries within this space makes it necessary to create artificial political or even civilisational lines, the protection of which in any case will be entrusted to the Russian soldier. This January we had the opportunity to look into this “hallway of hell”. There is no certainty that the instant collapse of a state close to Russia in the darkest periods of its political history should be viewed as a failure in development, rather than a systemic breakdown of the entire trajectory, inevitable because it took shape amid completely different conditions.

Therefore, now Russia should not try to understand what its further strategy might be; in any case, particular behaviour will be determined by circumstances. Our task is to explore the surrounding space in order to understand where Russia can stop if it does not want to resort to the historical paradigm of its behaviour. The developments in Kazakhstan, in their modern form, do not create any grounds for optimism or hopes for a return to an inertial path of development. Other states may follow Ukraine and Kazakhstan even if they now look quite confident. There are no guarantees — and it would be too great a luxury for Russia to accept such a fate.

This is primarily because the Russian state will inevitably face a choice between being ready for several decades of interaction with a huge “grey zone” along the perimeter of its borders and more energetic efforts to prevent its emergence. It is unlikely that Moscow would simply observe the processes taking place on its immediate periphery. This is not a hypothetical invasion of third forces — that does not pose any significant threat to Russia. The real challenge may be that in a few decades, or sooner, Moscow will have to take on an even greater responsibility, which Russia got rid of in 1991. Even now, there seems to be a reason to believe that thirty years of independence have made it possible to create elements of statehood that can be preserved and developed with the help of Russia.

from our partner RIAC

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Do as You’re Told, Russia Tells the Neighborhood

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The Kremlin has always argued that it has special interests and ties to what once constituted the Soviet space. Yet it struggled to produce a smooth mechanism for dealing with the neighborhood, where revolutionary movements toppled Soviet and post-Soviet era political elites. Popular movements in Georgia, Ukraine, Moldova, Kyrgyzstan, and most recently Kazakhstan have flowered and sometimes triumphed despite the Kremlin’s rage.

Russia’s responses have differed in each case, although it has tended to foster separatism in neighboring states to preclude their westward aspirations. As a policy, this was extreme and rarely generated support for its actions, even from allies and partners. The resultant tensions underlined the lack of legitimacy and generated acute fear even in friendlier states that Russia one day could turn against them.

But with the activation of the hitherto largely moribund six-nation Collective Security Treaty Organization (CSTO) in Kazakhstan seems to be an entirely different matter. Here, for the first time since its Warsaw Pact invasions, Russia employed an element of multilateralism. This was designed to show that the intervention was an allied effort, though it was Russia that pulled the strings and contributed most of the military force.

CSTO activation is also about something else. It blurred the boundaries between Russia’s security and the security of neighboring states. President Vladimir Putin recently stated the situation in Kazakhstan concerned “us all,” thereby ditching the much-cherished “Westphalian principles” of non-intervention in the internal affairs of neighboring states. The decision was also warmly welcomed by China, another Westphalia enthusiast.

In many ways, Russia always wanted to imitate the US, which in its unipolar moment used military power to topple regimes (in Afghanistan and Iraq) and to restore sovereignty (in Kuwait.) Liberal internationalism with an emphasis on human rights allowed America and its allies to operate with a certain level of legitimacy and to assert (a not always accepted) moral imperative. Russia had no broader ideas to cite. Until now. Upholding security and supporting conservative regimes has now become an official foreign policy tool. Protests in Belarus and Kazakhstan helped the Kremlin streamline this vision.

Since Russia considers its neighbors unstable (something it often helps to bring about), the need for intervention when security is threatened will now serve as a new dogma, though this does not necessarily mean that CSTO will now exclusively serve as the spearhead of Russian interventionist policy in crises along its borders. On the contrary, Russia will try to retain maneuverability and versatility. The CSTO option will be one weapon in the Kremlin’s neighborhood pacification armory.

Another critical element is the notion of “limited sovereignty,” whereby Russia allows its neighbors to exercise only limited freedom in foreign policy. This is a logical corollary, since maneuverability in their relations with other countries might lead to what the Kremlin considers incorrect choices, like joining Western military or economic groupings.

More importantly, the events in Kazakhstan also showed that Russia is now officially intent on upholding the conservative-authoritarian regimes. This fits into a broader phenomenon of authoritarians helping other authoritarians. Russia is essentially exporting its own model abroad. The export includes essential military and economic help to shore up faltering regimes.

The result is a virtuous circle, in the Kremlin’s eyes. Not only can it crush less than friendly governments in its borderlands but it also wins extensive influence, including strategic and economic benefits. Take for instance Belarus, where with Russian help, the dictator Aliaksandr Lukashenka managed to maintain his position after 2020’s elections through brutality and vote-rigging. The end result is that the regime is ever-more beholden to Russia, abandoning remnants of its multi-vector foreign policy and being forced to make financial and economic concessions of defense and economics to its new master. Russia is pressing hard for a major new airbase.

A similar scenario is now opening up in Kazakhstan. The country which famously managed to strike a balance between Russia and China and even work with the US, while luring multiple foreign investors, will now have to accept a new relationship with Russia. It will be similar to Belarus, short of integration talks.

Russia fears crises, but it has also learned to exploit them. Its new approach is a very striking evolution from the manner in which it handled Georgia and Ukraine in 2008 and 2014, through the Belarus and Armenia-Azerbaijan crises in 2020 to the Kazakh uprising of 2022.

Russia has a new vision for its neighborhood. It is in essence a concept of hierarchical order with Russia at the top of the pyramid. The neighbors have to abide by the rules. Failure to do so would produce a concerted military response.

Author’s note: first published in cepa

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