The Instability of Political Regimes, Prices and Enterprise Financing and Their Impact on the External Activities of the Russian Enterprises

Idäntalouksien katsauksia - Review of Economies in Transition
The Instability of Political Regimes, Prices and Enterprise Financing and Their Impact on the External Activities of the Russian Enterprises
Pekka Sutela
19994. 38 pages / sivua.
Suomen Pankki - Finlands Bank
The level of Russia's trade with the traditional convertible currency countries was fast to decline and remains slow to recover. The apparently missing Russian supply response to officially declared trade liberalization and substantial rouble devaluation has been the subject of much speculation and of a notably smaller amount of analytical research. There is also much uncertainty about the exact state of Russia's rapidly evolving foreign trade regime. This is the experience of its foreign trade partners, both ex ante and more surprisingly, ex post. This must also be the experience of Russian traders. It is therefore of interest to ask not only how the rules have changed but also how Russian producers, buyers and middlemen have adapted to this rather peculiar case of administrative uncertainty.

It is worth emphasizing that during the last few years changes in the rules of the Russian foreign trade game have been highly significant in their depth and scope. Generally, they have also been in the right direction, if our admittedly imperfect understanding of the nature and causes of the wealth of nations is taken as a criterion of judgment. Foreign trade liberalization is one area for which the Yeltsin Gaidar Chernomyrdin administration can claim some, albeit only partial, success. Though matters may not have always developed the way policy makers and advisors would have wished, neither have they stood still.

A brief look at the state of Russia's (or actually the USSR's) trade regime with the West in 1991 should make this clear. This is done in the first section of this paper. Then, to illustrate the speedy and to some degree even chaotic nature of the transformation, the article provides a generalized overview to early 1994 of the ongoing change in trade rules. A subsection assesses the actual state of the trade regime in the first half of 1994. Further, the article discusses in a more systematic way some of the crucial issues of principle regarding Russian trade liberalization. Throughout, we discuss the adaptation strategies of Russian enterprises in the face of the economic, political and administrative uncertainty created by the character of change in the Russian foreign trade regime. The article ends with some conclusions and prophesies.

This article focuses solely on commodity trade and the exchange rate regime. Payment systems, capital flows and indebtedness are thus largely bypassed. Furthermore, the emphasis is on Russia's trade with the West, here understood as the traditional hard currency economies.

Reprint in PDF format 2002.
Uudelleenjulkaistu pdf-muodossa 2002.