ABSTRACT
This chapter examines the peculiar evolution of Russia’s foreign economic policy with special focus on trade. It evaluates the role of domestic socioeconomic and political groups in determining foreign policy. Using hydrocarbons and agriculture as our cases, the authors make the following argument about policy and trade, in which domestic and global politics matter as much or more than markets. Firstly, the kinds of policies that emerge are in part a function of state structures and political relations. State structure affects the capacity (or lack thereof) of political elites to shape the economy (including traders and trade). Secondly, the authors argue that earlier fundamental reforms shaped future paths for trade and trade policies. In particular, privatization broke apart the agricultural sector, kept gas under state control, and left oil in a middle ground split between private oligarchs and state ownership. This affected state capacity and political relations as noted earlier, as well as creating variation in incentives for different trade policies. Third, we note how trade policies are embedded not only in these domestic political contexts, but also in geopolitics. In gas and oil, Russia had an important competitive advantage vis-à-vis other global actors, providing an incentive to maintain state leverage over this sector. The agricultural sector enjoyed no such advantages. However, the politics after the 2014 events in Crimea and Ukraine, especially Western sanctions, altered how state elites viewed agriculture, leading to import substitution policies - moving agricultural trade closer to that of hydrocarbons.
