Where Does Russia Fit in the Global Trade Restructuring?
Commodities are part of the US-mediated ceasefire negotiations between Russia and Ukraine. With global trade in turmoil and resource supply chains increasingly matters of national security, the EU must ask itself how it relates to these new realities and Russia’s role as an energy power.
The UN Global Resource Outlook 2024 projected that the extraction of natural resources would grow by almost 60 per cent by 2060. In a global economy that is undergoing a disorderly transformation, commodities are bound to become even more important than in the past – despite current price drops in the wake of US President Donald Trump’s tariff war. Amid systemic stresses on financial frameworks, shifting power dynamics, and geopolitical fractures, controlling commodity supply chains is at the core of many national security and economic development strategies.
For Europe, understanding Russia’s evolving position in a changing global order is critical. Russia will most likely maintain its role as an influential exporter of hydrocarbons and agricultural products for the time being. At the same time, the European Commission and Germany are hard-wired to ‘rearm Europe’, having declared Russia to be their primary security threat and, in so doing, shrunk the space for future cooperation – for plausible reasons.
The US, in turn, has pushed Kyiv to grant it access to previously untapped rare-earth deposits in exchange for money and weapons. In the course of negotiations on a ceasefire in Ukraine, Washington has also shown itself to be open to Moscow’s desire for an easing of restrictions on its gas, fertiliser, and grain exports. The EU is therefore operating in a highly volatile global context of contested commodity supply chains, in which the US has turned revisionist and Russia remains a major player.
Russia's economy: sanctions and new dependencies
Russia enters this new world with a particular set of preconditions that defy notions of authoritarian state capitalism or a declining yet destructive power. True, the country’s political economy is unbalanced, authoritarian, and stagnant, and its foreign policy is destructive. Yet, Russia’s nuclear capabilities and hydrocarbons have ensured its global influence. What is more, while post-2022 Russia has significantly bolstered its military-industrial complex at the expense of civilian production, it bears little resemblance to the impoverished Soviet war economy of the 20th century.
The war against Ukraine and sustained sanctions have nonetheless isolated Russia from Western markets and reshaped Russia’s state-business relations. Emigration of skilled labour, war mobilisation, and sanctions are likely to impede Russia’s efforts to replace its imports and produce advanced civilian technology at home, particularly given the limited civilian benefits of an overheating military-industrial complex.
Russia’s aggregate weight in the global economy is therefore predicted to diminish further. A Russia-Ukraine ceasefire promises only meagre relief in this respect, as trade with the West is unlikely to return to pre-war levels. Russia’s former monopoly as Europe’s main oil and gas supplier will not return. Instead, Russia has become dependent on China, limiting Moscow’s influence over global commodity pricing. As of 2023, China accounted for 20 per cent of total Russian exports, three-quarters of which were fossil fuels.
Networked adaptation to global change
Reacting to this quagmire, the Kremlin has sought to diversify its trade partners and leverage its abundant natural resources through new currency arrangements and multilateral platforms outside the West, especially the BRICS format. These measures have coincided with an expanded use of the Chinese yuan and other non-Western currencies. However, it is doubtful that the Kremlin can establish non-dollar-denominated trading mechanisms that generate a similar level of resource rents to that of previous decades through exports to the West.
In adapting to global change, Russia has been relying on networks of individual, corporate, and institutional intermediaries beneath the geopolitically strained realm of interstate relations and economic warfare. These intermediaries include Western and non-Western companies and enablers of Russia’s oil-transporting shadow fleet, diplomatic networks of Russian regional politicians and business association representatives in various multilateral forums, and transnational elite networks in the global finance and technology sectors. These networks provide the flexibility, informality, and reliability needed to cope with the current global unpredictability.
Can Europe cope with Russia’s looming rehabilitation?
US attempts at a Russia-Ukraine ceasefire and the BRICS group recently gaining new members have partly rehabilitated Russian President Vladimir Putin on the global stage, despite his unbroken militarism and his ongoing war against Ukraine. Should global demand for energy and agricultural products start to recover at least partially from Trump’s recent tariffs, a lower yet sufficient level of resource rents will provide Russia with the means to adapt to global chaos and the strains of war.
Against this background, Europe has to play the long game: Brussels should maintain a tight sanctions regime on Russia to keep the financial burden and societal costs of warfare high for the Kremlin. At the same time, those parts of the Russian elite who now passively uphold the regime but secretly disagree with Putin’s anti-Western militarism should be encouraged to openly distance themselves from the Kremlin's policies: The EU must make clear to economic and societal actors in Russia the domestic political conditions (however unattainable they may seem at present) under which limited cooperation would be acceptable again.
Given Russia is already facing financial and technological limits to invest in its resource sector, the EU should also encourage energy competition with Russia from alternative suppliers, such as the US, Norway, and Middle Eastern states. Such a strategic attempt to outcompete Russian energy must be accompanied by an accelerated push towards intra-European decarbonisation to further reduce fossil-fuel demand.
Decarbonisation will not only make the EU less dependent on oil and gas imports. It is also a long-term goal that the EU shares with China and some of Russia’s BRICS partners – despite other political differences. A coordinated Sino-European decrease in fossil-fuel consumption would reduce global demand for Russia’s primary export goods, thus lowering world market prices and depriving the Kremlin of the resources to wage more wars. Above all, such a European approach will require pragmatism: accepting contradictions and trade-offs as well as committing to engage with new partners that prefer coordination to self-defeating autarky.
Sebastian Hoppe is an expert on the political economy of state strategies and a researcher at ZOiS.