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U.S.-RUSSIA TRADE GROWS IN FIRST QUARTER
by Padraic J. Sweeney

U.S. exports to Russia grew 9.3 percent in the first quarter of 1995, amid
increasing signs of economic stabilization there.  Processed foods and other
manufactured goods again led U.S. shipments to the Russian Federation. 
Elsewhere in the Newly Independent States (NIS) of the former Soviet Union, a
number of smaller markets grew rapidly from very low levels, compared with the
first quarter of 1994.  Exports to Ukraine, Kazakhstan, and Turkmenistan--the
largest regional markets after Russia--declined. 

Exports to Russia, by far the largest NIS market, totaled $595 million in the first
three months of the year.  Meat products were the largest category of exports,
growing 142.8 percent to a total of $170.6 million.  Exports of machinery and
parts totaled $104.5 million, electrical equipment deliveries were worth $48.5
million, and shipments of motor vehicles amounted to $40.6 million.  U.S. exports
of cereal grains also expanded by 11 percent, to $34.6 million.  Although this is an
improvement over last year's performance for cereal grains, it does not represent a
significant reversal of the sharp decline in exports over the last several years,
which have resulted from the elimination of Russian government import subsidies
for these commodities.  

Exports of aircraft and parts, the leading category of U.S. exports to Russia last
year, accounted for less than one percent of the total in the first quarter of
1995--although this situation is likely to improve as a result of the Russian
government's recent decision to reduce tariffs on these products.  Exports of
meats and other processed foods are likely to suffer later in the year, however, as
a result of higher tariffs imposed on imported foodstuffs in May.

Crisis Bottoming Out
Continued growth in U.S. exports comes as Russia's post-Soviet economic decline
appears to be bottoming out.  A number of key economic indicators that have been
strongly negative since Russia began its transition to a market economy have
begun to moderate, according to the Russian Federation Ministry of Finance and
the Central Bank of Russia.  As reported in the Russian newspaper Izvestiya, the
fall in Gross Domestic Product (GDP) continued to slow in the first quarter of
1995, to 5 percent, compared with 17 percent in the first quarter of 1994. 
Industrial output dropped by only 4.5 percent, as opposed to 23 percent during the
same period last year.  Moreover, inflation continued to slow from 17.8 percent in
January to 8.9 percent in March.  These favorable developments extended to the
Russian Government's own fiscal condition as well, which enjoyed significantly
higher state revenues in the first quarter than originally expected.

As a result of this apparent bottoming out, Russian government officials are
beginning to predict that the country's economy will turn a corner in 1995.  First
Deputy Prime Minister Anatoly Chubais, cited by the Russian news agency
Interfax, recently claimed that Russia may well stabilize its economy in 1995,
while conceding that inflation and declining standards of living remain a problem. 
Yuri Yurkov, Chairman of the Russian State Committee on Statistics, has predicted
that in May 1995 both GDP and industrial output would rise one percent over May
of last year.  Russian Prime Minister Viktor Chernomyrdin has also sounded a note
of cautious optimism,  observing recently that "so far, only selected branches [of
the economy] are entering a stable run, but I am most encouraged by that alone." 

The Bottom Line
For U.S. exporters, these developments make it all the more likely that Russia will
continue to grow in importance as a market for their products, and are consistent
with the overall improvement of business conditions there since the early 1990s. 
Russia has maintained positive foreign trade and current account balances for a
number of years, based largely on exports of its natural resources--which means
that its economy can afford to import U.S. products.  The private sector is growing
rapidly, too, creating jobs and wealth, and is quickly replacing the state as the
driving force for imports of U.S. products. 

The outlook for Russian trade is not unclouded.  As parliamentary elections later
this year approach, the Russian Government and the Central Bank will face
growing pressure to relax the more stringent spending and credit policies that have
begun to stabilize the economy.  Moreover, even if Russia really is starting to turn
the corner, it still has a long way to go before it achieves sustained growth and
prosperity.  Finally, it remains a challenging, often difficult place to do
business--although not without promise for U.S. firms willing to take the risks.

Padraic J. Sweeney is Managing Editor of BISNIS Bulletin.
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