markets and add exports for which demand is likely to be steady over the medium term); (3) technological upgrading (move to more sophisticated goods with greater innovation content); and (4) regional development (promote the uplift of lagging regions). Each of these motives has a different profile in terms of goods exported, regions, and most closely associated destination markets _._ In the short to medium run, the most income can be earned from goods in which Russia already has a comparative advantage, which are natural resource-based products such as mineral fuels, metals, and wood. Mineral fuels, main oil, and natural gas (including refined and processed products) accounted for 72 percent of Russia’s exports in 2012.<sup>13</sup> Metals and wood and products made there from together accounted for an additional 11 percent. Exports of mineral products<sup>14</sup> are highly concentrated in certain regions, for example in the Urals and the Far East, while many of Russia’s regions export little or no mineral fuels. About half of Russia’s total goods exports are of mineral fuel to the EU, which forms the foundation of Russian export income generally. China and the rest of Asia receive a large share of the other mineral fuel exports.

Diversification of export products and destinations helps to alleviate the risks associated with price and macroeconomic shocks. For example, the steep drop in the price of oil in 2008–09 severely impacted the Russian economy, as did the slowdown in Europe associated with the debt crises in many EU countries in 2010–13. Since Europe is Russia’s largest market for mineral fuels, these shocks interacted in a negative way for Russia’s exports and economy. Above-average growth in new categories of exports—food and agriculture, non-fuel minerals, and miscellaneous exports—helped to diversify Russia’s exports, as has a pivot to China and the rest of Asia, Latin America, and Africa as new destinations for exports. The regions differ in their ability to take advantage of emerging diversification. For example, the Far East is oriented toward Asia (regional diversification), while regions in the South, the North Caucasus, and the Far East are oriented toward food and agriculture (product diversification).

Russia’s current export basket offers different levels of stability. Some of Russia’s exports can be sold year after year in the same markets and enjoy a solid competitive position. Others have higher rates of experimentation and failure. In an analysis of export survival, Russia’s relationships within the EACU<sup>15</sup> and secondarily in the rest of the CIS are by far the most lasting compared with other geographical regions, while export of primary and resource-based intermediate goods have higher survival rates than other manufactured exports. Russia’s comparatively low survival performance relative to the BRICS is accounted for by low survival of exports outside the former Soviet Union and of exports other than the traditional resource-based exports.

Exporting for technological upgrading can promote greater sophistication of products. While the broader benefits of a strategy of promoting high-technology exports are a subject of some dispute among 13 The source is Comtrade 14 “Mineral products” in this report includes not only mineral fuels (HS 27), but non-fuel mineral products (HS 25 and 26), which account for 1 percent of Russia’s exports. Rosstat data on regional exports group all mineral products together, but in fact 98 percent are mineral fuels. Since exports are assigned the location of company headquarters, high export shares for places like Moscow city, Moscow region, and St. Petersburg city may not reflect where the exports are actually produced.

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