THE MINISTRY OF FOREIGN AFFAIRS
OF THE RUSSIAN FEDERATION
official site

Economic diplomacy continued to play in 2008 its important role in shaping a unified national foreign policy of accomplishing objectives in the promotion of Russian interests abroad.

The Russian Ministry of Foreign Affairs continued its consistent work aimed at strengthening the positions of our country in the world and at establishing an equitable world economic order predicated on the supremacy of international law, the Charter of the United Nations and equal and partner-like relations between states.

Russia’s foreign-policy priority in the realm of international economic relations was to help advance the development of the national economy, which under the conditions of globalization is impossible without broad participation in the system of global economic ties.

In this connection the Russian MFA consistently pursued a set of measures aimed at solving key tasks in establishing favorable external conditions for modernizing the Russian economy, shifting it onto the innovative development path, raising the people’s standard of living and ensuring national competitiveness. A sturdy potential for diversifying the Russian presence in international trade has been built up over the elapsed year, primarily through a purposeful effort to assist domestic business in developing traditional and getting into new markets, above all for science-intensive products and high technology goods.

The important events of 2008 comprised the adoption of the Foreign Policy Concept of the Russian Federation and of the Foreign Economic Strategy of the Russian Federation to 2020.

Heightened attention is paid in the economic area of activity of the foreign affairs agency and Russia’s overseas representations to counteracting discrimination against domestic business abroad. Regrettably, a number of states kept incorrectly applying antidumping, protective and compensatory measures, granting illegal subsidies, violating intellectual property rights and non-observing technical standards. For the most part we succeeded in facilitating the mutually acceptable solution to trade issues using political and legal means.

Faced with an expanding global economic crisis, coordinated action was undertaken to develop in multilateral formats measures aimed at preventing adverse consequences both for the Russian economy and for the world economy as a whole.

The necessity to maintain the ongoing economic growth and raise the level of foreign investment called for heightened attention to effective work aimed at streamlining further the investment climate, attracting foreign strategic partners and improving the investment image of Russia abroad.

It should be noted that the Russian investment climate, despite the serious impact of the deepening world economic crisis, remains generally favorable.

Foreign investment in the Russian economy remains significant. According to Rosstat, as of October 1, 2008, the accumulated volume of foreign investment reached 251.3 billion US dollars, including direct investment US$117.9b (46.9%), portfolio US$6.1b (2.4%), and other (mainly commercial and tied credits) US$127.3b (50.7%).

The size of Russian investment abroad at October 1, 2008 constituted US$91.3b, and for the first time in recent years, surpassed the foreign investment inflow.

Participation by the Ministry in the work to strengthen the juridical base of Russian participation in international investment cooperation retains its importance. Forty-two bilateral agreements on encouragement and reciprocal protection of investments were concluded.

As part of the deepening of interaction with domestic business, cooperation agreements between the MFA and the state company Rosnanotechnologia and OJSC MMC Norilsk Nickel were signed in 2008

The Business Council, set up at the Ministry in 2006, worked actively. Its principal task was to strengthen coordination with the domestic business community. Practical activities in this sector were carried out by means of diplomatic follow-up to specific projects and via securing nondiscriminatory terms for the realization of investment projects of Russian companies abroad.

The potential of the Ministry’s overseas agencies is currently in greater demand. Russian diplomatic missions regularly provided domestic economic operators with legal, economic and commercial information on the state of foreign markets and firms and interacted with public associations of businessmen in countries interested in developing economic and trade cooperation with Russia.

Diplomatic assistance to the organization of international economic and investment forums and of exhibitions devoted to Russia and its regions was provided on a regular basis along with holding the appropriate presentations.

A promising mechanism for developing government-business interaction continued to be intergovernmental commissions and commissions, as well as business councils, in the framework of which a consolidated position was worked out on specific problems of bilateral trade, economic, scientific and technical cooperation. The proper organization and regular holding of meetings of these structures also were in the center of attention of the Ministry and its overseas agencies.

One of the key thrust areas of the Ministry’s economic diplomacy was securing the foreign policy interests of Russia in the energy sphere. In 2008 considerable attention was paid to the preparation of analytical and informational materials on energy problems for high- and summit-level visits, and negotiations of Russian delegations on different international energy platforms.

An important role was allotted to developing the Russia-EU energy dialogue and maintaining contacts with major energy consuming countries – the US, China, India and Japan. The MFA regularly assisted Russian ministries and agencies across a broad range of areas for international energy cooperation.

The Ministry, in particular, coordinated the work on problems relating to the Energy Charter Treaty and to the energy part of a new Partnership and Cooperation Agreement with the EU. Interaction was built up with energy resource producers – Saudi Arabia, Qatar, Venezuela, Algeria, Libya and others.

Special emphasis was laid on strengthening interaction with key multilateral structures operating in the energy sector: the Organization of Petroleum Exporting Countries (OPEC), International Energy Agency (IEA), and the International Energy Forum (IEF). MFA representatives took part in the ordinary and extraordinary OPEC conferences, and made a substantial contribution to working out the approaches to deepening the country’s interaction with this organization. The elaboration of a Russia-OPEC Cooperation Memorandum is under way, with the MFA playing an active role. A fruitful dialogue continued with independent oil exporters.

Work on strengthening interaction among gas producing states was conducted with the Ministry’s direct participation. Mechanisms were studied for turning the Gas Exporting Countries Forum (GECF) into a full-scale international organization. The foreign affairs agency played a key role in preparing and holding the Seventh Ministerial Meeting of the GECF in Moscow in December 2008.

The Ministry continued diplomatic follow-up to several key projects for Russia’s energy sector: the North Stream and South Stream Gas Pipelines, the Burgas-Alexandroupolis and Eastern Siberia-Pacific Ocean (ESPO) Oil Pipelines, the Baltic Pipeline System (BPS) and the Caspian Pipeline Consortium (CPC).

In the field of transport, priority attention was paid to realizing Russia’s transit potential as a “bridge” between Europe and Asia. Studying the question of linking Russian to European transport infrastructure was assisted and measures to implement the multilateral Agreement on the International “North-South” Transport Corridor were taken.

The negotiation process on Russia’s accession to the World Trade Organization (WTO) continued. In May 2008 discussions began regarding the fourth version of the Working Group Report, a final document fixing Russia’s obligations. In the course of multilateral and bilateral consultations many issues were removed and ways to find solutions for the problems still outstanding were outlined. The Russian position rests on the imperative of joining the Organization on standard, nondiscriminatory terms, which should not be dependent on the time factor.

Coupled with the growing politicization of Russia’s WTO accession process, the role of economic diplomacy in securing the fair modalities of our participation in this international economic organization consistently increases.

In 2008 the Ministry was actively engaged in coordinating the negotiation process on Russia’s entry into the Organization for Economic Cooperation and Development (OECD) on the basis of the “roadmap” approved in November 2007.

An OECD delegation led by Deputy Secretary General Thelma Askey paid a visit to Moscow in February 2008. Within its framework, the OECD Secretariat officials held full-scale consultations with representatives from more than 20 Russian agencies on substantive and organizational issues relating to the negotiation process, including the preparation of a draft Memorandum on Russia’s position concerning the OECD legal and regulatory base.

In June 2008 an OECD Ministerial Council Meeting took place in Paris, to which Russia was invited for the first time in the capacity of a candidate country envisaging a much broader format of participation compared to the traditional.

Assistance was provided on a regular basis to concerned Russian agencies with regard to their participation in meetings of specialized committees of the Organization.

In the light of the financial crisis that has engulfed the global economy, a dialogue with international financial organizations and forums, including the Group of Twenty and the Bretton Woods Institutions (BWI), acquired special relevance for the purpose of working out a coordinated line on overcoming its negative consequences.

During the summit in Washington in November 2008, the G20 Declaration on Financial Markets and the World Economy was adopted that sets forth the common principles for reform of the world financial system and a concrete plan of action to implement them. Overall, the ideas and approaches promoted by the Russian side found adequate reflection in the document. Among them: strengthening transparency and accountability of the financial sector; enhancing the effectiveness of economic regulation; promoting integrity in financial markets; reinforcing international cooperation; and reforming international financial institutions. Interim outcomes of this work are planned to be summed up at the next G20 summit, slated for April 2, 2009 in London.

Cooperation with the World Bank continued on a new constructive basis. For Russia this financial institution is no longer a source of financial resources, but an important transfer channel of know-how and knowledge in different fields. Thus, Russia particularly actively interacted with the World Bank in the realm of international development assistance. Negotiations were held on its participation in Russia’s “debt relief for development” program envisaging conversion of the debt of a number of African countries totaling US$558 million into aid projects. In October 2008 an implementation agreement for the joint initiative of Russia, the World Bank and the OECD on financial literacy was signed, to the trust fund of which our country allocated US$15 million.

In 2008 Russia remained the largest market for investments of the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD). Their accumulated investment, preeminently in the private sector of the Russian economy, constituted US$2.8 billion and €10.5 billion respectively. Russia also retained first place among the Multilateral Investment Guarantee Agency (MIGA) beneficiary countries. Cooperation with the IFC and MIGA in third country markets continues to be of great interest to us.

There remains a definite potential from the viewpoint of strengthening the political and economic positions of Russia in the Latin American and Asia Pacific regions in joining the activities of the Asian Development Bank (ADB) and Inter-American Development Bank (IDB). In 2008 work continued on studying the conditions for Russia’s possible entry into these financial institutions. Efforts for the soonest completion of negotiations to establish on the basis of the International Investment Bank and International Bank for Economic Cooperation of a unified international development bank with headquarters in Moscow were also undertaken.

The line continued on intensifying the economic dimension of the OSCE in order to establish favorable conditions for developing pan-European economic and environmental cooperation in Europe on an equitable and mutually advantageous basis.

The importance of this task was determined by the fact that in conditions of globalization the significance of the socioeconomic factors of security has increased substantially and new economic threats have appeared which require joint action by the OSCE member states for their removal or minimization.

In this connection the Russian Ministry of Foreign Affairs initiated the transformation of the OSCE’s work in the economic sector in order to ensure its greater correspondence to the scope and character of the obligations and action plans contained in the documents of the Organization.

Measures were taken to raise effectiveness of the OSCE Economic Forum and to strengthen its ability to generate new ideas and practical suggestions. In the format of the various Forum events the representatives of the MFA and other concerned Russian ministries and agencies took part in the debates and the elaboration of recommendations on current issues in the assurance of environmental safety and regional cooperation in the fields of sea and river transport, regulation of migration processes in the context of security and the struggle against organized crime and terrorism. In our work we presumed that OSCE activities on the economic track should not duplicate other international organizations, specialized institutions and initiatives.

We actively used the capabilities of UNCTAD in discussing topical problems of international trade and upholding Russian interests in this sphere and supported the initiatives to bring certain corrections to the work of UNCTAD in the framework of the overall concept for reforming the UN system and adapting the activities of the organization to present-day realities and the practical needs of member countries. It was with such an approach that the Russian MFA in conjunction with the Russian Ministry of Economic Development took an active part in the discussions at the UNCTAD conference in Accra in April 2008 and in the preparation of its outcome documents.

In 2008 the Russian MFA continued to pay considerable attention to regional economic cooperation. In this sector great significance was attached to the activities of the Black Sea Economic Cooperation Organization (BSECO) as a well-structured mechanism of regional economic interaction. Russia comprehensively assisted the strengthening of the positive dynamics in cooperation among member countries, regarding the Black Sea states as major political and economic partners.

Striving to preserve the positive aspects of BSECO activities that have formed in recent years, the MFA supported the focus of all Black Sea countries on enhancing the effective work of the Organization. The incipient contacts between BSECO and EU, which we think should develop as cooperation of equal organizations, are opening up definite opportunities in this respect.

The Council of Foreign Ministers of the BSECO member states, at its special meeting in Kyiv in February 2008, adopted a Declaration on BSECO-EU Partnership providing for cooperation in a number of priority areas for the two organizations.

Russia in conjunction with other countries of the Organization succeeded in preventing within the BSECO framework the realization of a politicized approach actively pushed for by Georgia to multilateral economic cooperation among the countries of the Black Sea Region.

Concerned Russian ministries and agencies, and South Russian regional administrations continued efforts to intensify cooperation in the Black Sea Region, with the Russian MFA playing a coordinating role. Advance has been made toward the start of practical work on large-scale multilateral projects, primarily in the transport infrastructure, energy and environmental protection spheres. Among the most significant among them are the projects for the construction of a Black Sea Ring Highway, the resumption of regular ferry service between sea ports of the region and the creation of a Black Sea Energy Ring.

In 2008 the Organization succeeded in preserving the positive dynamics of its activities, in demonstrating its political maturity and in strengthening its authority as the only full-format and advanced international organization corresponding to the aims of economic development in the Black Sea Region.

To sum up, it can be stated that, despite the negative external factors, the economic diplomacy of Russia was effectively realizing its objectives, securing national interests and ensuring the growth of Russia’s international authority.