Türkiye, Azerbaijan to gain significant share at Russian market due to withdrawal of Western companies
Alexander Razuvayev for Caliber.Az

INTERVIEWS  16 June 2022 - 13:17

"Azerbaijani business plays an important role in Russia's economy," Alexander Razuvayev, Russian economist and expert on Eurasia, told Caliber.Az, speaking about the difficulties of the Russian economy that arose due to the restrictions imposed by the West and overcoming them.

First of all, the economist believes that the talks about the strong dependence of the Russian economy on the energy sector are nothing more than a myth and a stereotype.

"The share of the oil and gas sector in Russia's GDP is about 20%. Another thing is that the Russian budget depends heavily on payments from the oil and gas sector. Naturally, it is necessary to take into account oil and gas prices, the rouble exchange rate, and many other factors, but in any case, the total share of budget revenues from oil and gas is 30%-50%. In addition, the situation is fundamentally changing," the expert points out.

Razuvayev also touched on the topic of taxes. In his opinion, no tax increase is expected in Russia. However, according to the economist, "we should not forget that the shadow sector of the Russian economy, according to rough estimates, is about 300 billion dollars."

"At the same time, Russians annually receive up to 15 trillion roubles "off the books" and it would be good to collect taxes from this sector. It is possible that taxes will even be reduced as part of the Russian government's actions to tax the shadow sector. We cannot rule out a reduction in personal income tax (PIT) from 13% to 10%, as well as other deductions that go to payroll," he added.

However, the expert believes that the Russian economy will never be the same and draws parallels with the financial sector of other countries. Thus, according to Razuvayev, "the Russian stock market, which is 19 million private brokerage accounts on the Moscow Stock Exchange, can become similar to the stock market of Iran."

He argues that the Bank of Russia has reduced the key rate to 9.5%, that is, there is no alternative to stocks. "The dividend yield on some securities could be 15%-20%. If we talk about other sectors, the import substitution in some cases is successful, in other cases not. But it should be noted that previously it was believed that Russia had only three competitive advantages - the energy sector, the defence industry, and Rosatom, in recent years Russia began to export goods that in the context of traditional Russian exports few people had heard of. We can also see what an important player Russia is on the grain market."

At the same time, the expert admits that the single economy of the Eurasian Union is a different matter. "It is clear that India and China are the biggest buyers of Russian arms and raw materials, but if we are talking about close friendly and partnership relations, the Turkic world has a priority here. These are Azerbaijan, Uzbekistan, and, of course, Türkiye. The Presidents of Türkiye and Azerbaijan, Recep Tayyip Erdogan and Ilham Aliyev are highly appreciated in Russia for their decision not to join the Western countries in anti-Russian hysteria. Accordingly, this and other factors will have a positive impact on integration," the economist emphasizes.

Razuvyaev calls the transition to the Russian rouble in trade with the CIS countries an important element of the qualitative changes in the Russian economy.

"Currently, Belarus can be considered the leader - 88% of the trade turnover with this country is in roubles. Although, on the other hand, the creation of a single currency would be a better solution. President of Belarus Alexander Lukashenko was right when he said that if we are talking about integration, we should talk about the Eurasian euro. I once called the single currency for the Eurasian Union 'three-kopeck coin'," recalled the expert.

The expert outlined Azerbaijan's role in the Russian economy: "Azerbaijani business plays a very important role in the Russian economy. And it is not only about "Lukoil". Azerbaijan is seriously represented in Russia in the sphere of real estate and trade. Therefore, I think that as a result of the withdrawal of Western companies from the Russian market, Türkiye and Azerbaijan will increase their share at the expense of their goods and re-exports. Of course, this year we will have a recession, but I think that next year the Russian economy will come back to growth. A lot will depend on the monetary policy of the Bank of Russia. As soon as the key rate is lowered to 8%, the second and third-tier bond market will revive, which in turn will smooth out the recession," our interlocutor said.

In conclusion, Razuvyaev suggested that Russia is becoming a Eurasian country, a country of the Turkic world, and he, as a Eurasian, welcomes it.

Caliber.Az