Some Insights into the Bilateral Value Chains—The EU and Russia

Abstract

Russia and the EU represent two economic blocs with high-value bilateral trade, especially in several specific sectors. The Russia–Ukraine war has facilitated the escalation of protectionism against Russia, and the EU and Western partners have introduced a set of sanctions on the import of goods from Russia, but also on EU exports to Russia. This analysis aims to research in detail the characteristics of the global value chains (GVCs) of the EU and Russia, focusing on their interconnections. Russia is a resource-rich country whose exports are mainly based on resources and resource-related products. Therefore, forward participation in global value chains dominates, being 4.5 times higher than backward participation. In the EU and its member states, backward participation dominates, implying a high level of dependence of the production process in the EU on import of intermediates (i.e., production inputs) from abroad. The analysis indicates a high share of value added from Russia in the sector “mining and quarrying, energy producing products” in the EU final demand where almost one-fifth of foreign value added pertains to products from Russia. On the other hand, the sectors of electrical equipment, pharmaceuticals, chemical products and construction in Russia rely on value added imported from the EU.