US-Russia Trade To Increase Under Biden If Anti-Russian Rhetoric Muted - Investor

WASHINGTON (UrduPoint News / Sputnik - 10th November, 2020) Trade between the United States and Russia will increase under the administration of presumed President-Elect Joe Biden if the anti-Russia rhetoric is muted to accommodate business interests, Kyle Shostak, director of Navigator Principal Investors, told Sputnik.

"If the anti-Russian rhetoric is to be somewhat muted to accommodate business interests, we shall see more mutual trade, the reinvigoration of the bilateral Government Committee on Trade, but most importantly, more active private business initiatives, investments in research and development, capitalization of already existing Russian subsidiaries of US companies, especially consumer-oriented, and hopefully opening of new ones," Shostak said.

The investor pointed out that an increase in bilateral trade will be a function of how much economic growth the Russian economy can demonstrate and sustain.

A number of US businesses are genuinely interested in developing a footprint in the Russian market and they hold no political biases, he said.

"For many, it is a case of the major emerging markets, largely overlooked and underappreciated, cheap and artificially isolated," Shostak said. "Doing business in Russia for consumer products companies is completely outside of sanctions and so is investing in Russian equities and debt (at least thus far). For that reason, I believe trade may have a good chance to pick up so long as the natural economic fundamentals support it."

Shostak noted that Russia is the 26th largest US trading partner in goods totaling $28 billion last year whereby goods exports totaled $5.8 billion and goods imports $22.3 billion.

"The US goods trade deficit with Russia was $16.5 billion in 2019," he said.

Shostak said US-Russia economic and trade relations hit a low during Donald Trump presidency primarily because of the rapid build-up of anti-Russia sanctions - mostly introduced by the US Congress - amid a bi-partisan consensus that Russia was the United States No. 1 enemy.

As a result, US businesses have been reluctant to invest in Russia as many expected the country's economy to be "sanctions-contained and also shrinking as a result of its own domestic troubles.

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"The change of command at the white House doesn't necessarily impact bilateral trade as it already is at a record-minimum level," Shestak said.

Shostak pointed out that the Russian debt continues to be highly popular amongst investors due to the high real interest rate, which is about 2 percent net of inflation.

"The ruble-denominated OFZ bond market is roughly 35 percent owned by the foreigners," he said.

Shostak noted that Russia's share in JPMorgan's GBI-EM index, the main global benchmark for emerging market local Currency bonds, has also grown to 8.3 percent from the nearly 7 percent a couple of years ago and 1.5 percent in 2007.

Russian bonds earned more than 20 percent and equities more than 40 percent last year, while Russia's debt-to-GDP ratio is expected to be just 20 percent this year, less than a fifth of that of the United States, Britain or France and under a third of China's debt-to-GDP, thus remaining one of strongest public balance sheets in the world, he said.

"Any worsening in Russia's stand in the West (Georgia, Ukraine, Skripal and now Navalny) in past has led to the weakening of the bond, but also to an opportunity for investors to get in cheaper," Shostak said. "The trend, if it can be of any guidance, has shown that the Russian assets always traded back very nicely."

Commenting on possible sanctions policy by the presumed new Biden administration toward Russia, Shostak said the greatest damaging effect would be if the United States introduces a ban on owning Russian debt or cutting off Russian banks from the SWIFT global payment system.

"At the moment, such risk remains high but not something that the new administration will rush to implement," Shostak said.

The official results of the 2020 US presidential election have not been certified yet and are disputed, but all major US media have projected Biden to be the winner.

While Biden claimed victory on Saturday, Trump also claimed he won the election. However, Trump said the election has been stolen from him via a massive fraud and consequently he is disputing the election result, asking for audits and recounts and taking the matter to court.