Analysing the dynamics of the Baltic States's production linkages with Russia

Abstract

Russia and the Baltic States have a long-standing relationship of industrial specialisation, cooperation, division of labour and trade exchange, all dating back to the Soviet Union. Today, this relationship is facing a tough test amid political and ideological challenges and risks. The last two years have seen a profound and large-­scale crisis caused by the global COVID-19 pandemic. Overall, the production linkages between Russia and the Baltic States have adapted in response to the existing problems, remaining resistant to the geopolitical and pandemic shocks. This article examines the production linkages between Russia and the Baltic countries, investigating the export-­import flows of consumer and intermediate goods in 2003-2020. A comparative study of the Baltic States' production linkages with Russia and their main partners in the EU - Germany and Finland - is carried out. It is concluded that, before the introduction of sanctions in 2014 and the world trade crisis of 2015-2016, Russia was a more promising market than Germany and Finland for the Baltic States' companies trading in intermediate goods.