The Baltic Region

2020 Vol. 12 №4

Back to the list Download the article

Transformation of global value chains in Russia and the Baltics amid Covid-19: prospects for regionalization and implications for economic policy



Although Russia and the Baltics have historically been economic partners, the economic relations between them are tense today. Nearly stagnating bilateral trade contributes little to the development of either side. The Baltics-Russian bilateral trade conducted within global value chains (GVC) and operations of multinational companies is much more resistant to geopolitical and economic shocks than traditional international trade. In particular, the accession of Estonia, Latvia, and Lithuania to the EU and NATO in 2004 and the introduction of reciprocal EU-Russia sanctions in 2014 did not curb GVC activities between Russia and the Baltics. The article discusses factors in the transformation of the Baltics-Russian GVCs amid COVID-19. The research aims to prove regionalisation as a viable prospect for the transformation of global value chains in Russia and the Baltics. In the medium term, regionalisation is possible as (1) part of global trends towards GVC transformation in the industries in which Russia and the Baltics traditionally specialise; (2) as a response to the long-term structural challenges faced by Russia and the Baltics in creating a new generation of internationally competitive firms; (3) as a result of companies tackling the effects of the pandemic against the background of historically stable relationships; (4) as a product of strong social contacts and soft power. GVC regionalisation will be driven by individual companies, regional (local) governments, and Russian-Baltic cross-border cooperation initiatives. Finally, repercussions for Russian and Baltic politics are discussed alongside GVC regionalisation benefits for all the parties involved.


1. Baldwin, R., Freeman, R. 2020, Supply chain contagion waves: Thinking ahead on manufacturing ‘contagion and reinfection’ from the Covid concussion,, available at: (accessed 8 August 2020).

2. Miroudot, S. 2020, Resilience versus robustness in global value chains: Some policy implications. Covid-19 and trade policy: Why turning inward won’t work,, available at: (accessed 8 August 2020).

3. Pisch, F. 2020, Just-in-time supply chains after the Covid-19 crisis,, available at: (accessed 8 August 2020).

4. Imbs, J., Pauwels, L. 2020, A new measure of openness,, available at: (accessed 5 August 2020).

5. Banh, H., Wingender, P., Gueye, C. 2020, Global Value Chains and Productivity: Micro Evidence from Estonia,, available at: 07/03/Global-Value-Chains-and-Productivity-Micro-Evidence-from-Estonia-49376 (accessed 5 August 2020).

6. Hagemejer, J. 2018, Trade and growth in the new member states: The role of global value chains, Emerging Markets Finance and Trade, vol.54, no. 11, p. 2630—2649. doi:

7. Cieslik, E. 2014, Post-communist European countries in global value chains, Ekonomika, vol. 93, no. 3, p. 25—38. doi:

8. Simachev, Y. V., Daniltsev, A. V., Fedyunina, А. А., Glazatova, М. К., Kuzyk, М. G., Zudin, N. N. 2019, Russia in the changing conditions of world trade: A structural view at the new positioning, Voprosy ekonomiki [Questions of Economics], no. 8, p. 5—29 (In Russ.).

9. Ali-Yrkkö, J., Mattila, J., Seppälä, T. 2017, Estonia in Global Value Chains, ETLA Reports, no. 69, available at: (accessed 8 August 2020).

10. Yashiro, N., De Backer, K., Hutfilter, A., Kools, M., Smidova, Z. 2017, Moving up the global value chain in Latvia, OECD Publishing, Paris, 2017. doi:

11. Klemeshev, A., Fedorov, G., Zverev, Yu. 2011, On the potential and opportunities for cooperation between the Baltics in the field of innovations, Balt. Reg., no. 3, p. 76—84. doi:

12. Veebel, V., Markus, R. 2008, The bust, the boom and the sanctions in trade relations with Russia, Journal of International Studies, vol. 11, no. 1, p. 9—20. doi:

13. Fedorov, G. M. 2018, Russian Federation in the Baltic Region: Political Relations and Economic Development in 1992—2017, Polis. Politicheskie issledovaniya [Policy. Political studies], no. 3, p. 30—41. doi: (In Russ.)

14. Djankov, S., Freund, C. 2020, Trade flows in the former Soviet Union, 1987 to 1996, Journal of Comparative Economics, vol. 30, no. 1, p. 76—90. doi:

15. Frankel, J., Stein, E., Wei, S. 1997, Regional Trading Blocs in the World Economic System, Washington DC, Institute for International Economics.

16. Eichengreen, B., Irwin, D. 1996, The Role of History in Bilateral Trade Flows, Cambridge, MA: NBER, doi:

17. Frankel, J., Stein, E., Wei, S. 1995, Trading Blocs and the Americas: The Natural, the Unnatural, and the Super-natural, Journal of Development Economics, vol. 47, no. 1, p. 61—95. doi:

18. Freund, C. 2000, Different Paths to Free Trade: The Gains from Regionalism, The Quarterly Journal of Economics, vol. 115, no. 4, p. 1317—1341, available at: (accessed 6 August 2020).

19. Berg E., Ehin P. 2016, Identity and foreign policy: Baltic-Russian relations and European integration, Routledge, 2016.

20. Fedorov, G., Korneevets, V., Tarasov, I., Chasovskiy, V. 2016, Russia among the Countries of the Baltic Region, International Journal of Economics and Financial Issues, vol. 6, no. 4, p. 1502—1506.

21. Bělín, M., Hanousek, J. 2020, Which sanctions matter? Analysis of the EU/Russian sanctions of 2014, Journal of Comparative Economics. doi:

22. Dreger, C., Kholodilin, K., Ulbricht, D., Fidrmuc, J. 2016, Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia’s ruble, Journal of Comparative Economics, vol. 44, no. 2, p. 295—308. doi:

23. Yeliseyeu, A. 2017, Belarusian shrimps anyone? How EU food products make their way to Russia through Belarus, Think Visegrad — V4 Think Tank Platform, available at: (accessed 5 August 2020).

24. Miroudot, S. 2017, The servicification of global value chains: Evidence and policy implications, UNCTAD Multi-Year Expert Meeting On Trade, Services and Development, available at: (accessed 5 August 2020).

25. Broadman, H. 2006, From disintegration to reintegration: Eastern Europe and the former Soviet Union in international trade, Europe and Central Asia reports, Washington, D.C., World Bank Group, available at: (accessed 5 August 2020).

26. Simachev, Y. V., Fedyunina, А. А., Kuzyk, М. G., Daniltsev, А. V., Glazatova, М. К., Averyanova, Y. V. 2020, Rossiya v global’nom proizvodstve [Russia in Global Production]. In: XXI April International Scientific Conference on the Development of Economy and Society, HSE Publishing House, p. 1—147 (In Russ.).

27. Sineviciene, L., Krusinskas, R. 2018, How Dependent Are the Baltic States on Russia? Europe-Asia Studies, vol. 70, no. 8, p. 1264—1280. doi:

28. Zvaigzene, A. 2015, EU sanctions against Russia renewed: pros and cons for business and Baltics economy, The Baltic Course, available at: (accessed 5 August 2020).

29. Ratso, S. 2015, EU-Russia Trade Relations in Light of Sanctions and Russia´s Import Measures, Diplomaatia, available at: (accessed 6 August 2020).

30. Morozenkova, О. V. 2019, Prospects for the development of Russian exports of non-primary non-energy products in new markets, Rossiiskii vneshneekonomicheskii vestnik [Russian Foreign Economic Bulletin], no. 9, p. 44—60 (In Russ.).

31. Efremenko, I. N., Karaya, Y. V. 2013, Development of integration processes in the Baltic region countries, Vestnik Rostovskogo gosudarstvennogo ekonomicheskogo universiteta (RINKh) [Bulletin of the Rostov State University of Economics], no. 1—2, p. 126—132 (In Russ.).

32. Khodachek, А. M. 2010, Transgranichnoe sotrudnichestvo makroregiona Severo-Zapad [Cross-border cooperation of the North-West microregion], HSE Saint Petersburg Publishing House (In Russ.).

33. Zhilina, L. N. 2018, Russian Diaspora in the Baltic States and its Role in Russian Foreign Policy, Vestnik diplomaticheskoi akademii MID Rossii. Rossiya i mir [Bulletin of the Diplomatic Academy of the Russian Foreign Ministry. Russia and the world], no. 2, p. 130—116 (In Russ.).

34. Vorotnikov, V. V. Ivanova, N. A. Russian soft power in the Baltic States through the lens of research: traditions, competition, confrontation, Balt. Reg., vol. 11, no. 3, p. 107—124. doi:

35. Baldwin, R. 2020, The Greater Trade Collapse of 2020: Learnings from the 2008—09 Great Trade Collapse,, available at: https://voxeu. org/article/greater-trade-collapse-2020 (accessed 5 August 2020).