Israel and Russia Aim for Free Trade Treaty

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Israel and Russia have agreed to begin negotiations over a free trade area agreement to take place in the first quarter of next year, TheMarker has learned.

Sources in Israel told TheMarker that an agreement could be concluded within a year and a half and could lead Israeli exports to Russia to triple within 10 years, from about $820 million last year.

The start of trade talks comes as state-owned Ashra – The Israel Foreign Trade Risks Insurance Corporation on Tuesday signed an agreement with its Russian counterpart, the Export Insurance Agency of Russia. The deal would enable Ashra to increase coverage for Israeli companies exporting to Russia and to countries that were once part of the Soviet Union.

The agreement would also widen Ashra insurance coverage to include not only exports to Russia’s government sector but to the private sector as well as to governments belonging to the Commonwealth of Independent States, which groups the former Soviet republics.

“The agreement will greatly ease the activities of Israeli companies and entrepreneurs in the markets of Russian and the CIS,” said Zvi Chalamish, Ashra’s CEO, anticipating it could pave the way for Israeli exports to grow by billions of dollars.

The move toward an FTA with Russia comes amid calls from some government officials to loosen Israel’s political and economic ties to the United States by forming closer relations with other powers. The United States is Israel’s biggest trade partner and the two have had an FTA in force since 1985. Russia has long been interested in Israeli technology, both to acquire intellectual property and manufacture products using it. Israel, however, has responded cautiously to sharing technology but is nevertheless interested in boosting exports to the country.

The two sides decided to move ahead with the talks at a meeting in Indonesia last week between Economy Minister Naftali Bennett and Russian Economic Development Minister Aleksey Uluykaev. The Russians expressed an interest in getting easier access to Israeli high technology, spurring a consensus that any future accord would involve not only a reduction in duties but also cooperation in technology. For its part, Israel said it wanted an easing of restrictions on agricultural and industrial exports to Russia.

Israel’s major imports from Russia include oil and oil products, natural gas, metals, wood and wood products, chemicals and a wide variety of civilian and military products. Israel’s major exports to Russia include cars and transport vehicles, pharmaceuticals, plastics, partially finished metal products, meat, fruit and nuts, medical and optical equipment and iron and steel.

Prime Minister Benjamin Netanyahu with Russian President Vladimir Putin during a meeting at the Kremlin in November. Credit: AP

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