HELLO RUSSIA: New Zealand has become the first country to start negotiating a free trade deal with Russia.

New Zealand has scored a trade coup by becoming the first country to start negotiating a free trade deal with Russia.

While the Russian market is currently small for New Zealand – around $200 million a year – the potential is seen as huge by our trade negotiators.

However, they warn it could be two or more years before the talks yield a result.

Trade Negotiations Minister Tim Groser spearheaded the effort to put New Zealand at the top of Russia's list for a free trade agreement. Speaking from Moscow last night, he said while the decision to launch talks was a breakthrough, they would not be easy.

The talks will also include discussions around extending free trade to Belarus and Kazakhstan.

A free trade deal would be a first for Russia, which is not yet a member of the World Trade Organisation. It is seen as a potentially lucrative market – the world's fifth-largest food importer and among the world's largest importers of meat and dairy products.

The outgoing tourism market is growing – around 11 million Russians holiday in other countries each year, but less than 1 per cent of them come to New Zealand.

The education sector also has potential – tens of thousands of Russian students study overseas each year, but only about 1000 of them come here.

Most of what New Zealand exports to Russia is agricultural produce and New Zealand goods currently face stiff trade barriers.

But Mr Groser said there had also been surprising inroads by "clever New Zealanders", including fashion designer Karen Walker, who has three stores in Moscow, along with Pumpkin Patch and Icebreaker.

After talks in Moscow yesterday, Russia agreed to proceed to a formal trade agreement with New Zealand, subject to an initial discussion.