A new analysis by the New York Times shows that despite sanctions, Russia has continued to capitalise on its exports to other countries, including European countries.
Journalists looked at trade between Russia and some dozen other countries in the five years before the war and compared it with the trade in the months following Russia’s invasion, using data from the Observatory of Economic Complexity.
“The value of its exports actually grew after it invaded Ukraine,” the Times analysis shows, “even in many countries that have taken an active role in opposing Russia.”
While Sweden, Germany, Portugal, and the UK have overall decreased trade with Russia since the start of the war, the Netherlands, Spain, and Belgium actually increased trade by 32%, 57%, and 81% respectively.
Equally important, though, are the precise shifts in imports and exports. In Germany, exports to Russia dropped by 51% while imports increased by 38%. Norway, too, has an import surplus with Russia now, with imports increasing by 21% while exports dropped by 14%. In Sweden, imports declined 86%, 20 points more than exports declined. Both Belgium and Spain increased their imports from Russia by over 100% while exports to the country dropped significantly. Portugal has decreased both imports and exports, though exports dropped further than imports.
The reason for Russia’s trade surplus with Europe is two-fold: the EU’s need for Russian products and the high price of gas and oil.
“Russia has withstood the economic sanctions better than anticipated, aided by high oil and gas prices and our dependence on fossil fuels,” said Gilberto Garcia-Vazquez, chief economist at Datawheel, the company that operates the Observatory of Economic Complexity, told the Times.
What it lost in volume in fossil fuels as some countries immediately started switching suppliers, it recovered in high prices.
Russia also remains a principal global supplier of many other essential products for Europe, from nuclear reactors to fertilisers, diamonds, and minerals for car parts. Case in point: a giant magnet, needed for the ITER nuclear reactor in France, set sail from St. Petersburg on November 1st, Euractiv reports. When finished, the ITER nuclear reactor will be the largest nuclear fusion reactor in the world. The joint project involves 35 countries, including Russia, and requires six giant magnets.
Simultaneously, whatever trade Russia has lost with Europe, the U.S., the UK, and South Korea, it has recovered in trade with China, India, and Turkey, even tripling and quadrupling the flow of imports and exports with countries to its east.
“As it drags on, the war, and the world’s response to it, are bringing about a remarkable change in international trade flows,” the Times observed.
A similar analysis by Reuters also showed that Russia can simply take its business elsewhere when sanctioned by the West. The news outlet consulted 42 experts and analysts on the EU and the G7’s proposed price cap on oil, essentially an oil trade cartel, that could go into effect in December. Overall, their consultations with experts revealed “uncertainty on its impact but little deep concern.”
“Russian exports will find other buyers in Asia in the long term. But in the short term the sanctions could result in some 1.5-2 million bpd [barrels per day] that will be taken off the market,” Frank Schallenberger, head of commodity research at German bank LBBW, explained to Reuters.
One U.S. expert told Reuters that 80% to 90% of Russia’s oil could still flow through the global market, earning money for Russia, despite the imposition of a price cap.
As Europe gives up Russian oil in favour of crude from Africa and the Middle East, Russia has simply found customers to its east.
The Russian advantage can also be attributed to the slow implementation of EU sanctions, as embargos on fossil fuels such as coal and oil had months-long lead times to give countries a chance to adjust. The complete package of oil embargoes, for example, won’t go into effect until the end of the year. Whether the full implementation of European and other Western sanctions will eventually impact Russia remains to be seen.
“So far,” the Times noted. “the data underscores how deeply intertwined Russia is with the global economy, allowing Moscow to generate substantial sums of money as it enters its ninth month of war. Attempts by Western nations to use sanctions and other measures to cripple Russia’s economy have so far had limited effects.”
Snippet: The reason for Russia’s trade surplus with Europe is two-fold: the EU’s need for Russian products and the high price of gas and oil.