European Union Running An US$83 Billion Trade Deficit With Russia

Posted by

eu-russia

EU loss Of Russian and British Consumer Markets Close To €100 Billion Per Annum

The European Union is currently importing rather more from Russia than it exports, according to new data from Eurostat, the data analysis unit within the European Commission. In 2018, the EU imported US$83 billion more from Russia than it exported.

EU exports to Russia were dominated by machinery and vehicles, chemicals and other manufactured products, which together accounted for 90% of EU exports to Russia. EU imports from Russia were dominated by primary goods (72%), mainly energy, raw materials, and food and drink. At a more detailed level, medicaments were the EU’s most exported product to Russia, while the most imported product from Russia were petroleum oils, and crude.

contact_rb-iconsNeed Business Intelligence About Russia? Contact Us here

In 2018 Russia was the 4th largest partner for EU exports of goods and the 3rd largest partner for EU imports of goods, while among EU Member States, Germany was both the largest importer of goods from and the largest exporter of goods to Russia.

russia-eu-trade-balance-graph

As can be seen, EU imports from Russia are starting to recover from the sanctions imposed in 2014, while Russian purchases of EU products has remained static, a position that will start to place additional pressure on the EU to reduce sanctions and restore what until 2014 had been a popular and productive trade partnership. While the EU continues to need Russian energy supplies, Russia has moved on from EU purchases, especially in the consumer categories, and begun making produce itself that it previously bought from EU based suppliers. The sanctions are estimated to have cost EU businesses US$240 billion and rising, which must be of serious concern to Brussels. Losing one market in Russia is one thing; losing another with the UK and a no-deal Brexit is indicative of poor leadership with a lack of understanding long term strategy.

Ordinary Russians meanwhile have taken the advantage of the EU’s self inflicted withdrawal from the Russian market and begun making products they previously imported. These include a raft of micro-breweries being set up in addition to Russian made gourmet foods, such as wines and cheeses. Moreover a more patriotic sensibility has become instilled in Russians, with Russian Farm to Table restaurants such as LavkaLavka proving hugely popular.

EU – Russia Sanctions & Brexit Consumer Market Combined Losses

Country Cause Middle Class Population Estimated Annual Trade Loss Total EU Export Trade
Russia Sanctions 50 million €50 billion 4%
UK No Deal Brexit 42 million €40 billion 3.5%

Clearly, the EU needs to do something to break the impasse with Russia over sanctions. The Russian middle-class, consumer base amounts to about 30% of the total population, or about 50 million. It is also shrinking as a result of sanctions, meaning that there are now less families able to afford imported EU goods than there were in 2014. Of the 50 million, these are now 5 years into being weaned off imported EU products, and are developing tastes and experiences that are not as influenced by EU tastes as was previously the case. Consumers who were 15 and 16 at the time of sanctions imposition are now earning their own money and are buying Russian. Getting that consumer trust, pricing and confidence back that EU goods will not be politicized in future years is going to be a tough task, even as and when sanctions are eased or lifted.

 

About Us

Russia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors in Russia and Russian investors in Asia, and maintains partner offices in Moscow and St,Petersburg, and full professional service offices throughout China, ASEAN and India. Please contact us at russia@dezshira.com for assistance or visit our website at www.dezshira.com

Leave a Reply

Your email address will not be published. Required fields are marked *