Russian Import & Export Analysis 9M 2023
Asian suppliers have replaced nearly all of Russia’s imports needs
By Paul Goncharoff
As Russia approaches the New Year, several scattered analytical reports have been released, which I call “appetizers” both from the Ministries as well as Russian language press such as Izvestia, Kommersant, and others.
By January/February 2024 the full 2023 data should be in, usually after the lengthy Russian New Year celebrations, which last until mid-January. Meantime I have tried to combine, sweep together, and organize some information gleaned from Russian language sources.
Keep in mind that while the trade turnover figures are posted in USD for easy conceptual purposes, a key fact is that these figures are comprised of a variety of national currencies, no longer dominated by the USD. However, I have used a common exchange rate for all as was the ratio at the end October.
According to the Federal Customs Service, for the first nine months of 2023, the total volume of trade between Russia and other countries amounted to US$530.2 billion. Of this, exports amounted to US$316.9 billion, while imports totalled US$213.3 billion, meaning Russia achieved a positive trade balance in its favour of US$103.6 billion.
When compared to the same period in 2022, exports decreased by 29.4% (in the 9M 2022 these amounted to US$448.9 billion), however, imports increased by 18.3% (US$180.3 billion last year).
From the various information gathered it looks like imports in general grew by around 10%. This has been supported by supplies from “friendly countries”, and increasingly creative financial and logistics solutions.
Oil, and also other Russian exports have been, and are now exported at price discounts to allow for the necessarily byzantine means to address the sanctions restrictions and restructure the flow of trade. This can be expected to improve further into 2024 and beyond as the paths and inroads against trade restrictions normalize further. These include parallel imports and imports from middle-men in mainly the CIS countries, who buy mainly EU goods on Russia’s behalf and then sell them on.
It should be noted that this is not necessarily illegal – about 49% of EU goods are not subject to sanctions. However, the EU has closed its ports for direct shipments to and from Russia meaning alternative routes are being used to transport EU exports to Russia. Armenia, Georgia, Azerbaijan, Turkiye and Kazakhstan are all involved in this trade – without which European export manufacturers would be laying off staff.
The decline in Russian gas exports to the EU since 2022 has also had an impact on this year’s figures. However, the coordinated actions of Russia and Saudi Arabia have helped to reduce the supply overhang on the oil market, while exporters have been increasingly creative in overcoming the externally imposed price ceiling concept which for a while slowed exports and affected discounts.
According to the Russian Central Bank, while in Q1 2023 export decline in value terms reached 32% year-on-year in Q1 2023, it slowed to 23.9% in Q3 2023. If one compares the period from January to September of this year with that of two years ago (nine months of 2021), exports decreased by only 7%, a non-critical passing bump in the geoeconomic road.
As for imports, their growth is largely due to the recovery of economic activity in Russia after the recession in 2022 and the innovative adaptations made by supply chain operators and logistics companies in handling sanctions, and the logistical and financial restrictions.
The increases in the value of imports has also been partly influenced by global inflation and the growth of transaction costs while making key changes in suppliers and trade routes. According to the Federal Customs Service, imports in value terms grew by 18.3% year-on-year in the first nine months of 2023. However, when compared to the first nine months of 2021, imports are now at the same level they were two years ago, so one can say they are back to pre-Ukraine conflict levels. It would also be fair to observe that active trade development with friendly countries such as those in BRICS+, the SCO, ASEAN, EAEU, MENA, AfCFTA, and LatAm nations are key to assisting in this recovery process and establishing the future realignments in global trade.
Russian exports to Europe for the first nine months of 2023 decreased 3.3 times, while Europe’s share in Russian exports dropped from 48% to 20%. This loss was for the most part replaced by an increase in Russian exports to Asia which grew by 10.3%, while its share in total exports increased from 46% to over 71%.
Other export destinations (Africa, North America, and Oceania) still occupy less than 5% of each of the total structure of Russian exports. Therefore, despite the strong relative changes – exports to Africa grew by 54% year-on-year, while exports to North America fell by 1.7 times – they do not truly contribute to Russia’s foreign trade in any meaningful manner at this juncture.
The structure of imports has also changed, but not so dramatically. Imports to Russia from Europe decreased in the first nine months of 2023 by 8.7% year-on-year, Europe’s share decreased from 35.9% to 27.7%. Asia’s share increased from 55% to 65%. Africa’s share is about 1% and America’s share is still above 5% (5.3% for January-September 2023 vs. 6.9% a year earlier).
At some point mid-way through 2024, it is likely that Russia will have absorbed the economic shock of Western sanctions and replaced the decreases of trade with the EU and United States by an increase in trade with Asia. This means that in many respects, the analytical prowess needed to accurately assess the Russian market requires Asian, and not European experience. The complete Russian economy has turned its trade face to the East.
2023 has seen Asia consolidate its position as Russia’s key foreign trade partner, yet it should be understood that in many cases Asia/Eurasia plays the role of a trans-shipment link for goods coming from the EU or the US to Russia. Much like the reverse where Russian oil refined in India continues to flow to Western markets.
The strong and swift development of Ruble/Yuan, and Ruble/Dirham transactions contrast with the teething pains still being resolved with India on transactions of the Rupee/Ruble. This is being addressed, and even now the Reserve Bank of India is relaxing its rules regarding the re-investment of excess funds held in Vostro bank accounts. Russia will shortly be able to invest their overabundance of Indian rupees in corporate stocks, thus investing in the economy of India, and further enhancing closer relations with Russia across the board. It looks as though more than one person in the Russian Government has been reading Mark Twain a US writer popular in Russia who once said, “Continuous improvement is better than delayed perfection.”
During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email firstname.lastname@example.org or visit www.dezshira.com