Russian Trade Boomed After Invading Ukraine, Providing Ample War Funds

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Russia’s relationship with the world is continuing to evolve rapidly. To assess the global shifts, The Times analyzed years of country-level trade data compiled by the Observatory of Economic Complexity, an online data platform. Because the data is published with a lag, the picture it provides is inherently backward looking. Russia’s ability to trade with the rest of the world could be further curtailed in the coming months as the West introduces new restrictions.

But so far, 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.

“It’s very difficult to live without Russian resources,” said Sergey Aleksashenko, the former deputy finance minister of Russia and deputy chairman of its central bank. “There is no substitute.”

As it drags on, the war, and the world’s response to it, are bringing about a remarkable change in international trade flows. Food is in short supply in many countries that rely on wheat and other staples grown outside their borders. Prices for fuel and other products have risen at a time of record inflation. And Russia’s long-standing economic ties with Europe are gradually being unknotted, and new alliances are forming as goods are rerouted to other countries, the data shows.

The European Union, the United States and the United Kingdom have imposed harsh economic penalties on Russia, sanctioning hundreds of wealthy citizens and government officials and largely cutting the country off from the international financial system. They also vowed to stop sending advanced technology and banned Russian airlines from flying to the West.

Decisions by global companies to halt operations in Russia have also had a major impact. Container ships filled with foreign goods are no longer streaming into the port at St. Petersburg, a main point of connection with the rest of the world. And inflation and economic uncertainty are causing Russian consumers to cut back on buying the products still on store shelves.

But sanctions on the Russian energy that helps power Western economies have been slower to take effect. The United States has already cut off purchases of Russian oil, and the United Kingdom will do so by the end of the year. But neither country is a major buyer.

The European Union — which is heavily dependent on Russian energy, and, like many countries, is already struggling with inflation — has been slower to act. Europe stopped importing Russian coal in August. It will ban all imports of oil shipped by sea from Russia in December, and all petroleum products in February. Russia, in turn, has banned some of its own exports, including agricultural and medical products.

How trade with Russia has changed since it invaded Ukraine

Average monthly post-invasion trade volume compared with previous 5-year average

United States

Current total trade

$1.5 billion

Imports from Russia

–20%

Germany

Current total trade

$4.8 billion

The Netherlands

Current total trade

$2 billion

China

Current total trade

$15 billion

India

Current total trade

$3.3 billion

Imports from Russia

+430%

Turkey

Current total trade

$6.2 billion

Imports from Russia

+213%

Japan

Current total trade

$1.6 billion

Sweden

Current total trade

$95.7 million

Imports from Russia

–86%

South Korea

Current total trade

$1.5 billion

Imports from Russia

–4%

Norway

Current total trade

$198 million

United Kingdom

Current total trade

$328 million

Imports from Russia

–81%

South Africa

Current total trade

$75 million

Belgium

Current total trade

$1.4 billion

Imports from Russia

+130%

Spain

Current total trade

$739 million

Imports from Russia

+112%

Brazil

Current total trade

$939 million

Imports from Russia

+166%

Saudi Arabia

Current total trade

$103 million

Canada

Current total trade

$59.4 million

Imports from Russia

–44%

Portugal

Current total trade

$63.9 million

Imports from Russia

–42%

Source: The Observatory of Economic Complexity

Note: Based on latest monthly trade volume data from each country. Post-invasion trade data availability varies by country, with the latest month of data ranging from June to August.

Oil and gas are Russia’s most important exports by far, and a major source of government funding. The high price of oil and gas in the last year has inflated the value of its exports, which has helped Moscow offset revenue lost because of sanctions. Gazprom, the state-run Russian energy giant, posted a record profit in the first half of this year, even as shipments to Europe began to slump.

The International Monetary Fund has repeatedly revised its forecasts this year for the Russian economy, saying it would contract by less than the organization had anticipated. The I.M.F. said in October that it expected the Russian economy to shrink by 3.4 percent this year, a much smaller contraction than the 6 percent it forecast in July and the 8.5 percent it expected in April.

“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.

The new bans on oil and petroleum products that European officials will introduce in coming months could represent a major loss for Russia. But the oil that leaves Russia on ocean-going vessels will probably find its way to new markets. Since the invasion of Ukraine, India and China have emerged as much bigger buyers of Russian crude.

Where Russian oil shipments are headed

25%

55%

20%

17%

55%

29%

E.U. countries

Other countries

China and India

Russia invades Ukraine

Source: Kpler

Note: Data through Sept. 2022.

In turn, the countries that used to sell more oil to India and China — like Saudi Arabia, Iraq or Angola — may sell more oil to Europe. That would lead to a global “reshuffling of the energy market,” Mr. Aleksashenko said, in which Russian oil is merely diverted to new markets rather than being cut out.

How much money Russia will ultimately generate from its oil sales remains unclear. As demand for its products elsewhere has fallen, Moscow is being forced to sell its oil to India and China at a discounted rate. Western countries are now trying to introduce a price cap that will further limit how much revenue Moscow can earn from each barrel of oil sold.

So far, higher energy prices have offset those effects. Prices for benchmark oils like Brent crude and Urals — heavily traded varieties of crude oil that serve as global reference prices for buyers and sellers of oil — have fallen in recent months. But because energy prices were elevated for much of this year, Russia actually received more money from oil and gas sales in dollar terms from March to July than it had in previous years, according to the International Energy Agency.






Russia has had to sell at a discount,

but high oil prices blunted the effect.

At the same time, Russia found new buyers

for its oil as Europe bought less.

This resulted in Russia seeing steady oil

profits, although that will likely change.

Monthly average price in U.S. dollars

Russian oil exports, thousands of barrels per day

Monthly total value of oil exports

Russia sells at

discounted rate

Russia has had

to sell at a

discount, but

high oil prices

blunted the

effect.

Russia sells at

discounted rate

Monthly average

price in U.S. dollars

At the same

time, Russia

found new

buyers for its

oil as Europe

bought less.

Russian oil exports,

thousands of

barrels per day

This resulted in

Russia seeing

steady oil profits,

although that

will likely change.

Monthly total value

of oil exports

Russia has had to sell at a discount, but high oil prices have the effect.

Monthly average price in U.S. dollars

Russia sells at

discounted rate

At the same time, Russia found new buyers for its oil as Europe bought less.

Russian oil exports, thousands of barrels per day

This resulted in Russia seeing steady oil profits, although that will likely change.

Monthly total value of oil exports


Sources: Refinitiv, Kpler.

Note: Crude oil prices are monthly averages.

In the longer run, Russia’s prospects for selling its gas look dimmer. Unlike its oil exports, where the majority is carried by tankers at sea, much of Russia’s gas leaves the country through pipelines that take years to construct, making it hard for Moscow to shift to new markets.

By July, Germany had cut the amount of natural gas it imported from Russia by half and turned to importing more from Norway and the United States. In September, the primary pipelines that carry gas from Russia to Germany were damaged in explosions.

Russia is trying to find buyers elsewhere for its gas. Its exports to China have increased, but it has only one existing pipeline to China that can move a fraction of the volume of its pipelines to Europe. To move gas by ship, Russia would need to build new facilities to liquefy the gas, an expensive and time-consuming process.

Apart from energy, Russia also continues to be a leading exporter of other essential commodities, ranging from fertilizer and asbestos and nuclear reactors to wheat. International car makers still depend on Russia for palladium and rhodium to make catalytic converters. French nuclear plants rely on Russian uranium, while Belgium is still playing a key role in Russia’s diamond trade.

Russia’s ample trade, and the war chest it has generated, could start to dwindle in the next year as more sanctions bite.

Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace, said that he expects the volume of Russian exports to drop significantly in the longer run as Europe gradually turns to new sources of energy, and as further sanctions, including a potential oil price cap, take effect.

Developments in the war, where Russia has recently suffered a series of setbacks, could also influence economic relations. This weekend, it withdrew from a global agreement that would have allowed grain to be exported from Ukrainian ports. If Russia were to use nuclear weapons in Ukraine, for example, that could galvanize more global sanctions that could cut Russia off from trade with Asia, Mr. Gabuev said.

“We’re going to see probably a different picture next year​​,” Mr. Gabuev said.

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