Within days of Vladimir Putin’s invasion of Ukraine, Russia’s financial system was on the verge of collapse. The West imposed a number of financial sanctions, most notably on the Russian central bank’s foreign exchange reserves, which sent the ruble sinking and prompted citizens to withdraw cash. Then the central bank raised interest rates, imposed capital controls and injected liquidity into the banking system, and some of these misfortunes were reversed. Although a portion of Russia’s currency reserves are frozen, the country generates about $1 billion a day from its energy exports.
Russia has stopped publishing detailed monthly trade statistics. But data from its trading partners can be used to figure out what’s going on. He suggests that as imports dwindle and exports stall, Russia is running a record trade surplus.
On 9 May China reported that its goods exports to Russia fell by more than a quarter in April from a year earlier, while its imports from Russia increased by more than 56%. Germany reported a 62% monthly decline in exports to Russia in March, and its imports declined by 3%. Adding up such flows into Russia’s eight largest trading partners, we estimate that since the invasion of Ukraine, Russian imports have declined by about 44%, while its exports have increased by about 8%.
Imports have declined partly because sanctions on the Russian central bank and the expulsion of some lenders from the SWIFT interbank messaging network have made it harder for consumers and firms to buy Western goods. Elina Ribakova of the Institute of International Finance (IIF), a group of bankers, says earlier regulatory uncertainty was also a big factor, as Western firms were unsure which Russian banks would come under sanctions. Logical disruptions also matter, including decisions by Western firms to suspend deliveries to Russia. The initial depreciation of the ruble also dampened Russian demand for imports, says Claus Vistesson of Pantheon Macroeconomics, a consultancy.
Meanwhile, Russia’s exports have been surprisingly good, including exports directed to the West. The sanctions allow oil and gas sales to continue uninterrupted in much of the world. And rising energy prices have further boosted revenues.
As a result, analysts expect Russia’s trade surplus to hit record highs in the coming months. The IIF believes that the current account surplus, which includes trade and some financial flows, could come in at $250 billion (15% of last year’s GDP) in 2022, more than double the $120 billion recorded in 2021. can be more than This ban has boosted the economy of Russia. The trade surplus, and thus helped finance the war, is dismal, Mr Wisteson says. Ms Ribakova believes the effectiveness of the financial sanctions may have reached its limit. The decision to tighten trade restrictions should come next.
But it may take time for such measures to take effect. Liam Peach of Capital Economics, a consultancy, says even if the EU implements its proposal to ban Russian oil, the embargo will be phased out so slowly that the bloc’s oil imports from Russia will increase by just 19% this year. will decline. The full effect of these sanctions will be felt only in early 2023 – by which time Mr. Putin will have accumulated billions of rupees for his war. I
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