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The Russian Federal Customs Service published data on the volume of Russian foreign trade with other countries for the first nine months of 2023.

This figure amounted to $530.2bn. While exports decreased compared to last year, imports, by contrast, increased by almost 20%. How to interpret these figures and what they mean for the economy of the country - in the "Izvestia" material. 

What affects the export

• According to the Federal Customs Service (FCS), the total volume of Russia’s trade with other countries amounted to $530.2 billion.
• Of these, exports amounted to $316.9bn and imports amounted to $213.3bn. The trade surplus was $103.6bn.
• Compared to the same period last year, exports decreased by 29.4% (previously it was $448.9 bn), but imports increased by 18.3% ($180.3 bn last year).

Recall that the Federal Customs Service partially resumed the publication of data on Russian foreign trade, interrupted in April 2022, in March 2023. Then the customs service disclosed data on the export and import of goods for 2022 and for January 2023. Then there was a short break, while the main indicators are not a secret for the expert community, the publication’s interlocutors note.

“We now have the opportunity to see general data on exports and imports in the monthly foreign trade statistics of the Central Bank, so the order of the numbers is expected,” Olga Belenkaya, head of the macroeconomic analysis department of the Financial Group Finam, told Izvestia.

"Imports as a whole rose by 10%"

The decline in exports by almost a third compared to the same period 2022 Belenkaya explains the weak performance at the beginning of the year. At that time, the "base effect" (very high world energy prices in the first half of 2022. - Ed.) and the sanctions on the supply of Russian oil and oil products, which led to the extension of the price discount of Russian export oil Urals to the benchmark of Brent oil to a record $35 per barrel. 

Price discount reduction

Not only oil, but also other Russian export products are being exported at the price discount, the collocutor notes. This is due to sanctions restrictions and the restructuring of trade flows.

The decline in Russian gas exports to the EU since 2022 has also affected this year’s performance. However, the situation has recently begun to improve: coordinated actions by Russia and Saudi Arabia have eliminated the excess supply on the oil market, and Russian exporters have adapted to the price ceiling. " All this helped to reduce the price discount to about $10 per barrel and some slowdown of the export decline," the analyst explains.

According to the Central Bank, while in the first quarter of 2023 the decline in exports in value terms reached 32% year on year, in the third quarter of 2023 it slowed down to 23.9%. If we compare the period from January to September of this year with a calmer period of two years ago (nine months of 2021), exports have decreased by only 7%. Experts do not consider this indicator critical.

As for imports, its growth is associated with the recovery of economic activity in Russia after the recession of last year and adaptation of foreign trade chains to sanctions, logistics and financial restrictions.

Also, the growth of import value could be influenced by global inflation, and the growth of transaction costs when changing suppliers and trade routes, experts believe. According to FCS, in the nine months of 2023, imports in value rose by 18.3% year on year, but compared to the nine months of 2021, imports actually reached the level of two years ago.

General Russian imports have recovered almost to the pre-crisis level, says Sergei Ramaninov, analyst of the channel "Money Power Markets". He explains this development of trade with China, India, Turkey and Azerbaijan.

Although the current account surplus of Russia’s balance of payments declined by 6.6 times in the first half of the year, I believe that the overall growth of the trade balance will continue next year, at least in the first quarter, the analyst predicts.

One of the main reasons, in his view, was the increasing number of barter transactions in international trade, which had previously been called for by the Federal Customs Service. 

Asia is the main partner 

According to Olga Belenkaya, the breakdown of Russian exports and imports by the enlarged regions of the world - or continents - is the most interesting from FCS data.

Thus, it can be seen that exports to Europe in the nine months of 2023 decreased by 3.3 times, and its share in Russian exports - from 48 to 20%. This loss was mostly offset by increased exports to Asia. [It increased] by 10.3%, with the share of total exports increasing from 46 to 71.5%, the interlocutor notes.

Other exports (Africa, the Americas, Oceania) still account for less than 5 per cent of Russian exports. Therefore, despite strong relative changes (exports to Africa grew by 54% year-on-year, and exports to America fell by 1.7 times), they have not yet made a significant contribution to Russian foreign trade, says Belenkaya.

The import structure has also changed - but not so dramatically. Imports to Russia from Europe fell by 8.7% YoY over the nine months of 2023 (compared to the period January-September 2021), the share of Europe fell from 35.9 to 27.7%. Asia’s share increased from 55 to 65%. Africa’s share remains close to 1%, and America’s share is still above 5% (5.3% for January-September 2023, compared to 6.9% a year earlier).

Over the past year Asia has consolidated its position as a key foreign trade partner of Russia, sums up Olga Belenkaya. "At the same time, it should be understood that in many cases Asia can be a transit point for goods from the EU or the US to Russia - she says. - On the other hand, Russian oil processed in India continues to flow to Western markets". 

Oil prices

It will be extremely difficult to maintain the trade balance at the level recorded in the first nine months of 2023, the experts interviewed by the publication believe.

According to Spartak Sobolev, head of the "Alpha-Forex" investment strategy research department, import dependence and its appreciation in the current sanction’s conditions will only increase. " The situation is aggravated by the conditions of the global economic recession, which is likely to collapse hydrocarbon prices," he notes.

Meanwhile, the external background associated with the worsening geopolitical situation in the Middle East has ceased to accelerate oil prices: the barrel Brent seeks to fall to the level of $80, and Urals - up to $65.

However, according to Sobolev’s forecast, all oil targets remain in place. " The maximum allowed range until the end of the year - at the level of $80-92 Brent and up to $65 Urals" - he believes.

Many billions of rupees

The volume of trade turnover in the report is estimated in billions of dollars, but in fact it is a variety of currencies that settle in the bank accounts and further do not work in any way for the Russian economy, Ekaterina Kosareva, Managing Partner of the analytical agency "BMT Consulting", says. "While there are no problems with the Chinese yuan’s appeal - imports are rising, Indian rupees, which are poorly liquid outside India, are making the Russian economy uncomfortable. We hope for the effectiveness of the decisions taken regarding the investment of Indian capital back to the Indian Peninsula," said the collocutor.

Indeed, there are prospects for resolving this issue. Earlier, this has been brought to the attention of senior officials and experts of the country, and the active search for alternatives was announced by Foreign Minister Sergey Lavrov in September. "In the current situation, there are many billions of rupees that have not yet been used, and our Indian friends have assured that they will offer promising areas to invest in," said the Minister at a press conference following the G20 summit, held in New Delhi.

The day before it was announced that the Reserve Bank of India (RBI) partially relaxed the rules of investing funds from the accounts. In this way, Russia will be able to invest its Indian Rupees in corporate equity by investing in the partner country’s economy.

Source: https://iz.ru/1605180/sofia-smirnova/tramplin-v-aziiu-raskryt-obem-rossiiskoi-vneshnei-torgovli-za-2023-god