其他服務業Business News

The Federal Customs Service [of Russia] reported an increase in the foreign trade balance from January to May 2024 by 16.3% (up to $64.3 billion) with a general decrease in exports and imports. Izvestia looked into how this would affect the economy.

Just the numbers

Exports of goods from the Russian Federation in the first five months of 2024 remained practically at the same level (minus 0.6%, to $172.1 billion). This is not the case with imports, which decreased by 8.5% (down to $107.8 bln).

Over the year, imports from Europe to Russia decreased by 16.6% (and amounted to $28.5 billion). According to Eurostat, the volume of imported goods to Russia does not exceed 1.4% in the structure of foreign trade of the EU countries. Since 2022, the indicator has halved from 3%. By comparison, exports have fallen much more sharply - from 9 to 1.6%.

The turnaround of Russian trade to the East is showing itself. But while exports grew by 10.1% (to $130.4 billion), imports fell by 4.1% ($71.8 billion).

In response to Izvestia's inquiry, the Ministry of Economic Development explained that it is premature to draw any conclusions about the reduction of imports, as there is a steady trend towards the development of cooperation with friendly countries.

"The current dynamics on imports is due to both the ongoing reorientation towards cooperation with friendly countries and the decline in imports from unfriendly countries," the ministry's press service commented.

The representative of the Ministry of Economic Development characterized the decrease in physical volumes of imports as insignificant. And in comparison, with the indicators of 2018-2019, the current import volumes are higher.

The Ministry of Industry and Trade did not answer questions about ways to solve the problems with settlements with the Chinese side and about the most important import items for the Russian economy.

Fear and trembling

The reduction in imports from friendly Asian countries is primarily due to the effect of the 14th package of sanctions on foreign companies that cooperate with Russia or the fear of inclusion in the sanctions lists in the future.

The December decree of the US President simplified the application of secondary sanctions against banks of third countries for participation in the supply of sanctioned goods and dual-use goods to Russia. Extended supply restrictions on chips produced in non-Western countries but using American technology. EU countries have introduced similar measures to prevent circumvention of sanctions.

Despite resistance from Chinese authorities, some PRC companies have been sanctioned - along with firms from Turkey, Kazakhstan and the UAE.

For this reason, Bank of China refused to work with Russian sub-sanctioned entities. In February 2024, China Chouzhou Commercial (the main settlement hub at the time) unilaterally stopped servicing Russian organizations. DBS Bank, Great Wall West China Bank, and China Zheshang Bank followed suit.

The restrictions also affected banks indirectly - in terms of the use of the Russian payment system SPFS. Not all Chinese banks were connected to it, but not wanting to take risks, they refused to use the gateway between the SPFS and the Chinese CIPS. This is despite the lack of the very technical possibility to incriminate a bank by third countries.

Settlements with counterparties have become much more complicated, which was recognized by the head of the Central Bank of the Russian Federation Elvira Nabiullina. According to her, the situation has led to an increase in costs and the rise in the price of imported goods. Alexey Podschekoldin, president of the ROAD (Russian Automobile Dealers) Association, even announced the threat of stopping deliveries of cars and components from China to Russia due to blocked payments.

Five reasons

Among other reasons to reduce imports, in addition to the obvious difficulties with cross-border transfers, Olga Belenkaya, Head of Macroeconomic Analysis at Finam Financial Group, pointed to the tight fiscal policy aimed at slowing down the growth of domestic demand, including imports, in order to balance the growth of demand with the possibility of increasing supply and reduce inflation.

The decrease in imports is also explained by the natural course of things: the structure of suppliers on the national market in certain segments has changed. According to Antonina Levashenko, head of the Russia-OECD Center of the Presidential Academy IPEDI, "For example, this factor is relevant for the segment of agricultural goods, where the Federal Customs Service recorded a 6.4% decrease in imports.

The Ministry of Economic Development also told Izvestia about the factor of domestic production. "In January-May 2024, the growth of the manufacturing sector amounted to +8.8% in annual terms," they reported.

The factor of production growth at the plants of foreign investors in the country should not be discounted. "Since 2022, the presence of the Chinese automobile industry - such companies as Great Wall Motor, Geely, Chery Automobile - in the Russian market has noticeably increased. If earlier components were imported for further processing (assembly) at Russian factories, then with the establishment of production of certain components in Russia, their imports are naturally decreasing," Levashenko told Izvestia.

She also drew attention to the so-called country factor. For example, China has reduced its exports of engineering products, which has affected the imports of buying countries. According to the results of the first half of 2024, the decrease in imports of equipment and machinery in Russia amounted to 4.9%.

Significant import items

According to the Federal Customs Service data for the first five months of 2024, imports in January-May decreased by 8.5% yoy. The top three largest items of Russian imports include machinery, equipment, vehicles (here the reduction amounted to 4.9% yoy), chemical industry products (-16.5% yoy), food products and agricultural raw materials (-6.2% yoy).

New restrictions are curbing Chinese exports of certain items.

For example, in March 2024, China cut direct supplies of electrical equipment, machinery and spare parts for them. "The Americans threatened vendors with sanctions for the fact that this equipment can be used for the needs of the Russian defense industry. And the shortage of these goods could deal a blow to Russian production," Alexander Shneiderman, head of sales and customer support at Alfa-Forex, explains the situation.

In the first half of 2024, imports of products of the Chinese automotive industry decreased. However, this can be blamed not so much on sanctions as on the overstocking of warehouses with Chinese cars in Russia, which was announced by car dealers at the end of 2023. At the same time, imports of spare parts for cars - to repair those that Russians have already purchased - have expectedly increased.

Deliveries of Chinese tractors, pumping equipment and water heaters, tractors, and pneumatic tools have decreased. "Nevertheless, this can be considered a positive trend," Shneiderman believes. - These types of equipment have started to be successfully import substituted in Russia, and the need for Chinese analogs has decreased."

What's next

"Over time, businesses will find a way to adapt to these changes as well, by complicating settlement chains and using new payment methods, including cryptocurrency," comments Olga Belenkaya.

Nevertheless, according to her, we should expect that imports, especially manufacturing imports, will become less accessible to Russia and their cost will increase further.

Source: https://iz.ru/1725546/sofia-smirnova/chuzhogo-ne-nado-pochemu-sokratilsia-import-v-rossiiu?ysclid=lypuiew9iw854853543